As of late June, as much as 18 percent of hard liquor consumed in Estonia was sold on the Latvian side of the border, which, according to the Estonian Union of Alcohol Producers and Importers (ATML), suggests that the Estonian government stands to forgo 15-20 million euros in excise duty and VAT in 2016.
"Cross-border trade on the border with Latvia is becoming an ever more serious tax problem month after month, and we are making constant efforts to raise awareness of this among politicians and officials," said Nele Peil, general manager of the ATML, in a press release. "Beginning in January, sales in stores on the Latvian side of the border have doubled every month, and Estonia stands to forgo 15-20 million euros in alcohol taxes alone this year.
Peil noted that the government was mistaken in its belief that reduced alcohol sales at points of sale in Estonia were a result of rapidly declining consumption, pointing out that the decline was actually the result of a tremendous surge in cross-border trade.
She also added that cross-border trade and consumption of illicit alcohol were threatening the survival of small rural stores, and that large retail chains have warned that losing a big portion of the alcohol market may force them to increase markup on food instead.
The ATML maintained that the solution is to reverse the hike in excise duty implemented in 2016 and to raise the duty in the future at the same rate as wage increases instead of viewing the alcohol excise duty as an inexhaustible source of revenue, tapping into which had no side effects.
Beginning in March of this year, the inflow of excise duty revenue into the state budget has consistently been smaller by approximately 10 percent compared to the same month the previous year, added Peil.
Data from the ATML is based on the sales data of organization members during the first half of this year as well as their orders and forecasts for the full year.
Editor: Editor: Aili Sarapik