Estonia to Increase Excise on Tobacco

Estonia’s incoming government plans to increase the excise duty on tobacco and alcohol products, but the rate has not yet been released, according to The Baltic Times.

“The coalition partners have agreed upon a slow yearly growth, and a proposal by the finance minister is expected regarding concrete rates,” said Merlyn Sade, head of communications at the Social Democratic Party. 

Mart Vorklaev, the Reform Party’s finance minister designate, said that it has been agreed upon that the taxation of health-related risk-taking behavior would continue and that an increase needs to be avoided in cross-border trade.

“It should also be a part of the tax package that’s planned to be brought into the Riigikogu during the spring session,” Vorklaev said. “We will try to adhere to the principle that tax changes be known six months before they enter into effect, and we’ll also monitor our neighboring states’ tax rates to prevent cross-border trade.” 

“The difference in excise duties with Latvia is small at present,” said Sven Sulga, Distillery Moe OU sales manager. “If Latvia doesn’t increase its duty rate, people might not go to Latvia [to buy alcohol] in the first year, but they will start doing it after that. Looking at all the incoming taxes, however, I think people will go to Latvia out of spite.” 

“It would definitely be interesting to know how the state plans to avoid, in the case of products subject to high excise duties, a future scenario where the same goods can be obtained at a cheaper price from our neighboring countries and the Estonian taxpayer decides to take their money there instead,” said Kristina Mustonen, CEO of Maxima Estonia. “I am of the opinion that the increase in excise duty rates will boost alcohol tourism once more, and trade near the border will gain impetus for the benefit of our neighboring state’s budget.”