In addition to the already legislated excise increases on alcohol and tobacco products scheduled for January 2025 and 2026, the new draft bill proposes a further 5 percent rise in excise rates during the same years. This means excise duties will increase by 10 percent in both 2025 and 2026. For 2027 and 2028, excise duties on alcohol and tobacco products will rise by 5 percent each year.

"Excise duties serve two purposes: generating revenue for the state budget and also limiting consumption. The harmful side effects of these goods are the reason excise taxes exist, and why they shouldn't remain relatively cheap over time," explained Finance Minister Jürgen Ligi (Reform).

Lauri Laats, chairman of the Center Party group in the Riigikogu, noted that the excise hikes will have a broader impact than just on the prices of alcohol, tobacco and gasoline.

"You can't look at just one sector. If we raise the excise on beer or gasoline, what happens? In reality, the effect is much broader and will impact absolutely every sector," he commented.

In 2018, protests were held against previous excise increases in an action called "Taxes are Going to Latvia." At that time, the Reform Party was in opposition and criticized the excise hikes. Jürgen Ligi does not believe that taxes will shift to Latvia again.

"That movement was due to a sharp rise in alcohol excise, and we criticized that increase. Over time, people's purchasing power grows, and excise should keep pace with inflation to some extent. But it hasn't," Ligi said.

The finance minister also plans to meet with his Latvian counterpart to discuss aligning excise policies.

Estonia's gasoline excise rates have remained unchanged since 2018. Due to the challenging state of the national budget, excise duties on unleaded gasoline and aviation fuel will be increased by 5 percent annually for the next four years.

"We are more cautious with diesel excise because it's a highly mobile fuel, used for long distances, and its role in the economy is larger than just private consumption," Ligi stated.

Tarmo Kärsna, head of energy sales at Alexela, acknowledged that the excise increases will affect consumers' purchasing power. He noted that a decrease in fuel consumption compared to the previous year is already evident.

"Both the excise increase and the overall economic environment are such that we can already see a decline in consumption. Just like in retail, it's clear that people are thinking more carefully before driving and refueling, with refueling quantities smaller than a year ago," Kärsna explained.

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