Ready-to-drink alcoholic beverages (RTDs) or alcopops are defined as “a premixed drink which is part spirit or wine and part non-alcoholic drink such as milk or soft drink” (Parliament of Australia 2009, p 4). These types of drinks are generally preferred by young people and generally by females (Parliament of Australia 2009, p 3). The government decided to place a higher tax on RTDs which increased the rate “from $39.36 to $66.67 per litre of alcohol” (Parliament of Australia 2009, p 2). The increased tax was believed to be a necessary measure by the government for purposes that will be examined later. RTDs were taxed at the same rate as full-strength beer but with the increase in tax they became taxed at the same rate that applies to full-strength spirits (Parliament of Australia 2009, p 3)
The government stated that the reasons they increased the tariff on RTDs was to firstly close a loophole that appeared in regard to the duty that was placed upon these beverages (RTDs were taxed at the level that full strength beer was taxed at) and to also put the tax on them at the same level that full-strength spirits were taxed (Parliament of Australia 2009, p 2). These are the reasons that are evident on the surface but there is a deeper reason that is related to the initial ones. The deeper reason for the increase in the tax on alcopops was explained by the government as a way to decrease excessive consumption of the beverages that causes harm particularly by young people and more specifically young females. Throughout this essay data from the senate inquiry will be quoted in regards to the Australian Taxation Office (ATO) clearance figures as “the Committee preferred the ATO clearance data” (Parliament of Australia 2006, p 20).
The effect of the tax on the market for RTDs is determined by the price elasticity of
