TALLINN – The rise in the alcohol excise duty in Latvia is helpful for the recovery of the Estonian domestic alcohol market and will reduce cross-border trade, the Estonian alcohol industry association finds.
The decision of Latvia means that under conditions of a tax peace in Estonia, the current gap between the excise duty rate applicable in the two countries will halve by March 2021, the Estonian Association of Alcohol Producers and Alcohol Importers (ATML) said on Friday.
Where at present the difference between the amount of tax levied on a half-liter bottle of liquor is 0.63 euros, next year it will be 0.31 euros for a half-liter bottle of beverage with 40 percent alcohol content. The difference for beer will be smaller still -- 0.10 euros for a half-liter container of beverage with 4.5 percent alcohol content.
"Due to the big difference in the excise duty, strong alcohol was the commodity that kicked off cross-border trade on the Latvian border. The decisions adopted by our Riigikogu last June and the current decisions of the government of Latvia will help to further halt cross-border trade between the two countries," said the CEO of the association, Triin Kutberg.
A reduction of more than 50 percent in cross-border trade in strong alcohol on the Estonian-Latvian border was observed in the final months of last year.
"Each subsequent rise in the excise duty in Latvia will help the Estonian domestic market recover," Kutberg said. "Also the ending of construction works in the Tallinn port area, which will help enliven trade on Estonia's northern border, will be conducive to growth of the Estonian domestic market," she added.
The members of ATML are AS Liviko, Altia Eesti AS, AS Prike, Pernod Ricard Estonia OU, AS Remedia, Estonian Spirit OU, MOE OU, Tridens AS, Amber Distribution Estonia OU, Balmerk OU, AS Avallone, AS Coca-Cola HBC Eesti and Brown-Forman Netherlands B.V.
The parliament of Latvia on Thursday approved amendments to the Law on Excise Duties, according which the excise duty on alcoholic beverages will increase by 5 percent on the average in 2020 and 2021. As a result, the duty on liquor will rise by 0.38 euros per liter in 2020 and by 0.4 euros per liter in 2021, while the duty on wine will increase by 0.06 euros in 2020 and as much in 2021. The excise duty on beer will increase by 0.03 euros per liter.
Under the amendments, the excise duty rate for intermediate products with alcohol content between 15 percent and 22 percent will increase from 168 to 176 euros per 100 liters, the duty on liquor will increase from 1,564 euros to 1,642 euros per 100 liters as of March 1, and to 1,724 euros as of 2021.