Tax Board: Implementation of sweetened drinks tax to cost €4.9 million

Implementing the government's planned sugary drinks tax will cost Estonia €4.9 million over four years, said Raili Roosimaa, deputy director of the Tax and Customs Board.
During a session of the Riigikogu State Budget Control Select Committee Monday, Roosimaa explained that good tax design is simple and convenient, and it is difficult for taxpayers to avoid this tax. She outlined four problems and tasks that the Tax and Customs Board (MTA) faces in relation to the planned tax.
Roosimaa mentioned that since the MTA involves interested professional associations in the preparation of taxes, the year 2026 seems more realistic for the implementation of the tax on sugary drinks than next year. She also mentioned the cost of implementing the tax for the state.
"Implementing the tax will cost €4.9 million over four years. Two million for IT investments and development, the exact price of which depends on the content of the draft law; three million euros are economic costs and personnel expenses," said Roosimaa.
"MTA has questions regarding the object of the tax. The tax is narrowly targeted, but the exemptions are unclear – how to tax sugared drinks that are used for multiple purposes. For example, are there tax differences between a sugared drink sold in a cafe as a beverage and when it is used in the production of confectionery," Roosimaa explained.
MTA also has questions about how importers should recognize themselves as taxpayers. "Especially when supply chains differ. To what extent is it possible for the MTA to find and identify them if they do not have a registration or licensing obligation?" Roosimaa pondered.
Roosimaa emphasized that no new tax is implemented without supervision. "The question arises, how do we find the taxpayers? And once these individuals are known to us, how then do we verify whether the data they provide is correct? In addition, according to the draft law, small producers are not required to submit data," said Roosimaa.
Roosimaa stated the need to clarify how to practically implement MTA's supervisory duty in a manner that is reasonable and not financially burdensome. Since tax calculation is based on the information on the product, she questioned how to assess the tax obligation when a sample can be taken from one bottle but cannot be applied to an entire batch. "The cost of a single analysis is €90," said Roosimaa.
Speaking before the commission, Sirje Potisepp, the head of the Estonian Food Industry Association, told the committee that the planned so-called soda tax is not a health tax.
"Arguments from the World Health Organization are selectively used. Our survey conducted by Kantar Emor shows that 62 percent of respondents are against the tax on sugary drinks. We consider this initiative by the Ministry of Social Affairs to be irresponsible and cynical, as consumers and producers are going through difficult times," Potisepp said.
"This tax will not bring money to the state budget nor will it contribute to producers' self-regulation, and we do not need it because we already have self-regulation," she stated.
In response to Potisepp, Health Minister Riina Sikkut (SDE) said the planned tax is a health tax. "If we had wanted to just fill the state's coffers, we would have created a tax with a broader base, like Finland or Latvia. Our desire to tax drinks with a very high sugar content is genuine," said Sikkut.
"Reducing the tax rate according to the amount of sugar should motivate a reduction in sugar in recipes. Estonia's tax is higher than Latvia's, but they do not wish to change the recipes, they want to fill the budget. Estonia would not make a tax that is more burdensome on the MTA if all we wanted to do was to top up the budget," she explained.
The minister added that children's health is not only the state's concern but should be everyone's concern. "We cannot only deal with children's health when producers suddenly start doing well," Sikkut said. Raising awareness is not enough; other measures must also be implemented, the minister added.
The State Budget Control Select Committee of the Riigikogu received an overview of the taxation of sugared drinks at a public session on Monday.
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Editor: Mari Peegel, Marcus Turovski