Evaluation of the Demand for Alcoholic Beverages and Tax Policy in Turkey

ABSTRACT

The tax burden on alcoholic beverages has been rising remarkably in Turkey. This policy has significantly increased tax revenue in Turkish Lira, but it has not generated more tax revenues in terms of U.S. dollars since 2013. This study estimates price and income elasticities for select alcoholic beverages using demand models and simulates the impact of changing tax policies on demand in Turkey. Results show that the cumulative effect of increasing prices will eventually decrease total tax revenue. Simulations suggest that the government should periodically reassess its tax policy to prevent bootleg drinking which results in deadly incidents and hospitalizations.

KEYWORDS:

• Excise tax
• alcoholic beverages
• demand elasticities
• expenditure simulation

JEL CLASSIFICATION:

• D40
• H21
• Q11

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1. The communication issued on March 17, 2007 (no.26465) by MTF on “monopoly tax label” (Banderol) mandates the use of tax sticker on the alcoholic beverage containers with an exception for beer products. This communication was further amended on December 23, 2008 (no.27089) and came into force in January 2009. However, wine industry association estimated that wine production volume had not been reflected correctly in the TAPDK data, according to the State Planning Organization’s 2006 report. Specifically, established annual wine production capacity reportedly amounted to 93.5 million liters in 2004, although the actual production capacity was estimated to be three times that measure. Therefore, the official wine statistics (concerning both consumption and production) is bound to be more accurate after year 2008.

Additional information

Notes on contributors

A. Ali Koç

Ahmet Ali Koç obtained his M.Sc. degree in the field of Agro-food marketing from Mediterranean Agronomic Institute (CIHEAM/IAMZ) and Ph.D. from Cukurova University in the field of Agricultural Economics. He is a full professor at the Akdeniz University, Department of Economics. His academic research and publications focus on agriculture-food market analysis, agriculture-rural development policy impact assessments, and applied microeconomics.

Serhat Asci

Serhat Asci is an associate professor in the Department if Agricultural Business at California State University, Fresno. He received his doctoral degree from the Food and Resource Economics Department at the University of Florida. His research focuses on three key areas: decision-making under uncertainty, demand modeling and international trade.

Peyman Uysal

Peyman Uysal is an assistant professor in the Department of Economics at Antalya Bilim University. She attended Akdeniz University's Institute of Social Sciences to get both her Master of Science and Doctor of Philosophy degrees in the discipline of economics. Her areas of research involve rural development, environmental economics, agricultural economics, and food economics.