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Supreme Court: Faster hike in alcohol excise duty not unconstitutional

The Supreme Court of Estonia found that the legislative body's decision to increase the excise duty on beer and cider faster than planned was not unconstitutional.

Chancellor of Justice Ülle Madise turned to the Supreme Court to determine whether the sped-up increase in taxes on alcohol was in conformity with the Constitution, citing that the rapid rise interferes with the freedom to conduct business of companies involved in handling alcohol. The chancellor of justice said that a legitimate expectation arose for the companies handling alcohol that the law passed in 2015 would not increase the excise rates set for 2017 and 2018.

The Constitutional Review Chamber of the Supreme Court did not agree with the chancellor of justice and said that no legitimate expectation could have arisen on the basis of the law passed in 2015. The chamber said that although the Constitution is the basis for the legitimate expectation principle, which must ensure the certainty of the continuity of norms that have been implemented, this does not take away the right of the Riigikogu to amend laws.

The legislator has extensive jurisdiction to implement taxes, which also means a lot of room for consideration when it comes to carrying out policies concerning excise duties. Thus, the legislative body can reshape legal relationships according to changed circumstances and, with this, inevitably worsen the situation of some members of the society.

"A situation in which tax rates have been fixed for years in advance and the legislative body does not have the chance to change them in accordance with changed economic and social circumstances may not be consistent with the principle of democracy," the chamber stated. Judicial control is limited in this regard.

The Supreme Court agreed with the chancellor of justice in that the provisions in question negatively affect the freedom to conduct business of companies handling alcohol as the product's final price, which increased due to the excise hike, may bring along a decrease in demand and therefore also a decrease in the company's profit. At the same time, the chamber said that it is the duty of the state to protect the health of its people and as alcohol is one of the biggest causes of health damage, restrictions set on alcohol production, sale and consumption are undoubtedly necessary. The price policy of alcohol, including excise duty, is an important part of the alcohol policy directed against the excessive consumption of alcohol.

For the aforementioned reasons, the Supreme Court left unsatisfied the chancellor of justice's request to declare unconstitutional the paragraphs of amendments to the Income Tax Act, Social Tax Act and other laws which stipulate the sped-up rise in alcohol excise duty.

Editor: Aili Vahtla

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