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Cross-border trade brings in 500,000 liters of beer, not millions

The Food Industry Association claimed on Tuesday that cross-border trade had brought in millions of liters of beer within just months.
The Food Industry Association claimed on Tuesday that cross-border trade had brought in millions of liters of beer within just months. Source: (Quinn Dombrowski/Creative Commons)

The Ministry of Finance said on Wednesday that approximately 500,000 liters of beer had been brought into Estonia within five months, contradicting earlier data by the Estonian Food Industry Association, who had talked about several million liters.

“The Estonian Tax and Customs Board estimates that short-term visitors to Latvia have brought approximately half a million liters of beer to Estonia in five months. This accounts for a very small part of the total consumption of beer in Estonia,” spokesman for the Ministry of Finance, Ott Heinapuu, told BNS.

This position is also supported by Latvian statistics. As any alcohol bought as part of cross-border trade must be reflected in the tax revenue earned by Latvia, the increase in cross-border trade to millions of liters this year would have to be highlighted in the country’s tax receipts, which it isn’t.

The Latvian Tax Board said last week that in the first five months of this year, 59.9 million liters of beer had been allowed for consumption or retail sale in Latvia, 0.6 percent more than at the same time the previous year.

Peeter Võrk, head of the Estonian Breweries Association, which helped calculate the figures published by the Estonian Food Association on Tuesday, was unable to explain this anomaly. He said that June would perhaps bring a change, but admitted that it isn’t realistic to assume that cross-border trade would have increased at such a rate in June.

The Estonian Food Industry Association stated in a press release on Tuesday that according to its own calculations, 9.7 million liters of alcohol had been brought into Estonia within the first six months of 2017, of which 7.1 million liters had been beer.

The association further estimated that all in all, alcohol brought in as part of cross-border trade could account for 17 percent of total consumption this year, increasing to 48 percent next year. The association did not explicitly explain where those assumptions came from.

In the same calculations, the association also highlighted how much tax revenue Estonia would lose due to cross-border trade.

In its Tuesday press release the association stated that Estonia would miss out on between €150 and 170 million in tax until the end of next year, as people continued to shop for certain products across the border in Latvia and higher excise duties in Estonia would keep Finnish tourists from continuing to buy the current amounts.

As stated, the numbers were based on projections by alcoholic drinks producers and importers, and also took into account expected value-added tax losses on products not sold.

The state would lose approximately €68 million euros in excise tax and VAT, and the estimated tax revenue lost in 2018 was already between €150 and 170 million per year, the association stated, money that “could be used to build a four-lane highway between Tallinn and Tartu in three years”.

After Minister of Finance Toomas Tõniste rejected the numbers as “pure PR” on Tuesday, BNS now also referred to the data as “misleading statistics”: In reality, the association’s calculations showed that if the assumptions hold, the state would lose €22 million in tax revenue this year and another €22.6 million next year, a total of €44.6 million, far from the sum actually needed to build said four-lane highway.

The Finance Ministry estimates that cross-border trade this year will negatively affect tax revenue by €22 million, but budget revenue will still increase by €25 million as a result of the higher excise duty.

Editor: Dario Cavegn

Source: BNS, ERR

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