According to the WJS$, Denmark has slashed the excise tax on Scotch whisky by 45%, or more than $5 per bottle. “Scandinavian countries traditionally have taken a hard line on the hard stuff, but the effect has generally been to encourage tax avoidance. Swedes circumvent the national liquor-store monopoly by loading up their cars in Denmark; Danes in turn drive south to Germany to buy their booze. Norway has repeatedly cut excise taxes on liquor in recent years, and Finland is considering a reduction of its own. So with the high-price system unraveling, the Danes are bowing to the inevitable by cutting the liquor levy. With so many Scandinavians choosing to purchase their alcohol elsewhere, or simply brewing their own, the taxes are increasingly ineffective as revenue-raisers. Lowering the tax may even reduce market distortions enough to raise revenue, much as the Laffer Curve predicted. Scandinavia’s liquor taxes have long created more tax dodging and distortion than revenue. The sight of even tax-happy Europe’s northern outposts waking up to that fact is worth a toast. Make ours a double.”
It seems that liquor-tax competition is bringing about a much-welcome downward spiral.
