Europe’s Sin Tax Debate Needs More Evidence

Across Europe, governments and EU institutions are expanding taxes and regulations aimed at shaping personal behaviour. Excise policy has quietly become one of the most active fronts in Europe’s broader debate about public health, state intervention and fiscal pressures.

Many of our life choices harm both ourselves and those around us. The role of the state should primarily be to minimise the latter, in line with the principle that one person’s freedom ends where another’s begins. “That the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others,” wrote John Stuart Mill.

Far more controversial, however, is the state’s attempt to prevent people from harming themselves. Governments often justify such intervention by arguing that unhealthy behaviour generates costs for others as well – for example through publicly funded healthcare systems. This is where taxes on products such as alcohol, tobacco or sugary drinks enter the picture. But that raises a fundamental question: how should such taxes actually be designed?

In a recent article for the IMF’s Finance & Development magazine, Christoph B. Rosenberg and Marius van Oordt offer a clear answer – taxation should be linked to harm. The idea sounds straightforward, yet European tax policy often follows politics and fiscal pressures more closely than evidence.

The IMF authors argue that sin taxes should reflect relative risk: more harmful products should face higher taxation, while lower-risk alternatives should be treated more favourably. This approach is broadly consistent with the idea of “libertarian paternalism” associated with Nobel Prize-winning economist Richard H. Thaler – shaping incentives and nudging behaviour without outright prohibition.

Yet this logic is still largely missing from the tax policies of many European governments and EU institutions. In my native Poland, debates around excise duties are driven less by evidence than by fiscal needs and public-health rhetoric, often with little regard for data, economic consequences or individual freedom.

During a recent roundtable on alcohol policy in Poland, participants discussed data showing that alcohol consumption and the number of accidents involving drunk drivers have both been declining. The question was raised whether further restrictions were really necessary. One member of parliament responded that she was simply not interested in percentages or data. It was a striking moment. Public policy in democratic societies should be grounded in evidence, particularly when it concerns taxation and restrictions on individual behaviour.

Too often, current policy is deeply inconsistent. Poland introduced a sugar tax on sweetened beverages while maintaining a reduced VAT rate on sugar itself. The result is an incoherent system that penalises one form of consumption while favouring another.

Rosenberg and van Oordt’s argument, however, deserves to be applied more broadly – including to regulation itself.

The same inconsistency is visible in alcohol policy. Non-alcoholic beer has become one of the fastest-growing segments of the Polish and European drinks market, particularly among younger consumers looking for alternatives to traditional alcohol. Yet Polish politicians increasingly discuss tighter restrictions on non-alcoholic beer and similar products linked to alcohol brands. If governments genuinely want to reduce alcohol-related harm, discouraging substitutes appears counterproductive.

The debate over alternatives to cigarettes raises similar questions. The Polish government is moving towards stricter regulation of nicotine pouches widely regarded as significantly less harmful than combustible cigarettes. Once again, the debate is driven more by emotional narratives than by comparative risk assessment.

As Rosenberg and van Oordt argue, harm-based taxation only works if governments are willing to follow evidence even when it conflicts with fiscal interests. That, in turn, requires something increasingly fragile in Europe – trust in public institutions.

A credible harm-based system depends on regulators being perceived as independent, scientifically grounded and resistant to pressure from politicians, industry and public health interest groups. Citizens must believe that products are taxed according to measurable risks rather than ideology or short-term budgetary needs. Without that trust, health taxes begin to resemble arbitrary lifestyle penalties imposed from above.

Part of excise revenues should therefore support independent public institutions capable of gathering data, analysing scientific evidence and assessing relative levels of harm. Such analysis could help finance ministries and regulators design more rational tax systems.

International institutions also have an important role to play. As Rosenberg and van Oordt note, “global institutions such as the IMF, and especially regional bodies like the EU and the African Union, are pivotal in advancing frameworks that align taxation with harm and promote innovation toward safer products.”

Nevertheless, both national governments and EU-level policy can also get excise policy badly wrong. Excessive taxation may encourage illicit trade and cross-border shopping, undermining both public health and state revenues. Large tax differences within the EU push consumers towards cheaper neighbouring markets and increase the profitability of organised crime. Attempts to solve this problem simply by “harmonising upwards” risk expanding the black market even further.

Ultimately, the realistic goal cannot be to eliminate all risky or unhealthy behaviour. Europeans will continue consuming alcohol, nicotine, sugar and many other substances in different forms. The real policy question is whether governments create incentives that reduce overall harm or whether they prioritise symbolic politics over measurable outcomes.

The argument put forward by Rosenberg and van Oordt matters because it rejects simplistic prohibitionism. But implementing genuinely harm-based taxation requires intellectual consistency, institutional credibility and the willingness to follow evidence even when politically inconvenient – qualities still too rare in European excise debates.