iz — ——s a o~ i | Che ZO count bin | ‘The Journal of the National Board of jol. 19 No. 3 July - ve September, 2006Introduction “The excise taxation in Tanzania vas introduced in 1950s, levied ‘nthe cigarettes and bees and Saubsequendy disilled spirits, thereater-merged with the Sales tax in the year 1979/80 so as to case administration lowe, in the year 1989/90 sales tax stem was eefonmed leading tothe re intoduction ofthe excise taxation under the Excise Tasft Ordinance (Cap. 332). The main objective for the introduction of excise dury in Tangania at the outset has been reveaue-aising adequacy though the argument on cexternaies also prevalled, as Stephen Smith (2000) in his literature ideniies che main poligy isuce in taxing alcohol fo be the revenue rising tfficiency of excise taxes, fad their potential sole in Coeting ngatve extrac ‘specially socal coss and their ‘Esuibatonal incidence “Though Excise day generates a large portion of government revenue, the alcoholic abuse fill prevails in Tanzania not ‘only atone ofthe exteral costs Ibat also causes of side effects THE INCIDENCE OF ALCOHOL EXCISE TAXATION REPLI Abwiract Tanzania continues ry reluey mowe on ese diy on be and eigres in” ender to. mobilise resources to nance public Sxpenditue, thereby posing high axes. on Be phate none 0 masini revenue, This purer anys the Fate of Exc day on tat nanan wr taken in a ample of fandom tere leven ‘toons of dns, At the tute, shows the ape or eoablyy and Sseasments impact of ‘eal in a dng mae the tne for cing Shjcnes of skahol tx iy and pros and cons oF Aeobol a key acy in Ialying: nedenc. “The paper coches tha, tax puligy should be Seucired in sich 4 a7 tha allows oon-dtoron om marker elu. I Sige censan Ehegeaily to he formalized foc brew Indust order badge Unnecessary presure Cat tay enfie fox poli 1 impose high tate of exe fay thaty casing xe Stan burden to dines for the Tanzanian. Howeves, in coder 10 curb side effec of wihatsoeeer nature the excise uy is levied ac ahigh ste s0 as to protect the development steategies ia the county as Dion (1986)... Argues thac Taleahol drug and tobacco abuse can quit lel pu a sop to development or Seriouly compromise it ‘The definition of excises incades VAT rates in excess of standard rates applied co hosury ipods, Cleary this definition gece beyond the usual Anglo-Saxon description of fences as taxes imposed on the manufscrure, sale, oF consumption of certain domestically manufactured igoods. However, eacse axes have not been properly coordinated with other taxes fon goons and services in the Anglo-Saxon taxing conditions “The Excises are broadly defined ‘tw encompas al taxes on goods and services ober than General Consumption taxes such as Sales tax and VAT. The definition of facises it arcribed into ‘Smoking, deinking, gambling, polluting, drinking, and luxurygoods, Therefore, excise tx is imposed on the selective produc ix pce commode, with greater Hleibilcy uch as tobacco, sleohol and mineral oils chteby proving to be very productive source of revenue, "The Excise tax base and rates ‘an be selected according tthe government priorities despite the fac that the resons for levying high taxes on selered foods and services in Taran ate the predicubilty of the revenue “and social costs, “Therefore the exis coverage is (oF fourfold; 1) Pel ue ptcl, sles, paraffin, 2) Tobacco ie gare, pipe tobaceo, cigars procesed tobaceo, enprocested tobacco 3) Alcokol ie pict, Beers(cleav/opaque); wine, Home disille spin, Home made beess and 4) "Others such as soft drinks, Mineral/watt, Household produces (oap) ‘Taxability and Basis of, The differential rates and uniform ates ate commonly applicable in Tanzania. The excise duty is levied oa some quantiaive amount eg, Volume, Weight, of Scength to which "a specific ate on absolute amoune per unit of measurement i applied ‘The specific excise dy can be collected at the vee points such a 1) end of production line 2) ex-production Warehouse 3) ex factory gate and 3) Sale. As long as alcohol cacse tax is levied a the high rates, it may be imposed a any stage of production and Aistibution chain and usually at the manufacturer’ stage hence require some form of psc ental oer proton. In assesing how alcohol can be taxed at best John Dues conclusion in his pionesrng, review of Affcan tax sates 40 years ago argues char “the experience with the administration of these excises has been very stisfactory (ue 1963, P 96) sit coms no longer true. The teadtional public” finance tency of equity eMciency and sdminiseation muse dhs all be ‘considered caefllyin deciding how best to ax alcohol in Aa, “The specific tax rate aystem in sleohot is simple to administce than ad salon eae rate, the amount of tx should be the same per physical unit of Aleohol,seganllss of the price paid and dhece i no need 10 determine he value of the production for the application of tax. The specific tax ensures thar the eax burden borne by the consumers will be related othe physical quant consumed not <0 the value Thisreatoning has vliy only If one accepts the negative ‘extemnaiies penalty as the cae ray be "Sin" justification of these taxes. Hall (1996 P2) argues tat, inthe prsence of the nee negative extents uniform excize tax will maximize aggregie wellae if the tax rae is determined with reference 10 the weighted — average across drinkers of their ‘marginal nc exerts. In the county with inflation ‘when prices ate rising specific rates “must constanly be revised. In this system it i through Valuation where consumes have to dele and define the exable unit. Ie is pertinent ls to know that the relatively sai aloohol x ates ‘would indicates that prices of alcoholic beverages inctesse far les than those of other consumer goods. Do objectives of Alcohol Tax Policy justify tox incidence? One ofthe objecives of aeohol tax policy i evenue generation for economic developement the alcool tx may be higher based fon the social cose such as abusive dnking inthe fem of work absenteeism, criminal bichavior and eric accidents. Therefore, end- up generating revenue that is to be utilized for economic development. Bolnick and Haughton (1998) cssentlly conclude hat, this is the right way to view alcohol (and other taxes) in Aftica a, ficient revenue — raises. In the same line O'Hagan and Relly (1995) noted chat in 1991 for example revenue fom6 — Ueihan elie: Garman ES eer FE «mit Sate cea NS chai inb agince acta era fee ae Fiebtyingeay Lape ete Seca, are eee ite melee ato eat Bee tee Coe ee ES Seo tae fekdadarcna cine, (uc ie wi See eee ae ee as herafdcettese eas pokes fae cates ot - regresive in tems of income he erature rearing the eis therefore, pertinent a his juncwte 1 belive chit the ‘objecives of alcoho tx policy justify adi of tx incidence soups, impact of alcohol so as to analyae as to whether easing aleohol is due co such impacts 6t not, Does such impacts accelerate ex incidence to end tuser? OF couse, there ie a principle of consumer In arguing that beer is ‘complements to leisure Catlet and Hague (1953) have proven that, since leisure cannoe_ be taxed, efficient taxation eae marta soveeigny which asserts that, any rational person who weigh up all the eats and benefits of his actions should be fice to smoke, drinks, drive and pollute as long as he is fly informed about the consequences of is choice for him of herself. Therefore, the ‘reasons for moderating the level of revenie excises excluding the wer charges ae the principle of consumer soverignty higher faxes impored on fly informed individual’ tea form of paealism, “The costs of sleobol abuse ate associated withthe Medical and tehabliation costs and Productivity loses. In. such ‘oncext Devlin, Suff harm and Bunt (1996) on the bass of 1979 report by the US General accounting ofice assumes that annual working efiiency is reduced by 25% if workers abuse akohol Another problem i the costs that is associated. with the premature deaths whereby Elson (1995) in his erste notes thar physiological studies have shown that healthy individuals only show liver abnocmalties when they consume fil large amounts of sleobol “ees engn ands,_ Harding (1996) the United Kingdom Commitee on Carcinogenicity examined seudies published fom 1988 to June 1995 on the ink between Cancer and alcohol. Tt concluded chat cere is evidence thar the ssk of Cancers ofthe 4 upper aco- digestive tract, induding, Cances of the oral caving, phasyas, lagynx and csophagus, increses at ‘consumpeion levels of above 40 grams (approximately four Arinks) per day- The commninee leo concluded ehae che Hisks of liver Cancer are much greater for those who drinks heavily and that mast sumoes occur in people who already have Cirhosis or who have previously contracted hepatitis According to WHO report (2002), im 2000 the Global burden of alcohol in terms of death and disability was Derween 1.6% (for high ‘mortality developing counties) and 9.2% (for developed regions) of cor disabilcy adjusted life years lost accounting for 4.5 between years lose "The fremose problem is elated with faces and injuries H ‘Specially on road accidents, In their Hteratue, Bailey and i Bailey (1998) found that heavy (hard-core) drinkers, driving. with blood alcohol ‘onsumpeion level (Backs) will fovee the legal lime were the rain cause of many faites were alcohol was identified as 4 major contributor The study found than accidens on sural roads were the most likely 2 resi ina fatality Approximately one third of these raral roads faites involved a driver whose drink driving wae suspended as a contributing factor. Virwally drink drivers were found 10 have exceptionally BACs which corresponds t@ 300 ml gases fof beet. Likewise tie aserted that people who are having domestic. problem resort (0 drinking heavily. According to Parry (199858) research has shown that for both men and women the negative social tnd medical consequences of Alcohol consumption varies direcly with the average Amount of scohol consumed While most research has focused predominantly om sales, there is increasing fidence that women face substantial burden of direct and indirece harm associated with alobol abuse ‘Alcohol abuse increases high-tse behavior, may speed progression of diseases and lower che immune system. Hence, iti not advisable aso for the patents of HIV case. Hall 1996) in essence eats sleohol related unsocial lnchavior as cost of consuming sleahol. However, in his discussion of “net damage’, Hall only recognizes che benefit associated with a eduction in the ineidenceofeoronary heart, diese (CHD) for tha segment ofthe population who would otherwise suffer from CHD and donot drink abusive Harding (1996) seporss on a faumber of studies (including UK joindy study by the Royal colleges of physicians, poychiatits and” Genera Practioners ia. 1995) which consistently suggests chat compared to non — diinkers, moderate consumption of aleoholic beverages has a protective effect against, Tnchaemic stroke Arguing on the benefits of sleahol, Shugard (1997) sys, large umber of scientific studies have found chat moderate wine drinkers appear to be the healthies in teams fof cardiovascular fanction and overill mortality Shugard(1997) asserts that ‘welhdesigned scientific sedis suggests thatthe organic ‘components presntin wine ae associated with reduced heart tisease ik, reduced sees and other health benefits. Wine ‘contains antioxidants also found i fruit and vegeeables ‘which have the beneficial eft fn the vascular system and the Blood. However, while moderate alechol consumption ray reduce heart disease and strokes, dhese benefits do not scene to alcoholics and heary rinks We have alwo the economic benefits in the aleohol rade ‘whereby alcohol industry contributes rowardss 1) Beonomie growth and weak creation 2) Job creation in that ‘we expect 0 incest the level (of employmene when number ‘oF aloholic industies incense,3) Small business development ‘whereby the mote the aleohoic industie inthe county the higher the ouput of bees & spirits, as a consequence the scope of small business will be expanded and. the pacity of small business will be promoted 4) Reverie contribution othe government eg, Tanzania Breweries Limited which is among. the Large taxpayers and 3) Foreign curreney camer-esports snd. tourieat prometion is obvious. ‘The impact of aleohol excise ‘axin single market Imposition of specific excise rx fon alcohol leads the cort of production to incresetherchy Alecreasing the production ‘output The price paid by the consumes will increse while the price received by the supplier of alcoholic beverages ssl Te should be noted that the production ourput of alcohol plays an important cole in the Tanzanian Economies, specially when the industry Js buoyant. The ratio of investment in aleohol industies to GDP ie 4 good determinant of the Excise tax rato tothe Total Revenue. This can be exprened in the fllowing enon, a [ae a, +4, nM aor} ~* ** La va m[a] +e o Where a1<0, and «<0, ] = Tax reane ro GDP Import of exisable leohol to GDP rai, In cha regard, the Excise tax ro GDP ratio is negatively comebated t0 the ratio of raw materials (¢g bale) used to produce alcohol to GDR but under che assumption of non-atff it may also. be negatively. rated to the Import ratio of excsable alcohol ro GDP otherwise in the cae of, Import it is positively rela Aue co the role of protection, Moreover, the greater the share of raw materials used to manufacture alcohol 1 GDP, the less the government revenue due to excessive ‘exemptions. In contrast, the high Import ratios of exible aleohol yield higher tax revenues since excsable duties provide a significant ex bass, Aleohal excise duty during the petiod of Inflation erodes the tax base because che Government increase in price will rede tax revenue in real cerms. The Minister for Finance will be responsible in this sination adjust the rates in order to keep up with inflation. In that sopard, by vine of section 124 of the Excise (Management and Taff ‘Act—CAP 147 RE of 2002 the Minister foe Finance has been conferred powers to. amend, vary or replace the First Schedule of such Act (which stipulates the Fists of excise goods and sei ates) by Order that must be published in the Gazette The Order will be sffecive only if the National Assembly has approved or Signi changes be made. If the Onder isnot approved by the National Assembly shall expire forthwith or ceate to Ihave effect asthe case tnay be, bue anything previously done or suffered tobe done under che Onder shall not be affected One of the problems in this practice is indexation lag when pices fluctuate before the next National Assembly: che Minister has no eights of obligation ro adjust auch excise duty rate thereby loosing revenue in such particular petiod. In owder to avoid thi Shor, cis suficient to have the provision in the Act which allows the Miniter to adjust excise rates wich inflation without approval of the National Asembly provided that such adjustment docs nog 0 beyond the rate of inflation Abespite the fict that powers to amend, vary of replace the Ftst Schedule prevail Raising alcohol taxes and indexing chem so tha they will increase at the rate of inflation, will help to keep aleohol beverages. prices inline with those for other consumer goods. Such increases wil allow Government to reclaim a valuable source of rvente tht has decined dramatically ver the years‘The historical standard by = parameters of the wine in thesame rates cheap Cook and Moore (1993) says Inodel which are wine. thar aleobol exes should be oral disribne, ‘maintained at helt teal RPM = return toan ‘The diagnostic raison d'etre historical levels and not be iso ina hoklng for aleoholic excise duty allowed 10 be eroded by indus, In analyzing the features of inflaton. Because alcohol exes Rpt = retuen to an alcool excise duty, we could ae generally levied on & per investor holding evaluate the excise taxes tallon basis and are not ad diverted porlio fist based om the “ALoholic ‘are, that standard seems to of ses Ezonvmie Effcieny. The have some valdiy. However, SURing = effos of surprises alcohol excise duty should frequent adjustments with the inthe inflation interfere as litle as posible ‘nc rates tend co reduce the love eating, with markerdetermined femdom: syRindececangr inthe “oko! produces and The Hae diy sould nt a Se em be expected co ctode the production of pene ara dad wight lm profiablcy of the industy — srpspegig noes in ehe of Heo ec ation eis ‘whichis pillar forthe investor a Bape ia the cox o> chery over and to. antidpare ren fom price of alcohol hove the revenue said. In hhisther holdings. ‘The simple ‘excise duty echsive principle this excise tax burden marker model augmented thinner rable SU Red ‘sce ta burden of aeative imended to cape the effec eane) fat eenon The ‘inflon lvl of outpace “heb Exon eficiny? price of alcohol on the rum Tse ine vals can be faces on the impact af rats fo. investors in. paul simi wsing the Ordinary gnthe production of alah companies ers and the Excie Least. Squares whereby if ad consumption deciions of Gy incease in pavielar RPMI increases by ay wth Grnkens leis. determined alee. Ths en be pened OSE patamees che etm oy the” mapniude of the a fallow, an investor holding assets production of alcohol or in brewing industry would consumption response by should be smaller than the incre inlinewith primers inher Le shake ers Tn gener, fom Ber ByRomt BUR HL * Brad vice vers consumption or production of Sunde,» SURaLoh, + alcool snot much aed by “The specific tax on alohol tax change is deemed to be SUR nnn) which it similar in type bue Known as Alcolic own price different in quantity, poses Inelastic". If we tax price where: By, B,B, By 8, amd B, equity problems, forinsance IF jnelatic alcohol, the welfare ‘J you tax a ote of expensive cost of stax i rlatively small oh rand estate ete attr eee ee eee ee ta am i nn ee pa iand we conclude chat, taxing help discourage some exeaive ‘such alcohol would not have alcohol consumption. much of a cost to. the economy". ‘The violation of the vertical ‘equity criterion is even more Secondly, the “Alesbolie obvious. Ik is generally distributional Equity” that conceded that aleohol taxes are focuses on the impact of the regressive chat is, they bear alcoholic excise taxes at the more heavily on poor people different levels of income because lower-income indivi ‘eamed by drinkers should be uals rend to drink more, and analyzed. AS a minimum, the alcohol raxes are levied on a ‘fiterion implies that it is quantity basis (eg, dollars per ‘generally undesirable co make gallon). The finding that imarker-determined incomes expenditures on. aleohol end more unequal through the % be a constant fraction of alcoholic excise eax system, _incomeiis based on the fact chat Hall (1996) advocates consumers demand better imposing a uniform tx on ality s their incomes rise. drinkers to core the problem “on average’. However, this The ctitetion concerning reduces the consumption ofall receipt of government benefits alcohol consumes, nor just the is reasonably cleat, Cook and problem for drinkers, In his Moore (1993), stare thar instance, uniform tx far too alkohol abusers clearly receive blunes an instrument ro mote from government improve social welfare. I¢ programs than do others. should bear in mind chat, for Nevertheless, the really ‘most consumers who diink interesting fict about che ‘minimally or noc a alla tax ftmess standard is char i says increase will hardly be noticed, "ething about whac the evel of Consumers will pay a tion should be. Ie addresses proportion to how much they Aly how the burden should be drink, and the bull of the ax sttbured hikes will be paid by the relatively small percentage of In alcohol eich consumer has a drinkers who consume most liferen¢ consumption pattern alcohol. These same drinkers and therefore generates a not surprisingly arc responsible different level of externality forthehighestconcentaion af In most cases it would alcohol-related problems and be prohibitively costly co societal cous Higher toes will distinguish a prior consumers force them to bear a more — who arelikely to generate ge cquitable share ofthe cons for extemalites, as this would } the problems they cause and require information on the intended consumption patem and Teel of consumption of the consumes Given this the fevenment wl be conssned {oappying uniform ex over a ‘ange of consumers and un TT tek of homogency in consumption paerne doesnt tess make uniform cx Adesinable A uniform tx seks eo balance the ans fom the reduction in the exeraliy ‘eae the le In consurprion Cent that ae nt pained in ficient consumption can be achieved dhrough tax atom by imposing excise tax on the aetivigy equal to the marginal cast of damage eased by other people, However, identification and measurement of marginal oss ae very dficule Ubimately the jase of “Aadminicravoe Few is of the major concem whereby the costs of alcoholic excise tax collection and compliance should be minimized. In principle, the ade off between effceney, equity and administrative consideration ‘must he made when fixing how much excise duty “should be paid as the case may be collected on alcohol, ‘The Determinants of the efficiency, effectiveness and equitable Excise cold be fine the function of drinkers incomes, alcoholic tastes and users preferences; this give rise to the acceptability” ofsubstitute consumption of cohol and distribution ofthe tax burden among drinkers Secondly, the performance of tax administrcion on part fof the Government that ‘encourages oF discourages tx ‘evasion and eax avoidance and the impaces ofthe cost-benefit of alcoholic excise taxation. Thirdly, the regulatory system which affects tax administration “andthe acceptance of the alcoholic fa regime and finally, che production technologies of sleahol which give rise to the production of substitutes ot djustments in op prices Rationale for Alcohol excise aration is of chieefld: 1) revenue for economic growth 2) The alcohol excise eax meets the external costs not only associaed with consumption bur also discourage! procct young fiom using alcool due to high incidence, 3) It thas simed at improving the progressvty ofthe ax sem because aleohol i the luxury soot, The Incidence of Alcohol ‘Taser Thrust ofthe Analysis The Incidence of a tax i defined aa pine where he ex omer 0 seat. There ate wo ‘ype of incidncs, the ae 1) Staworyncence which refs te lea ably of tax and the 2) Economie Incidence which refs tothe acl usden ofthe ta. “The tax burden or economic incidence is determined by the pice changer induced by the tax (Goode, 198480) According to Goode (1989; 81) ataxia co be shied when the enterprie of person who covginally pays i pac i forward to suppliers of goods and services. “The Imposition ofan excise tax will usualy tend co bing about an increase in prices. Tax shiing occurs because those engaged in the production of the taxable items wll tend to ‘withdraw from these activin rather than absorb the fll tax ‘while buyers will pay higher prices eather than do without such tems Goode (1989; 81) asserts that the greater the rie ascity of supply and the less the price clastcty of demand the greater is the degre of tax shiing The excise duty on aleoboic beverages can he om a ice percentage of the weighted average Rewil — Selig Price (RSP) of clear beer wine and P “The incidence of excise uty is expressed 2 fllons; p00 Tread) = a, + ens = vase. ° Where Tre) ~ Total Facine ae burden 36 cise day a 4 pereznage of Re Sling Pics, vase. VArasapaconge of Real Selig Trice and f= error term that represen fiscal and other charges which donot add valet the invoice value of aleaholic beverges. “The coal tax burden in thie study ia composition of Excise dduies and the VAT and it i expressed a6 a percentage of weighted average real prices of the beverages including, the (Club sods. The higher the excise duty, the higher the total tax burden while the VAT burden adds vlc 1 the cota burden wil beac the standard “The real prices fo alcoho has been declining for almore in continuous tends sine 19505 for almost many counties in Atica, however the conerl ‘measures on alcohol have been rane or abandoned ‘The Distilled Konyagif Spies has high tax incidence due co the high demand co ordinary people in Tansania and ‘principally due to higher level, of AY unit. The Malt Beer takes approximately 42.11% tax incidence 8 shown in the Histogram preceded by Spiis due to the high demand and this could e fined not ony #0 reduce external cos but aso for revenue mative. In most ‘eases where Spirits bear low ex incidence would likely be resulking from the prevailing demand. However, the sliferential analysis shows chat there is minor variation in mose ‘of the Sprts The Club Soda thas high incidence than Wine because in Tanzania iis used 10 luce dislled Spirits. Te ispertinent to tax beverages having. same AA content per unit at same level, rather than increasing tax on alcohol because it may encourage Smuggling oe Consumprion of “unhygienie concoctions 1k should bear in mtind chat while fusze taxes should at @ minimum be pegged to CPI, & very low taxon alcohol should be fixed on Inferior (Giffen) goods and should be teat as 2 special cate. Our analyse in Figure 1 is compatible with the Ineeenational Comparison of Excite tax burden which audocates that Wine should be lower than the Excise tax bbuden om Beers, and Excise tax burden on Spits: should be eater than that of Boers and ‘Wines, The total ax burden is a percentage of weighted average reall prices of spits, lear bees and wines as shown in Bigare I ‘The alcohol excise taxation poses three implications 1) when alcohol excise duty inceases che toa ex revere will reise and then fll 2) demand of alcohol is more clase for instance on Safari bees, the alcohol excise dury revenue will be lower because consumes wll hit quicly 0 cher beer say Kilimanjaro as the price goes up. On the ‘contrary, the yield of revere fon alcohol whose demand ie inelastic could be reasonably high. 3) IF supply of an sleohol is pesfoaly caste (xe horizontal supply curve) then the tial revenue on alcohol can be expresed a *Py* O48 *P, Om “ Where Ro = cot ex revenue = Excise races, P= Price oF alcohol, @ = quanti of leobol and n= Own price elasticity of demand forthe taxes cohol “The tx incidence is © (e-n) «ror tem tat isthe price elasticity of supply of alcohol and m= Own price elasticity of demand forthe excsable alcool 1 ' | I | : i | ‘Source: The Harmonized Customs Taff Cades & Retailers survey ‘quetionnare-The Tax incidence on alegho taxation in Taman, Using equation 3 we were able co know thatthe incidence of VAT. asa percentage of RSP on alcoho is constant fr all categories of| dink at a rate of 16,679 detived from the Sanaa rate of 20%. On the contary, Excise duty incidence Muctuates due to the waiation in the excise rate; demand, and RSP to mention the few. However, the sudy includes VAT in the excise dy incidence but excludes excise duty incidence ia the VAT. This should be inline with the valuation of alcohol on imports where VAT revenue obeys the WTO Valuation rules which acre thasWhere «) VAT rate eutently 2096), X = Cost, surance and Freight, 4) Import duty (currently 25%), = excise dary other ical on impors and F. charge. Consequences of Tax Incidence If we tax exorbiealy high re fon alcohol beverages could resu in the sugling and an incase inthe ili production of aleaholic beverages, The user of beers may shifts to local brews such as Mbege (Chaga waditional bee), Kyindi, and Kimpumu (Nyakyusa traditional. bees), Komoni, Uranai and Kangana (Hehe tradicional bees), ‘Ml, Mnazi, Dengerua, and Gongo(Zaramo traditional beers), Ulaka, Wala, Gongo (Makonde traditional bees), ‘x Likewise, Ouor eral 2001) finds relatively high eros price elasticities of demand berwcen “Tanzania local brew, Chibulas and Marker beet. This means thar taxation of maker hee wll increase the consumption of local brew. However, Ose et al (2001) also find the own — prize elasticiey for both the Fhome brew (0.44) and maker beer 031) to be smal and in mest ses, insignificane “These home brewed liquors ae very cheap but dangerous concoctions with one of the ingredients being the acid content of sed batteries which ix popular in many areas in ‘Tanzania especially amongst the unemployed and poor income earners. The home brewed concoction i popular ‘duc to is low price and high potency. In year 2000/01 people died in ‘Kimara aes and’ Manze a2 ‘commonly known as “Uwaaja wa fisi™ which means “The ch of Loca spits (Gongo)” ss a result of drinking. = poironous illegal “alcoholic suletanes", Some of the people ‘who consumed this substance and managed to survive reporedly lose thet ee sight. "This deadly miature is belived to contain a high level of methanol and very small os of “Tanzanian shillings po gs. “This evene shows that there is failure for the excise duty 10 Achieve is objective as a sci ests minimizer of alleinor Fctuse instead of minimizing alleviating the socal cons, it turns to be the social costs ‘multiplier, However, this holds tue under the sstamprion that poor income earners and unemployed are not cultural aleaholic-esranged, hence they are not engaged forthe home- brewed even if thee is 210 amount of excise duty om beet For unrelated comsumpdons on the goods, the exc ax should be levied at higher tx rates because goods have the lowest, clasiciey. This is a Ramsey (1927) rule which prescribes that tax rater should be inversely proportional 10 clasctes of demand (holding clasctes of supply constane. Hence, efficient taxation requites that elaively high rates of tax be levied on relatively inelastic goods which are goods with no. Asa mater of facts the igh exe uy on sleoholic beverges may cause ‘Smuggling, however, thie can be tickled as far at administration is concerned by 1) Bonding. The beers cannot be telested for home consumption unless excise dluy has been fully paid at cexfacory point and 2) Stamping: The bos tleased for home consumption will not be leased unless bottled beers tue stamped. However, this is ‘not exactly good to stamp carain alcoholic tems. CONCLUSION ‘An increase in aleohol excise taxes is an ffecive 100! reducing underage alcohol consumption which in esence ix termed as “wer fee” and therefore ie i unfair to expec thac consumers of the produc should asst in paying. for some costs of dealing ‘with tleohol-related problems, In that regard, alcohol excise tax revenues have to be incresed in order 10 cover a greater Proportion of the corte of Alcohol ute to taxpayers and shouldbe indexed co keep pace with inflcion while pegging ceacine tax at minimum 0 che CPI, because a solution to che tendency of inflation o reduce tax rate in real tems is t0 Ge cease taxes to cost of living index Ie is pertinent therefore, 10 argue that a portion of the| revenue fiom alcohol excise taxes should be dedicated to provide weatment services and alcohol prevention activitics, and to defray the costs of enforcement and criminal justice system inthe (Ministry) Public Sue's ore “The increases in acne tax rte should not be so high 0 a8 co encourage smuggling and ‘driving poor income eames co contact dangerous local breve (consumption of concoctions. If there are. Senuggling. and icc production, here will be reventic loser and the Government will no be able ro develop unless the sytem 0 formalize local brew sale so 38 fo impose excise tax is preserved. Fortunately, the Government has succeaded t0 formalize the Kibulex Local brew marker. However, the ‘Tanzanian alcohol excise tax thas been kept pace with the national average and srounding micio-aleoholic players since 2002 to 2006, Indeed, it has not been ‘economically ditorive ‘Therefore alcohol eae policies must aim to strike a balance Derween, Potential ax yield, Tnernalization of healeh and social costs, Revenue loses ‘caused by semugging and ici production and International competitiveness and viability fof the domestic alcoholic ‘beverages industry. References 1. Bailey JPM and Bailey, MAL (2000) “Paco: saber han Alcobel in fatal drink driving cident’. I 15th International Conference on ‘ohl, Drags and. Tac Safe. 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Sunley, Emil (1998) “The Design and Administration of Alcohol, Tobacce and Pestaleum Esse A Guide for Developing and Transitional Cours International Monetary Fund, March 25, World Bank (2000), "World Bank Group Note on Alcoholic Beverages, “Beverages, ‘Washington, DC March, 7, 2000, 26, World Health Organization (2001) “Global stauus Report on Alco hup:/wwn.who i/subseance_abuse/pailel hho _ned_msd_2001_2,pdF CALL FOR ARTIC GALL FOR ARTICLES The Editorial Board would lke to invite submissions of articles, papers and {features for publication in the Accountane Journal The Accountant Journal isan accountancy professional publication, Published by the National Board of ‘Accountants and Auditors (NBAA). Ie is issued on quarterly basis January = March, April = June, July - September and October December), that is four times in a year. 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