TALLINN – The Riigikogu finance committee on Monday made an amendment to the government-initiated bill to amend the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act and other laws to eliminate the five percent increase in the excise duty rates for alcohol scheduled to step into force from July 2025.
"The goal is for the government not to lose revenue due to cross-border trade or potential growth of the market for illicit alcohol," Annely Akkermann, chairperson of the finance committee, said in a press release.
Andrei Korobeinik, deputy chairman of the finance committee, said the government may have underestimated the impact of cross-border trade on tax intake.
"Even a modest increase in excise duties could lead to alcohol sold in Estonia becoming significantly more expensive compared to our neighboring countries. In such a situation, it is not impossible that Latvia would become the biggest beneficiary of the coalition's alcohol policy. For Estonia, this would mean not only a decrease in tax revenues, but also economic and social setbacks," the opposition Center Party MP said.
Akkermann, MP from the Reform Party, said that, in addition, the finance committee decided, at the proposal of the Ministry of Culture, to exclude from the law the provision limiting the decision-making powers of the Cultural Endowment of Estonia, according to which 0.5 percent of the alcohol and tobacco excise duty collected is the sole amount going to the endowment for physical culture and sports.
"The result is that the funds of seven other endowments have grown at roughly the same pace as the cost of living due to increases in the gambling tax, but the funds going to the endowment for physical culture and sports, which come from alcohol and tobacco excise duty revenues, have not grown or the growth has been modest," Akkermann noted.
The bill sets forth increases in alcohol, tobacco, and gasoline excise duties for 2025 to 2028. The law already stipulates a 5 percent increase in the excise duties on alcohol and tobacco products in January 2025 and 2026. As a result of the changes, the excise duty rate on tobacco products will rise by 10 percent in 2025 and 2026, and the excise duty rate on alcohol will also increase by 10 percent in 2026. According to the bill, the excise duties on alcohol and tobacco products will also rise by 5 percent in both 2027 and 2028.
The excise duty rate for unleaded gasoline and other similarly taxed fuels, including aviation gasoline, will increase by five percent annually over the next four years. In 2025, the excise duty will rise from July 1, and in 2026, 2027, and 2028, from May 1. The excise duty rate for gasoline has remained unchanged in Estonia since 2018.
The second reading of the bill will take place in the Riigikogu plenary on Dec. 4.
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