How does a Change in the Excise Tax on Beer Impact Beer Retail Prices in South Africa
This paper uses price data, collected by Statistics South Africa, to estimate the effect of a change in the excise tax on the retail price of beer. We find strong evidence that the excise tax on beer is overshifted to consumers. The pass through coefficient is estimated at 4.83 (95% CI: 4.02; 5.64) for lager, and at 4.77 (95% CI: 4.04; 5.50) for all beer (which includes dark beer) This implies that for every R1/unit increase in the excise tax, the retail price increases by about R4.80/unit. Of the 23 brand packaging combinations considered, the pass through coefficients vary between 2.39 and 10.05 (median 5.30) The majority of the price change in response to a tax change occurs immediately, and prices have fully adjusted two months after the excise tax increase becomes effective. Pass through differs substantially across packaging types. The pass through coefficient on 750ml bottles is substantially lower than that of 330 ml (or 340 ml) cans and 6 x 330 ml (or 6 x 340 ml) "six packs" The overshifting of the excise tax has positive implications for public health policy, since they increase the effectiveness of alcohol taxes as a tool to reduce the (excessive) consumption of beer.