The next scheduled alcohol excise duty hike, planned for 2019 should be canceled, said Minister of Health and Labour and chairman of the Social Democratic Party (SDE) Jevgeni Ossinovski.
"The Ministry of Finance has made an error in forecasting border trade and it is only right to correct previous decision," Ossinovski said in a letter to his fellow party members. "This is why I think that the excise hike planned by [former government leader and Reform Party member Taavi] Rõivas already for 2019 should be canceled.
"As Latvia is also raising its excise duties, as a result of this change, the difference in excise duty on vodka between the two countries will be smaller than it was in 2016, when border trade gained momentum," he said, adding that the difference in excise duty on beer between Estonia and Latvia will decrease as of March, when Latvia will increase its excise duty on alcohol to slightly over 20 cents per bottle.
"Along with this correction, we can clearly say that alcohol policy has been reviewed," explained the party chairman. "The right decision has been made, and we will wait for its positive results — both on public health as well as the party. As our next step, we must bring back into focus the real Social Democratic issues, which the voters expect from us."
The Pro Patria and Res Publica Union (IRL) had previously already been in favor of canceling the excise duty hike scheduled for next year. "Of course we do not consider increasing the excise duty on alcohol to be reasonable," IRL chairman Helir-Valdor Seeder said at the beginning of February.
Prime Minister and Center Party Chairman Jüri Ratas said after this that a change in excise policy must be considered in budget strategy discussions and that the Estonian government may cancel the alcohol excise duty hike planned for next year if the Minister of Finance can find sources of income to cover the resulting gap.
Estonia's alcohol excise duty rates have seen a considerable increase over the past few years. The excise duty on alcoholic beverages with a low alcohol by volume (ABV) has increased the most; for instance, the excise duty on beer has more than doubled since 2015. As a result, Estonians are making more and more trips to Latvia to purchase alcohol, and alcohol excise duty receipts have decreased in turn.
The government coalition decided to halve the 2018 excise duty hike that went into effect on Feb. 1. At the same time, however, the alcohol excise duty hikes planned for 2019 and 2020 remained unchanged. According to current legislation, the alcohol excise duty is to increase ten percent in both 2019 and 2020, while the excise duty on wine is to increase 20 percent.
Last year, Estonia's alcohol excise duty receipts decreased by 12.8 percent, or €32.5 million. Alcohol excise duty receipts totaled €221.7 million euros in 2017, coming in 19.8 percent or €54.8 million below budget.
Editor: Aili Vahtla