Impact story: Rethinking sin taxes and regulation
Author of the impact story: Tuomas Kosonen, VATT Institute for Economic Research
Finnish Centre of Excellence in Tax Systems Research FIT
Leader of the CoE: Kaisa Kotakorpi, Tampere University
Author of the impact story: Tuomas Kosonen, VATT Institute for Economic Research
Impact objective
One of the main goals in Work Package 2 of the Finnish Centre of Excellence in Tax Systems Research is to provide new insights on sin tax and regulation policies, such as taxes on sugary or alcohol products or alcohol sales restrictions. The term “sin good” – and associated policies – relates to consumption that brings current enjoyment but harmful health effects in the future. The goal of sin taxes or regulation is to reduce such harmful consumption, if consumers do not take the future harm fully into account in decision-making. On the other hand, badly designed regulation may fail in achieving public health objectives, and instead lead to welfare losses in the form of distorted consumption choices or costs to firms.
The research conducted on this topic can be divided into two main studies. The first study examines the sweets tax scheme that was in place in Finland from 2011 to 2016. The second study focuses on alcohol policies such as the 2018 reform which allowed stronger alcohol products to be sold in retail stores outside of the government monopoly (Alko), effectively making alcohol sales restrictions less severe.
The first study on sweets taxes examines a tax scheme that was in place in Finland from 2011 to 2016. It placed an excise tax on sweets (including chocolates), ice creams and all non-alcoholic beverages sold in grocery stores. Although this tax scheme was abolished from the beginning of 2017, the excise tax on non-alcoholic drinks is still in place. Also, there have been many proposals for similar or more extended new sin tax policies recently in the Finnish debate. Many other countries have implemented similar policies.
The second study focuses on the government alcohol policy that restricts the sales of alcohol products above certain alcohol strength limit to the government monopoly (Alko) stores in Finland. Similar alcohol sales restrictions are in place in Sweden, Norway and Iceland among Nordic countries and other form of alcohol sales restrictions are in place in many countries internationally.
The main impact objective of FIT in this field is to bring research-based insights into the heated public debate. Another objective is to participate in the discussion of proposals for new similar policies based on research findings on earlier reforms. This case demonstrates the impact of the research findings and their dissemination in improving the design, evaluation, and public understanding of policies. The research aims to ensure that such policies are grounded in empirically validated mechanisms, rather than simplified assumptions regarding their effectiveness.
More specifically, this impact objective can be defined along three interrelated dimensions:
- Enhancing policy effectiveness
To identify the conditions under which sin taxes and sales restrictions effectively reduce harmful consumption, particularly the role of substitution patterns and product availability. - Improving welfare outcomes
To inform policymakers about potential unintended consequences, such as welfare losses, market distortions, and employment effects, thereby supporting more balanced policy design. - Reframing public and policy debate
To shift the discourse from normative assumptions (e.g., “taxation improves health”) toward evidence-based evaluation of causal mechanisms, including heterogeneity in policy impacts. - Challenging institutional policy justifications
To critically assess foundational policy instruments (e.g., alcohol monopolies) and their effectiveness in achieving stated public health objectives.
Means
The primary means to achieve the impact objectives included raising awareness of the research results and actively participating in the public discussion surrounding them. These were achieved by:
- Publishing the research results as working papers allowing the research community to evaluate the research methods and assumptions within them. The papers were accompanied by press releases that explained the main findings in accessible terms for the broader public, thereby helping to disseminate the results more widely.
- Engaging with the media through interviews about the research and related policy proposals based on the research results.
- Participating in public events such as panel discussions and delivering keynote speeches on related topics.
- Participating in events that were targeted at policymakers and explaining the results and their meaning to the policy design. Also, by writing expert statements to Parliamentary committees about government proposals on related policies.
- Giving presentations at scientific conferences to help gain broader international recognition of the results within the scientific community.
Impacts
Publishing the studies and their impact in public discussion and policy
The study on sin taxes was published on 8 April 2024 accompanied with a press release (Kosonen, Jysmä and Savolainen 2024). Media outlets were thus aware of the results, which were disseminated for example through STT info on the same day. In spring 2024, the media further covered the topic by interviewing Research Professor Kosonen about policy proposals that had similar elements to the studied sweets tax scheme, which had been abolished at the beginning of 2017.
Health organizations in particular published proposals to implement a broad-based health tax in Finland in spring 2024. These proposals included at least those put forward by SOSTE in February and the Finnish Institute for Health and Welfare (THL) in April, both of which argued that Finland should implement an excise tax targeting all products containing sugar, hard fat or salt to improve public health.
Prime Minister Petteri Orpo’s government considered implementing this kind of broad-based health tax, as reported by Iltalehti on 13 April 2024. After apparently abandoning this proposal, the government instead proposed increasing the VAT from the reduced rate (applied to food) to the normal rate for product categories such as sweets and chocolates, and submitted a government proposal to Parliament (HE 141/2024 vp). The impact of the study by FIT researchers published on 8 April 2024 is visible in the fact that one of the key pieces of evidence on which the proposal builds on, is this exact study in question.
In multiple media interviews (e.g. Yle on 4 April and 18 of April) Research Professor Kosonen explained, that based on research a broad health tax is unlikely to lead to significant health gains through reduced consumption of unhealthy goods. Rather, the distortionary elements of the tax can still be present, but the health gains are limited, and thus aggregate welfare would be reduced from implementing a broad-based health tax.
The government proposal for increasing VAT for sweets and chocolates was assessed in a statement to Parliament by Research Professor Kosonen representing VATT Institute for Economic Research (VN/13506/2024). In the assessment Research Professor Kosonen laid arguments for and against an increase of the VAT for sweets and chocolates based on research. The main statements were that increasing the VAT for these product groups may increase tax revenue as the proposal foresees but does little to direct consumption away from these product groups. The assessment also questions the rationale to target the VAT increase to narrow product groups, if the main goal is to increase tax revenue, as the government’s proposal claims. With that political aim the VAT for all foodstuffs could be increased from the reduced VAT base to the main VAT base. This would bring much more tax revenue even after compensating the losses in increased food prices to low-income individuals.
The government backed down from the proposal of increasing the VAT for sweets and chocolates. Although it is impossible to know the reasons that led to first the proposals to be contemplated and then not implementing them, suggestively, the research described here and ensuing media interviews and the statement had an impact on the withdrawal of the proposal. The timing of events also supports this view.
The second study on government alcohol monopolies was published on 11th of December 2024 with a press release (Kosonen, Jysmä, Stefansson, Worku 2024). The research studied the 2018 reform that allowed certain alcohol products to be sold outside of the monopoly that were previously restricted there in retail sales. The research results described how the sales of newly unrestricted products increased dramatically after the reform. At the same time, however, the sales of other products decreased. Adding different sales channels together indicated that the net sales of alcohol did not increase.
The results contributed to an already heated debate on the effectiveness of alcohol policies, particularly the role of the government monopoly. Proponents of these policies have argued that they are effective in reducing total alcohol consumption, whereas opponents argue that these kinds of policies have high societal costs. Therefore, it was no surprise that this study was broadly discussed in the media, including coverage in the main editorial of Helsingin Sanomat, Finland’s largest newspaper. The discussion seems to have been that these alcohol policies did not have such a large public health impact after all, as the proponents of the policies had been claiming. The most recent reform on government alcohol monopolies was in June 2024, and there has not been any discussion of a new reform.
Dissemination in public events
These research-based insights were also discussed in public events in Finland with various stakeholders present. Research Professor Kosonen participated in a panel discussion in an event organized by the Finnish Food and Drink Industries’ Federation (ETL) on 11 February 2025 and in another event organized by The Finnish Grocery Trade Association (PTY) on 1 April 2025. In these events, Kosonen drew on existing research to discuss the conditions under which sin taxes are likely to achieve their objectives and whether a government alcohol monopoly seems to be desirable based on the published research results.
The Institute for Health and Wellbeing (THL) has sometimes been proposing policies that are at odds with the research findings. Director General Mika Salminen participated in the same ETL panel discussion as Kosonen, where they tried to find some common ground on their differing policy views. Finding common ground continued afterwards on 7 of April in a meeting with representatives of THL including Mika Salminen and Kosonen.
International policy impact
The policy impact of these research projects has not stayed only within Finland. Kosonen gave a presentation to a Fiscalis group that consists of representatives from ministries of various European countries that contemplate among other things to implement excise taxes to improve public health. The presentation was based on the research results explained above and was given in very intuitive manner. Based on the feedback it was highly valued and made possible that the research-based views reached also other European countries.
Moreover, Professor Barbaro Salvatore from Mainz University in Germany approached Professor Kosonen and wanted to distribute the policy implications of the sin tax study in Germany. Professor Salvatore has long been an economic adviser for ministries in Germany and remains very well-connected policy wise. Professor Kosonen provided a document to Professor Salvatore, in which he explained the research intuitively. He argued that one could implement a similar survey as the product survey in the published research paper, but oriented towards Germany and the specific product groups that the decisionmakers have in mind. Based on the survey, one might be able to provide much more ex-ante policy advice as to whether implementing an excise tax on certain products would be desirable. Professor Salvatore explained later that the paper was circulated and very well received. He also invited Professor Kosonen to give a keynote speech at a conference on Consumer Health Protection, which had a mix of researchers from multiple disciplines and policymakers. Kosonen gave the keynote speech on 28 November 2025. The circulated paper and the speech had an effect also on widening the reach of the research results and their policy implications to Germany.
Results and publications
The research on alcohol sales restrictions is still ongoing, but we had one publication from it (Kosonen, Jysmä, Stefansson, Worku 2024) that led to intense public debate. We studied the change in alcohol law in 2018 in Finland with a data covering about 90% of alcohol retail sales in Finland at product and store level and used the sales of Systembolaget in Sweden as a control group. The last change allowed the increase of the maximum strength of alcohol sold outside of the government Alko monopoly from 4.7% to 5.5% and allowed the retail sales of mixed drinks outside of the monopoly.
The main findings showed that the sales of the products newly permitted outside of the state monopoly dramatically increased after the reform. They were sold after at a level that is about 500% higher than their sales in the government monopoly before the reform. However, at the same time consumers bought less products that were allowed outside of the monopoly already before the 2018 reform, and they on average visited government monopoly stores less often. When considering all the channels that contribute to the total consumption of alcohol, the total sales did not increase as net after the reform.
The only negligible result on total alcohol sales called into question the rationale of the government monopoly. Normally competition laws forbid the existence of monopolies. Finland has received a permission from European Commission to have a monopoly for alcohol sales on the grounds that it reduces societal problems related to alcohol consumption in crucial ways. If it turns out that the alcohol monopoly does not have a significant effect in curbing the societal problems related to alcohol consumption, that questions the grounds for the alcohol monopoly. Of course, the research result does not apply to all alcohol products, only beer, cider and long drinks that are at most 5.5% strong. But relative to the previous research in Finland and views in public discussion, the results contradict heavily the insight that the government monopoly and alcohol taxes have a large effect in preventing excess alcohol consumption and associated societal problems. Thus, the research and the ensuing public debate had a large impact on views about effective alcohol policies.
The publication of the research led to a large visibility in the Finnish media. The research papers themselves have been read several times: Kosonen, Jysmä and Savolainen (2024) has been clicked 496 times in the publication platform Doria, and Kosonen, Jysmä, Stefansson and Worku (2024) has been clicked 469 times. Kosonen, Jysmä and Savolainen was published on 7 April 2024, and the press release was cited by major news outlets. Kosonen, Jysmä, Stefansson and Worku (2024) was published on 12 December 2024 and the press release was again very visible in the Finnish media outlets. Helsingin Sanomat wrote a piece in the main editorial about the research results and argued that the basis for having a government alcohol monopoly is in question based on the published research.
References
Kosonen, Tuomas; Jysmä, Sami; Savolainen, Riikka (2024). Studying a Sin Tax Scheme with Multiple Reforms – Lessons for Consumption Taxation. VATT Working Papers 164.
Kosonen, Tuomas; Jysmä, Sami; Stefánsson, Arnaldur; Worku, Lukas (2024). Vuoden 2018 alkoholilain uudistuksen vaikutuksista. VATT Tutkimukset 196.
