Cross-border shopping of alcohol – What is the effect on tax revenue and sales and which products are most affected?

Abstract

We use COVID-19 border closings and comprehensive store-level data on Norwegian alcohol sales to quantify the effect cross-border shopping of alcohol on sales volume and commodity tax revenue. Effects are large, for instance we estimate that commodity tax revenue for wine is about 20% lower because of cross-border shopping. Using product level data we establish that effects come from across all products rather than just a few, but effects are especially marked for bag-in-box wines. Neither availability of the exact same product in Sweden nor idiosyncratic product-level price difference with respect to Sweden has any marked effect on the impact of cross-border shopping on sales.