TALLINN - Estonian ministers last week decided to postpone a planned rise in the excise tax in order not to fuel inflation and keep hopes alive for a possible introduction of the euro in the beginning of 2008. The rise in the excise tax on alcohol and tobacco will be postponed from July 1 this year to Jan. 1, 2008, and the excise on fiscally marked fuel from Jan. 1, 2007 to Jan. 1, 2008.
"The aim of the bill is to slow down the growth of inflation by postponing a rise in the excise tax rate," the government press office said.
As a result of the measures, budget revenues will fall by 75 million kroons (4.8 million euros) in 2006 and 535 million kroons in 2007.
The amendment to the alcohol, tobacco and fuel excise will go into force on July 1.
The decision was criticized by the Estonian Institute for Economic Research, which said that failure to raise the excise will ultimately result in increased usage of alcohol.
"Consumption of alcohol has increased, and this is logical because alcohol prices have not risen, contrary to people's incomes," said Marje Josing, the institute's director. "At the same price level there is a danger of increasing consumption."
According to the institute, 74 liters of beer were consumed per inhabitant in 2005, while milk consumption amounted to only 64 liters per capita.
"What we win from [decision not to raise] the alcohol excise," she said, "we will lose at the expense of the people's health and lost working hours. This is not a good balance."