Alcohol excise duty hike cut in half

Photo: Gareth Fuller/PA Wire/PA Images

The government decided at its cabinet sitting yesterday to cut in half the planned hike of excise duties on strong and light alcoholic beverages,” Kanal 2 news reported.

This means that the duty on beer and cider will go up by 9 percent instead of 18, while the tax on strong alcohol will grow by 5 percent instead of 10 next year. The duty on wine will be hiked in the originally planned volume.

It is difficult to forecast how the hike will manifest in the price of beer in shops as traders are bound to adjust their margins. It is probable retail prices will go up a few percentage points.

Prime Minister Jüri Ratas (Center Party) said the government heard analyses by the finance ministry and other agencies yesterday and concluded that alcohol consumption has fallen in Estonia. “We took a more thorough look at broader economic effects tied to border trade. The cabinet decided the duties will go up by half of what was initially planned for next year,” the PM said.

Minister of Healthcare and Labor Jevgeni Ossinovski (SDE) told ERR that the duty on wine will grow in the planned volume because wine does not carry the risk of border trade.

Ossinovski said that while the finance ministry has no information to suggest planned revenue would be missed, it also lacks an analysis that would allow it to only make the right decisions. “Even though we would be far better informed on December 21 by which time November tax receipt would be in, the Riigikogu would have passed the budget by then, meaning that we cannot afford to wait,” the minister said.

“The situation being what it is, the finance ministry has made a rational proposal to cut the planned excise duty hike in product categories where the manifestation of risks is likely greater,” Ossinovski added.

Minister of Finance Toomas Tõniste (IRL), who took the proposal to the government, said that while his aim was to see the hikes canceled altogether, an acceptable agreement was achieved in the end. The minister said that the decision should slow down border trade with Latvia and help retain Finnish business in Tallinn.

Despite the decision for a smaller hike, Tõniste still hopes to collect more than €330 million in excise duties next year. According to the minister, yesterday’s decision leaves a €10 million tax hole that could be patched using state company dividends.

No decision was made concerning hikes in 2019, and Tõniste promised the government would discuss duties on alcohol in the longer perspective in spring.