Booze producers are blasting the government

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Photo: Toomas Huik

Yesterday, strong alcohol beverages producer Liviko announced of having laid off 18 posts and a switch to part-time work citing ultra sharp excise rise by the state.

«With no other options to compensate the volumes lost and export not catching up, we’ll try and keep up efficiency some other way,» said the CEO Janek Kalvi.

According to Mr Kalvi, Liviko does not see this as a one-off difficulty – following the excise rise of 15 percent this year, there are ten more percent to come on 2016. Excise used to grow by five percent a year.

Mr Kalvi said so far the company has managed the excise rises nicely. Now, however, exporting is made harder by other countries having a difficult time as well.

Liviko is exporting a third of its production. Of that, a fifth goes to Russia. «Surely Russia will backfire as well,» said Mr Kalvi, referring to recent drop in value of the rouble.

On top of that, a steep fall is evidenced in purchases by Finnish and Swedish tourists. Partly, that’s because the Finns now have to prove the booze was brought for personal consumption.

Excise making up varying shares of the price of various alcoholic beverages, finance ministry says the effect on prices has been different, but as a rule under ten percent of the final product price. «After this excise rise, sales of strong alcohol will come down 20 percent,» said Mr Kalvi.

A. Le Coq chief Tarmo Noop suggested that, just like Finns, Estonians may also start to haul alcohol home from abroad. «Due to rise in excise, Finns will buy less from us, and on the other hand – increasingly, Estonians will be bringing beer from Latvia where excise is lower than here by two and a half times,» he observed.

According to Mr Noop, sales of beer and cider were down 7 percent year-on-year in second half of 2014 and the decline continues. «If the market drops 20 percent from now, we are forced to halt large-scale production in Estonia and move it to Latvia or Lithuania,» he said.

Since summer, A. Le Coq has cut its payroll by 40 people, 60 are employed part-time.

As pointed out by Food Industry Association head Sirje Potisepp, some years ago alcohol producers and the state reached an agreement regarding excise rising five percent a year. That allowed planning of investments and drawing long-term plans. However, the government that entered into office in March last year raised alcohol excise by 15 percent.

«This isn’t being done to curb drinking, this is to cover costs,» said Ms Potisepp. «Worst of all – where are these people going to get new jobs?» she asked, pointing to the low mobility of workforce in food and drinks sector.

«Alcohol and also tobacco must get more expensive as, in the environment of rising salaries, these may not become relatively accessible. This has been the clearly stated standpoint of politicians, one we are guided by,» said Dmitri Jegorov, vice chancellor for tax and customs policy at finance ministry.

By the 2015 alcohol excise rise, finance ministry estimates the state will pocket additional €23.5m in excise and €4.7m in value-added tax.