Minister of Finance says alcohol tax cuts increased economic growth

Minister of Finance Martin Helme (EKRE)
Minister of Finance Martin Helme (EKRE) Source: Siim Lõvi/ERR

Minister of Finance Martin Helme (EKRE) speculated that the government's decision to reduce the alcohol excise duty was behind the 4.2 percent economic growth in the third quarter announced on Friday.

Helme wrote in a post on Facebook that if many experts were surprised by the good economic and wage growth statistics then they should not have been.

"Although this is only mentioned off-hand, one of the drivers of good wage growth is the service sector, and commerce remains at a good level despite people's more cautious expectations. Thanks to wage growth, labor taxes are in a very nice surplus, and VAT is also showing higher receipts than feared," Helme wrote.

"So I will help those experts who are scratching their heads wondering why and how. Behind this to a very significant extent is the decision to reduce the alcohol excise duty. We all remember the mocking this summer that this is a government that worships drunkards. In fact, this decision brought Estonians' purchases back from Latvia (and the trend continues, we see this in our monthly tax reports) and reversed the declining trend of Finnish tourism. Finns certainly don't just buy vodka here, as the cliche goes, but also visit hotels, spas, restaurants, hairdressers and shopping centers. In other words, they bring money to commerce and the service sector, and help to increase turnover and wages there. People tend to forget this when talking about excise duties," he said.

Helme wrote that, in addition to a good collection of excise duties, the duty on alcohol has had a major impact on the rest of the economy and other taxes. "In the past, the impact was negative, now it is clearly positive," Helme said.

"Thanks to this summer's excise duty cut, we now also have higher tax receipts on labor taxes and VAT in particular. Wage growth and good trade turnover boost the economy. And of course one can say that economic growth reflects exports, but within these exports is tourism revenue as well. I have been saying all of this since they started raising the alcohol excise duty rate. This week's data once again confirms that I was right. We are not a government supporting drunks, but rather a government supporting economic growth. And all of these arguments, from a slightly different angle, are valid in support of lowering the diesel excise duty rate as well," he explained.


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Editor: Helen Wright, Aili Vahtla

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