Prague Economic Papers 2019, 28(5):589-611 | DOI: 10.18267/j.pep.706

A General Equilibrium Model of Optimal Alcohol Taxation in the Czech Republic

Karel Janda1, Zuzana Lajksnerová2, Jakub Mikolášek2
1 Charles University, Faculty of Social Sciences, Prague, and University of Economics, Faculty of Finance and Accounting, Prague;
2 Charles University, Faculty of Social Sciences, Prague;

This paper provides a general equilibrium theoretical model of alcohol taxation and empirically estimates the model. For this purpose, we use a model determined by both externality corrections and fiscal considerations as the tax increase is assumed to immediately change other governmental policies such as labour taxation or medical expenditures. The results of our analysis show that under most parametric scenarios, the current Czech tax rate on beer and wine is below its optimal level and that the fiscal component has a significant impact on the optimal level of tax.

Keywords: alcohol, beer, wine, Czech Republic, elasticity, price, social costs, tax
JEL classification: H21, Q02, Q18

Received: May 28, 2017; Accepted: September 21, 2018; Prepublished online: September 24, 2019; Published: November 1, 2019  Show citation

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Janda, K., Lajksnerová, Z., & Mikolášek, J. (2019). A General Equilibrium Model of Optimal Alcohol Taxation in the Czech Republic. Prague Economic Papers, 28(5), 589-611. doi: 10.18267/j.pep.706
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