Alcoholic beverages in Ireland: market forces and government policy

The changing pattern of consumption of alcoholic beverages in Ireland and the association between this and the trend in alcohol-related problems are examined. As a result of a relatively low price and high income elasticities of demand for alcoholic beverages, the high level of taxation of alcohol in Ireland has resulted in an exceptionally large proportion of income being devoted to purchasing them rather than to a fall in their consumption. During the 1980's it became apparent that any major divergence between Irish and U.K. liquor prices generated a large cross-border trade and was counter-productive from a revenue perspective. Further pressure to reduce the level of taxation is coming from the move to harmonize taxes across EC member states. The limitations of taxation policy as a means of controlling the consumption of demerit goods in a small economy are clearly illustrated by the Irish experience.