The reduced rate will not apply to beer, wine or other alcoholic beverages containing up to 22 percent pure alcohol.

On July 8, the Saeima passed amendments to Latvia's excise tax law in response to Estonia's decision to lower excise duty rates on beer, cider and strong liquor by 25 percent as of July 1.

Authors of the draft amendments argued that the cut as necessary as recent tax measures adopted in Estonia were likely to have a negative effect on the Latvian alcohol market and retailers, particularly in Latvian-Estonian border areas.

The Latvian Ministry of Finance forecast the situation to have a negative impact of up to €92 million on the state budget, and recommended cutting the excise duty rate on strong liquor by at least 15 percent in order to offset the negative effects of Estonia's own cut. The ministry expects the duty rate cut to reduce the negative fiscal impact to €32 million.

Mārtiņš Bondars, chairman of the Budget and Finance (Taxation) Committee of the Saeima, previously told journalists that lawmakers may still decide on duty rates after Feb. 29, taking into consideration agreements on budget legislation, but this would depend on the result of talks between Latvia and Estonia, which are necessary to "prevent a situation in which two countries engage in excise tax rivalry."

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