HAPPY: Smokers Kreeta Kaeri, 23, and Teelele Kivi, 18, say an increase in the tobacco excise will help them quit.
TALLINN - Drinkers and smokers in Estonia are facing an even bigger-than-expected increase in excise as the government attempts to encourage healthier habits. Alcohol and tobacco products are already due for a price hike on Jan. 1, 2008, with booze excise scheduled to rise by 10 percent and cigarettes by 15 percent. But Prime Minister Andrus Ansip said that price hikes could be bigger and sooner than first planned.
The government is seeking to bring Estonia in line with European Union excise levels sooner than the required compliance date, but also wants to increase the health of the nation by discouraging drinking and smoking.
"Together with the tobacco law which comes into force on the 5th of June 2007 and forbids smoking in cafes, restaurants, bars and nightclubs, the influence would be substantial," a spokeswoman from the Ministry of Finance said.
As of Jan. 1, alcohol tax will increase by about 10 percent. Tax on a bottle of beer will increase from 1.45 kroons to 1.6 kroons, while excise on a half-litre bottle of spirits will rise from 30.4 kroons to 33.6 kroons.
While Estonia already meets the minimum European Union requirements for alcohol tax, its tobacco tax must be increased substantially by 2010.
Initially, the government planned to introduce this increase gradually, starting with a 16.5 percent increase from the beginning of 2008.
However Ansip said the gradual increase should be scrapped, and the full amount of EU-required excise be applied as of next year. That would see the retail price of a pack of cigarettes jump by a substantial 30 percent. The prime minister also said he wanted the excise on alcohol to rise by more than the current planned hike.
"The amount of smokers is quite large in Estonia, and youngsters tend to have bigger interest in smoking than before. So raising the excise faster could change customers' behavior and therefore be good for the nation's health in general," the Finance Ministry spokeswoman said.
However there is a second reason for bringing forward the tobacco excise hike 's inflation.
Finance Ministry experts are concerned that the substantial influx of tax revenue will further increase the nation's inflation level, making it even harder for Estonia to meet the Maastricht criteria for euro currency zone ascension.
"Since Estonia has very little hope of meeting the Maastricht inflation criterion in 2008 or 2009, it would be appropriate to have the inflation growth from raising excise tax now rather than later, when it could do further harm to our possibilities of meeting the criterion," the spokeswoman said.
Some Estonian smokers are happy about the increase.
"It's good because people will think about quitting," said Kreeta Kaeri. "But maybe they should also think about increasing the legal age to 21, so it is harder for young people to smoke."
The Finnish prime minister-elect has welcomed the news. Matti Vanhanen, who is currently negotiating to form a governing coalition, said his country may also increase its excise tax as a result of the Estonian decision.
Estonia's excise on alcohol plays a key factor in determining the Finnish policy, Vanhanen told the business daily newspaper Kauppalehti.
The current low excise is a key factor in attracting Finnish tourists to Estonia.
