The Estonian Food Industry Association thinks that the state will miss out on between €150 and 170 million in tax, as people continue to shop for certain products across the border in Latvia. The association’s numbers are based on projections by alcoholic drinks producers and importers.
The association looked into the sales results of importers and alcoholic drinks producers in the first half of 2017. Based on these numbers it concluded that the Estonian state will lose €68 million in tax revenue this year, and up to €170 million next year, the association wrote in a press release on Tuesday.
Sales along the Latvian border had increased substantially, with a total of 9.7 million liters of alcoholic drinks sold along the Latvian border, of which 7.1 million liters of beer and 1.4 million liters of hard liquor.
These sales results showed that sales along the border had grown by a factor of three in absolute numbers, the association claimed.
Translated into excise duties the Estonian state missed out on as the drinks were sold in Latvia and not in Estonia, this meant that €24 million in tax revenue were never realized.
The association then used this number to project tax losses for the remainder of the year as well as for 2017. Then it calculated based on missed sales revenue what the value-added tax (VAT) would be, and added this amount.
It then looked north: “In addition it is worth pointing out what is happening at the northern border, and what the government at this point hasn’t even included in its calculations. In a situation where the difference between alcohol excise duties on both sides of the Gulf of Finland is decreasing, slowing exports of alcoholic drinks across the northern border will affect tax revenue more and more as well,” the association wrote.
Here, the association expects the state to miss out on €15 million this year, and up to €50 million in 2018. All of these numbers taken together—lost tax revenue because of cross-border shoppers, lost VAT, and projected numbers based on the absolute sales figures of the producers and importers the association represents—then make up the €170 million mentioned above.
Editor: Dario Cavegn