TALLINN - The price gap in alcohol products on both sides of the Gulf of Finland will remain despite proposed excise tax increases in both Finland and Estonia. If anything, the situation may lead to more Finns trekking to Riga for cheap booze, industry officials say.
Liviko, Estonia's leading alcohol producer and exporter, said the current price gap, which has been a boon for Estonia thanks to thousands of Finnish travelers who make the trip across the gulf to stock up, said a proposed excise tax increase in Finland would be offset by similar planned hikes in Estonia.
In Helsinki, the Finance Ministry recently proposed raising the tax on strong drinks by 15 percent and on weaker booze by 10 percent. This follows a slash in the rate by one-third in 2004 as Finland tried to compete with the cheap liquor market in neighboring Estonia, which had joined the EU that year.
"The news from Finland should please Estonian alcohol producers. In view of the two forthcoming excise tax hikes in Estonia, the Finnish move will help minimize the impact of Estonian tax hikes on our tourist business," said Janek Kalvi, CEO of Liviko.
The excise tax on alcoholic beverages in Estonia will increase 10 percent in January 2008 and another 10 percent six months later.
"The Estonian tax is currently 10 percent higher than in Latvia, and since Latvia does not plan to raise the excise in the short term the situation will become more critical since Estonia is about to lose its competitive advantage," Kalvi said, adding that the advantage was geographic proximity to Finland.