Excise duties fell in 2019 by €5 million after government lowers tax

Alcohol. Source: Priit Luts/ERR

Last year, the state received €5 million less in alcohol excise taxes than in the previous year due to the decision to reduce the excise duty by a quarter. This is despite Estonians buying less alcohol in Latvia and Finns purchasing more in Tallinn.

In 2019, the excise duty on alcohol was 2.2 percent, or five million euros less than budgeted despite an increase in the amount of alcohol for sale in Estonian stores, reported by "Aktuaalne Kaamera" on Tuesday.

Merliin Laos, a fiscal policy analyst at the Ministry of Finance, said when the excise tax rate was cut by 25 percent in July 2019, the main goal was to reduce border trade. "Changes are noticeable on both frontiers. Estonians' purchases have returned to the country. Tourist purchases have returned to the port area," Laos said.

This is also acknowledged by Lennu-Imre Poll, CEO of Superalko Estonia, which operates alcohol stores in the port and on the Latvian border.

"The Finns are starting to come back, and if you look at the sales numbers, they are 30 to 50 percent better than last year," Poll said, adding that the government's decision to cut alcohol duty was the right thing to do.

Poll said sales in Latvian border shops have fallen, which is offset by domestic sales growth. The Tax and Customs Board said short-term border crossings in December were 15 per cent lower year-on-year. According to the head of Superalko, this is offset by the nationwide sales growth. 

Coop stores are also seeing growth in alcohol sales as well. Martin Miido, Communications Manager of Coop Estonian Central Cooperative, said: "After the decline in excise duty, sales will increase. In Central Estonia, Southern Estonia and less in Northern Estonia and the islands, the increase in excise duty also made them feel a little less."

Statistically, sales of strong alcohol increased the most. In the second half of last year, the sale of strong alcohol increased by 66 percent year-on-year and beer by 19 percent.

"When excise duty was lowered in the summer, strong alcohol growth was seen. And quite fast. About 30 percent. However, sales of light alcohol did not grow so fast, which is probably due to the fact that summer was quite cool and light alcohol is such a sensitive product. If individual products were purchased in the past, it can be seen that the packaging has become larger. Larger ones can take the same beer cases here. They have become more popular, "Miido said.

While alcohol sellers say excise duty cuts are all already included in prices, the Ministry of Finance estimates there is still room for some price reductions.

"The latest figure in November shows that prices have reached 60 percent. And when viewed by type, there is still room for lower prices for hard alcohol, and even higher than expected for beer," said Merliin Laos.


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Editor: Helen Wright

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