Estonia-Latvia: Continuing Alcohol Border Trade Issues
Alcohol border trade issues are continuing in the Estonia-Latvia border region, with both countries slashing taxes or reducing tax hikes.
As Movendi International reported, Estonia adopted a 25% tax reduction last year. This move sparked an alcohol tax race to the bottom in the region and will possibly undo the positive effects in preventing and reducing alcohol harm, achieved in Estonia in 2018 due to tax increases.
The Estonian government has said tax decreases were intended to reduce cross border trade with Latvia. Now, it seems this goal will not be achieved as alcohol and specifically beer is still cheaper in Latvia compared to Estonia.
According to the initial plan, Latvia was supposed to increase taxes by 30% but, due to Estonian tax cuts, Latvia only increased excise duty by 5%. Therefore, currently the excise duty difference for a litre of strong alcohol is €1.27 more in Estonia than in Latvia and starting March 1, 2020, for lower strength alcohol the excise duty per 100 liters calculated based on ethanol content will be €12.7 in Estonia and €7.8 in Latvia – translating to 12 cents extra per half-litre of beer in Estonia compared to Latvia.
Even the minor tax hike in Latvia may not lead to increase beer prices in Latvia at all because traders plan to swallow the duty hike, according to Einar Visnapuu, one of the owners of the Alko 1000 chain of alcohol shops on the Latvian border.
Meanwhile, tax cuts in Estonia have led to an increase in alcohol consumption both for strong and lower strength alcohol. Increased consumption means increased alcohol harm for the country.
Alcohol harm in Estonia and Latvia
As the World Health Organization (WHO) reports, total per capita alcohol consumption in Estonia is 11.6 litres – which is above the average of the WHO European region. Over half (57.4%) the alcohol users above 15 years and over two thirds (70.6%) of alcohol using youth between 15 to 19 years engage in binge alcohol consumption.
Estonian men are hit hard by alcohol harm in the country with 22.2% suffering from alcohol use disorders and 9.9% dependent on alcohol.
As the WHO reports, total per capita alcohol consumption in Latvia is 12.9 litres which is above the average of the WHO European region. Over half (59%) the alcohol users above 15 years and over two thirds (72.7%) of alcohol using youth between 15 to 19 years engage in binge alcohol consumption.
Latvian men are hit extremely hard by alcohol harm in the country with 28.8% suffering from alcohol use disorders and 19.9% dependent on alcohol.
Both Estonia and Latvia are placed at the highest end for years of life lost due to alcohol.
It is evident, both countries need to implement stronger alcohol control policies, including evidence-based alcohol taxation to curb alcohol harm. Decreasing taxes to reduce cross-border trade is not an effective method to deal with the issue, as it only increases alcohol consumption which will increase alcohol harm even more for both countries.
In close-knit regions such as the Baltics policies of one country affect the entire region. Slashing alcohol taxes is a blatant disregard of public health and people’s well-being. The WHO recommends increasing alcohol taxes as one of the most effective alcohol policy solutions. The health, economic and social costs of cutting alcohol taxes will likely be staggering for the region.