August alcohol tax inflows up 13.5 percent on year

Strong liquor for sale in a supermarket.
Strong liquor for sale in a supermarket. Source: Anna Aurelia Minev/ERR

In August 2019, the Tax and Customs Board (MTA) collected €663.7 million in taxes, up 9.2 percent on year, while tax receipts on alcohol surged by €20 million, or 13.5 percent on year.

In the first eight months of the year, 65 percent of the total amount of taxes budgeted to be received in 2019 had already been received.

Of the major taxes, the amounts received were influenced the most on year in August by bigger inflows of social tax, income tax of legal persons and personal income tax, the Ministry of Finance said on Tuesday.

Inflows of income taxes of legal persons was high in August primarily as a result of an increase in the income tax paid on the private sector's distributed profit. Inflows were reduced, meanwhile, by the reduced tax rate of 14 percent applicable to regularly distributed profits beginning this year.

Inflows of labor taxes were supported in August by an acceleration of the increase in average wages to 8.6 percent and an increase of 1.7 percent in employee numbers. Inflows of personal income tax had increased primarily as a result of a bigger payroll, while receipts were also boosted by the 7 percent income tax on dividends of resident physical persons.

As people's incomes grow, the inflow of consumption taxes increases as well. The increase in VAT receipts accelerated somewhat on month to 6.7 percent. By field of activity, real estate and plant and animal production contributed the most to the increase in VAT inflows in August 2019.

Fuel, tobacco duty receipts up

Excise duty receipts increased by 2.7 percent on year in August. 8.5 percent more fuel excise duties were paid into state coffers in the first eight months of 2019 than during the same period last year, including 2.7 percent more diesel and 25.4 percent more gasoline.

More gasoline was declared this year than last year, as the comparison is with a low tax income base in 2018; the increase in the excise duty for gasoline in January 2018 was preceded by stocking up in December 2017. Adjusted to stocks, 2.2 percent less gasoline was declared in the first eight months of this year than during the same period last year.

August tobacco excise duty inflows increased 1.6 percent on year. As a result of the 10 percent increase in the excise duty rate at the beginning of 2019, the price of a weighted average package of cigarettes rose 9.8 percent on year. Despite the higher price, the declaring of cigarettes has not increased this year. According to the MTA, this is due primarily to the reduced availability of cigarettes on the black market.

Alcohol excise duties up 13.5 percent

The amount of alcohol excise duty paid in August was up 13.5 percent on year. 17.9 percent more beer and 87.7 percent strong liquor was declared on year. The increase in the declared amount of strong liquor can be attributed to several factors, including the retail sale of alcohol in stores increasing due tow decreased prices and changes in cross-border trade.

On the other hand, producers and retailers stocked up on a year's worth of strong liquor at the beginning of 2018, which resulted in low alcohol excise duty receipts in the middle of the year.

In recent months, the dynamics of the inflows of the alcohol tax have been influenced significantly by the reduction in the alcohol excise duty that entered into effect on July 1, when duties were cut by 25 percent for strong liquor, beer and fermented beverages of less than 6 percent alcohol by volume (ABV).

Immediately prior to the lowering of the excise duty, stores no longer stocked up on products subject to the higher duty rate and sold their existing stocks to a greater degree.

This July, stores acquired larger amounts of beverages subject to the lower duty rate in order to replenish their normal stocks.

A major change took place in the declared amounts of strong liquor, which were 39.4 percent higher in August than in May this year. This increase is attributable primarily to changes in cross-border trade, which have included increase in sales on Estonia's northern border and a reduction in sales on the Estonian-Latvian border to the south.

Alcohol excise duty receipts in the first eight months of 2019 were affected the most by the months that preceded the July 1 duty reduction, as a result of which receipts are still down 3.6 percent on year.

According to the latest forecast, alcohol duty receipts in 2020 are to total €228.9 million, approximately 1 percent more than the total budgeted for 2019.


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Editor: Aili Vahtla

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