According to media reports on Thursday, Latvian Prime Minister Krišjānis Kariņš has claimed that Estonia violated an agreement on excise duties with Latvia when the government decided to lower duties levied on alcoholic drinks. Interior Minister Mart Helme (EKRE) emphasized that no such agreement exists, and that Latvia's own excise duties reduction does not mean Estonia's most recent policy adjustment is a failure.
Helme went on to day that any such statement by the Latvian prime minister is "domestic propaganda." Meanwhile, the findings based on which the government recently decided to lower Estonia's excise duties on alcoholic drinks still apply, and the excise cuts are here to stay.
This, according to Helme, in the long run will mean that prices of alcoholic drinks will eventually be the same on both sides of the Estonian-Latvian border, and that cross-border trade will develop accordingly.
"However, what will happen, and this is largely thanks to the daring excise duty hike of the Finns, is that we will likely get back the trips made by our northern neighbors, and Estonia's tax receipts will definitely improve as a result of the excise duty cut," Helme said. "Claims that we have failed with our excise duty reductions are unfounded," he added.
Helme also confirmed that there are no binding and signed agreements between Estonia and Latvia regarding excise duties. According to Helme, what Latvia has claimed has been the subject of debate in the Baltic Assembly. If the Latvian prime minister claims the opposite, this is a Latvian domestic policy propaganda issue, the Estonian minister said.
"We are not starting any sort of excise war, and there are no new excise duty reductions planned," Helme added.
The Saeima's decision to reduce the excise tax rate on alcohol might enter into effect in August, Prime Minister Krišjānis Kariņš said in an interview with the Morning Panorama program of Latvian Television.
The Latvian government leader was reported to have said on Wednesday that such a measure in response to Estonia's decision to slash its excise duties on alcoholic beverages would be an obvious course of action, though passing the necessary legislation will not be easy during the summer period.
Kariņš suggested that several years ago, both countries agreed that Latvia would raise the alcohol tax to bring it closer to the Estonian level. At that time, Latvia decided to raise the tax gradually in order to avoid an increase in the amount of contraband alcohol sold.
"I absolutely don't want an excise war with Estonia, but if the Estonians break the agreement and start this war against us, we will have no choice but to respond by reducing the excise taxes accordingly," the Latvian prime minister said.
He said the reduction would mean reverting approximately to the tax levels of last year.
Latvia last raised excise tax rates on alcoholic beverages in March this year. Now the excise tax rates are approximately the same as in Lithuania, though still significantly lower than those in Estonia.
The 25-percent reduction of Estonia's alcohol excise duty will enter into force on July 1 this year.
Editor: Dario Cavegn