25 percent excise duty cuts comes into effect Monday

Alcohol for sale in Estonia.
Alcohol for sale in Estonia. Source: Priit Luts/ERR

Excise duty cuts of 25 percent came into effect in Estonia on Monday. The rate slashing affects beer and cider, as well as spirits.

The law amending the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act 2008, in its accompanying notes, is aimed primarily at giving business operators an opportunity to cut alcohol prices in order to curb cross-border trade with Latvia, which gained momentum in 2015, BNS reports.

Successive hikes in excise duties in Estonia had, critics say, led to a large amount of custom from Estonia and even Finland traveling to Latvian border towns such as Valka or Ainaži (Estonian: Heinaste) to stock up on cheaper alcohol, to the detriment of Estonia's economy as a whole.

Opponents of the recent duty cuts have argued that tax revenue overall will fall, since the forecast growth in sales will not keep up with the excise fall, particularlly with the trend in recent years for an overall fall in alcohol consumption, or even that the cuts will not translate to lower prices, leading to greater profits only for producers.

Latvia too responded with a proposed rate cut of its own, at 15 percent, potential sparking off a trade war.

The bill was put to the Riigikogu by the ruling coalition of the Centre Party, the Conservative People's Party of Estonia (EKRE) and Isamaa, and passed its vote decisively on June 13, by 70 votes in support to nine against, BNS reports.

The bill's second Riigikogu reading saw an amendment aiming to avoid a loophole where alcohol on sale in Estonia prior to the excise cuts coming into effect might be transported from Estonia to any other EU member state and back to Estonia to fraudulently reclaim excise duties.

Goods already released for consumption in Estonia are thus subject to the excise duty rate in force when the goods were released to the market for consumption, according to BNS.

Other recent changes in alcohol policy in Estonia include the mandatory separation of alcoholic drinks' points of sale from other products in stores, except for smaller outlets where this was not practical.

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Editor: Andrew Whyte

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