Alcohol taxes up, production down

  • 2008-11-19
  • By Monika Hanley

TAXING BOOZE: Latvian alcohol is set to see an increase in the tax rate alongside plummeting production.

RIGA - The Latvian alcohol industry has felt the economic pinch more than most, as recent data has suggested that sales and production are plummeting while prices are on the rise.
Despite MP Janis Strazdins' claim that Latvia is still in the "vodka-drinking zone," this year's alcohol output is down 7 percent.

To make matters worse for the struggling industry, Parliament has just announced a new excise tax on alcoholic beverages for 2009, an increase of 11.9 percent.
Taxes are being raised in nearly every section of the food and beverage industry. In defense of the tax hikes, parliamentary speaker Gundars Daudze said in the recent parliamentary debate that "we cannot make the government responsible for the financial crisis and inflation in Europe and the world."
Daudze also urged people to stop harassing the government with price concerns.
"We cannot influence fluctuation of food prices on the world markets that also affect our producers," said Daudze.

Despite the rise in the cost of production and taxes, low alcohol prices have also long been seen as contributing to the high rate of teen drinking. 
During the parliamentary debate, Juris Dobelis, a representative from the Fatherland and Freedom/ LNNK nationalist coalition, said that parents were responsible for underage drunkenness.
Dobelis, known for making contentious remarks during parliament sessions, said he doubted that ordinary drunks bought their stuff from the stores, suggesting that they used illegally made alcohol.

"Try not to drink, try not to smoke and you all will die in good health," Dobelis said as he ended his speech.
Stradzins, a member of the Greens and Farmers Union, said that Latvia could not be compared to Germany because the old EU member states preferred beer and other light alcoholic drinks while Latvia, as a former Soviet republic, was still in the vodka-drinking zone.

According to specialists of the State Revenue Service (SRS), 42 percent of the alcoholic beverages made in Latvia last year were sold domestically, 35 percent were exported to third countries 's mainly to the U.S. and Canada 's while 19 percent were sold to EU member states 's chiefly Lithuania, Cyprus and Estonia.
Of the alcoholic beverages made in Latvia last year, the largest part 's or 58.5 percent 's was vodka. The SRS reports that although 79 percent of the vodka is exported, vodka is the most popular beverage among local consumers as well.

Beer output has also seen a relatively steep decline in 2008, as production hit 107.2 million liters 's down 6 percent from 2007. In contrast with harder alcoholic beverages, over 60 percent of beer was sold domestically, with 7 percent being shipped to Lithuania, according to Latvian tax authorities. Beer consumption is down 3.3 percent from 2007.

A recent survey from Eurobarometer has found that in the Baltic States a large portion of the population only drink alcohol about once a month (36 percent in Latvia, 35 percent in Lithuania, and 29 percent in Estonia). This stands in stark contrast with Ireland, where 41 percent of respondents reported drinking once a week.