Latvia takes plunge on raising its alcohol and tobacco excise duties

Alcohol on sale.
Alcohol on sale. Source: Priit Luts/ERR

Latvia plans to gradually phase in alcohol and tobacco excise hikes over the course of three years, ETV news show "Aktuaalne kaamera" (AK) reported Thursday, though its finance ministry says the hope is that this will not reverse the current situation and make Latvia the most expensive of the three Baltic states, in this product sector.

In the past, Latvia was a haven for cross-border trade from Estonia, prompting governments in the northernmost Baltic state to move towards equalizing rates to avoid losing too much business, but even to the present, excise duties have generally been lower South of the border.

Finance Minister Arvils Ašeradens told a cabinet meeting: "From the tactical side, I would refer to our government's decision to harmonize excise taxes in the Baltic countries. We are neither ahead of our neighbors, nor are we far behind them," said.

Latvia is at the forefront of European alcohol and tobacco consumption, AK reported, while the Minister of Health of Latvia Hosans Abu Meri, a doctor of Lebanese birth, suggested at a cabinet session that the excise duty could be hiked even further, in order to both curb consumption and obtain additional funds for the health sector.

Abu Meri said that the excise duty will increase too little based on the current proposal, while their ministry's stance follows recommendations given to the Baltic states by the World Health Organization (WHO), that excise on all alcoholic beverages should increase by at least 15 percent per annum; the excise duty on tobacco products by at least 10 percent.

Other planned changes in Latvia include a 25 percentage-point hike in the country's gambling tax, and the harmonization of VAT on fruits and vegetables – currently at just 5 percent – with the rest of the VAT system; the agricultural sector will be able to obtain compensation for this, AK reported.

Finance Minister Ašeradens says that the excise duty changes will be presented to the Saeima, the Latvian parliament; the government approved the finance ministry proposal to up the excise duty rate by up to 10 percent per year for three years from March 1, 2024.

Excise duty on tobacco products would increase by 5 to 6 percent per year also, under the new scheme.


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Editor: Andrew Whyte, Marko Tooming

Source: 'Aktuaalne kaamera,' reporter Ragnar Kond.

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