The Tax and Customs Board (MTA) is looking to equip ten border crossing points with cameras capable of detecting license plates and pass an amendment that would allow it to carry out test purchases to uncover illegal resellers of alcohol bought in Latvia.
Let it be said right away that the board is not targeting Estonian people who are currently allowed to bring over 10 liters of spirits and 110 liters of light alcoholic beverages in one trip.
Cameras to detect license plates
The board does, however, want to be prepared for when growing price difference will result in the emergence of networks of resellers of cheap Latvian alcohol.
The signs that there is cause for concern are there. This summer's record in the so-called Latvian alcohol rally was broken last week when customs officials pulled over a van the driver of which had loaded one and a half tons of beer that he intended to take to Finland. It is probable the driver was looking to resell the beer that costs more than twice in Finland of what it does in Latvia.
«He had already made several successful runs, crossing in Ikla and taking the ferry to Finland. We caught him thanks to the license plate detection system,» said Urmas Koidu, head of the customs department at MTA. «Officials always look at newcomers and what could be behind their trips.»
The way to determine the latter is quite straightforward: an algorithm uses images taken in border crossing points to single out vehicles that visit Latvia during business hours of alcohol shops and only stay in the country for 5-45 minutes.
Judging by the data put together with the help of cameras at the Ikla border point, alcohol traffic peaked in July of this year that saw 6,071 short trips to Latvia and back. The figure had dropped to 3,445 trips or on average eight trips an hour by September. Koidu said that traffic has doubled since last year, and that cold weather does not seem to be deterring people.
The tax board wants to install similar cameras – 14 in total – on all major roads between Estonia and Latvia in the near future. The object is not only better monitoring of alcohol tourism but also to combat illegal fuel and narcotics trafficking and other crimes.
«Persons of interest sometimes leave Estonia, while cameras do not show them returning, which is why we want to have cameras looking at all roads,» Koidu explained.
Customs officers have carried out around one hundred random checks of vehicles that have visited the Ikla border station's alcohol shop on the Pärnu highway in the past couple of months. Cases where the maximum amount of alcohol that can be brought into the country has been exceeded have been few.
«We can say that no one goes there every day. However, we will check people who make the trip four or five times in a short time. We have had a couple of cases where we suspected resale was the goal this summer,» Koidu said.
To determine the latter, authorities look at the entire causal chain. «When we see that the person who owns the vehicle also owns a nearby bar and drives across the border often, we will look into it; we'll visit the bar and see what's on sale there.» That is the reason the MTA is after an amendment that would allow its officials to make test purchases to uncover resellers.
Small-scale market distortion has already been noticed on both sides of the border. The MTA has found that the black market of vodka washed out of spirits so to speak has been replaced by cheap vodka coming from Latvia.
Latvian border settlements where Estonian businessmen are selling cheap Estonian alcohol to predominantly Estonian clients are becoming price oases for Latvians themselves. «Prices are lower in border shops than they are in nearby village shops. The price difference is considerably greater than the difference between the alcohol excise duties of the two countries,» Koidu said.
This means that as small shops close doors in Ikla, local businessmen will soon be looking to open alcohol shops of their own on the border to try and take some of Estonians' market share.
This might cause prices to drop further. «Shops are kept with minimum expenses, which makes it possible to keep prices low,» the department head explained.
Emotional purchases by middle-aged people
Who are the people who drive to Latvia to buy alcohol? A survey carried out by polling company Emor and published last week showed that the average Estonian alcohol tourist to Latvia is a 35-49-year-old Estonian male salaried worker who lives in a small town or rural settlement in Southern Estonia. His income is somewhat surprisingly high – more than 700 euros per family member.
«He is not someone for whom price is an issue as we are dealing with wealthier than average people,» said survey expert at Emor, Aivar Voog. «A person of below average income is perhaps not as mobile nor capable of spending the kind of money that would allow them to buy quantities that would make the trips worth while.»
Voog concluded that people who buy alcohol across the border are still emotional buyers who value the principle of economy above actual financial gain.
However, the situation is subject to change at any time. Calculations by the polling company suggest that should the price difference grow even greater, 26 percent of all alcohol purchased in Southern Estonia could come from Latvia in the future. Urmas Koidu said that it is clear the difference in prices will grow as the excise duty is scheduled to be hiked by 5 percent in Latvia and 10 percent in Estonia.
Koidu offered that the price difference will conquer Estonia's pain threshold once the amount of alcohol bought in Latvia becomes so great as to rob the state of the majority of planned excise duty revenue.
«For example we expect revenue to grow by 7-8 percent in a situation where the excise duty is hiked by 10 percent. However, if growth of revenue amounts to just 1-2 percent, we have to ask what is the point,» Koidu said. «Then you have the question of whether these hikes that are planned over four years are still purposeful.»