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Should governments sell liquor and run lotteries?
Why in News?
Kerala Governor recently criticized the State government for relying heavily on liquor and lottery to generate revenue.
Should the government sell sin goods? No!
● The role of the state is to provide public goods: The consumption of sin goods is instead linked with ‘public bad’.
● Negative effects of sin goods: Disproportionately impact the weaker sections of society.
● Public health concern: The rising demand for alcohol is a public health concern
● Revenue-maximizing objective: It takes precedence over the public interest.
How can the state play a positive role?
● Raising the tax rates and prices of sin goods will discourage people from consuming them in the long run.
● Developmental programs: Taxes collected from a significant source can be used for development programs.
Why is the State government increasingly dependent on taxes from sin goods?
● In 2019-20, Own tax revenues, collected by the States, accounted for only 43.5(forty-three point five)% of the total revenues of all States/UTs combined.
● Financial devolution: State governments are heavily dependent on financial devolution from the Center.
● There are only a limited number of goods and services, mainly alcohol and petroleum products, on which the State governments can independently set tax rates.
● Limited autonomy: The States enjoy limited autonomy in raising financial resources.
Way forward:
● Measures to limit the consumption of tobacco: It should go hand in hand with steps for providing alternative livelihood opportunities for those engaged in tobacco farming and processing.
● It is essential to deploy other instruments too such as public campaigns against the abuse of intoxicants.
● There is a limit to controlling demand simply through sin taxes: Government needs to take lessons from the Temperance movement.
○ Temperance movement(the 1880s): It was the lower castes and tribes’ movement against the role of the British Imperial state in encouraging the sale of alcohol.
● Rethink:
○ How the rising demand can be influenced by some health campaigns by the state.
○ Individuals take more responsibility for the social impact of their drinking.
Mains Links:
Q. Do the government’s schemes for uplifting vulnerable and backward communities by protecting required social resources for them, lead to their exclusion in establishing businesses in urban economies? (UPSC 2014)
