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Estonian government halves size of next planned alcohol excise duty hike

Prime Minister Jüri Ratas (Center) and Minister of Health and Labour Jevgeni Ossinovski (SDE) at a Cabinet meeting.
Prime Minister Jüri Ratas (Center) and Minister of Health and Labour Jevgeni Ossinovski (SDE) at a Cabinet meeting. Source: (Siim Lõvi/ERR)

The Estonian government on Thursday evening decided to halve the next planned alcohol excise duty hike on beers, ciders and strong liquor, which is to take place in February.

The Cabinet on Thursday discussed Minister of Finance Toomas Tõniste's (IRL) proposal to call off the next planned alcohol excise duty hike.

Minister of Health and Labour Jevgeni Ossinovski (SDE) confirmed that according to the Ministry of Finance, there is no reason to change the forecast for alcohol excise duty receipts, as excise revenues in recent months have followed expectations, but possible new risks have been identified which are connected primarily to Finns' purchases.

"And although Finland will be increasing their own excise duty rates next year, which should in fact reduce this effect, then as a result of these discussions and based on the proposal of Ministry of Finance predictors, we reached the solution that, in order to reduce the realizatin of potential negative risks, next year the alcohol excise duty on low-alcohol drinks and strong liquor will increase by half as much as initially planned," Ossinovski told the press upon leaving the Cabinet meeting.

While both vodka and beer were to see increases in retail prices of about six percent due to the excise duty hike, the government decided to reduce the increase to within three percent. "At the same time, as there is no such risk of cross-border trade in wine, no decisions were changed with regard to the excise duty hike on wine, and so the excise duty on wine will increase in the previously agreed upon amount," the minister added.

According to Ossinovski, the budget should still see receipts of the planned sums even after the size of the next duty hike is reduced.

"The Ministry of Finance does not currently have information that the sums planned for next year will not be received," he explained. "Since the summer months, excise duty receipts have equaled expectations, and the Ministry of Finance believes that their forecast for next year will remain true. But naturally various behavioral risks have been revealed, and as I said, one new risk about which we initially had less information is connected to Finns' purchases."

According to the minister, the government claimed that there is currently no good analysis based upon which to completely and correctly make decisions.

"Unfortunately the so-called calendar cycle is such that we would be significantly better informed on Dec. 21, when November receipts are known, but the Riigikogu will have passed the [2018 state] budget bill by then," Ossinovski noted. "It's not possible for us to simply wait."

Given the situation, the Ministry of Finance proposed decreasing the planned hike for those product categories in which the likelihood of these risks being realized is likely greater.

Finance minister: Dividends to partially cover difference

According to the current law, the excise duty on beer should increase 17.65 percent, on cider 17.89 percent and on hard liquor ten percent.

Minister of Finance Toomas Tõniste (IRL) explained to ETV news broadcast "Aktuaalne kaamera" that the planned receipts for 2018 will decrease by €10 million in 2018 as a result of the government's decision.

"Next year, the projected impact of the alcohol excise duty hike is an extra €35 million," Tõniste said. "The impact of our decision from today not to implement the alcohol excise duty hike in full on Feb. 1, but rather halve this plan for strong liquor, beer and cider, will be €10 million."

According to the finance minister, issues with the budget may occur if the effects of cross-border trade increase and excise duty receipts shrink even more. "But today's step will help alleviate risks and move toward more exact receipts," he added.

Alternative sources for this €10 million must also be found, Tõniste said, noting that the ministry would propose them within the next couple of days. "They do exist, they just need to be agreed upon," he said. "According to initial plans, dividends have been planned to partially cover this."

Editor: Aili Vahtla

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