As Movendi International previously reported alcohol tax increases in Estonia showed positive results in 2018 when the country hit the lowest levels of alcohol use seen in a decade.
A survey by the Foresight Center shows that Estonia’s alcohol and tobacco tax contribution to the government budget is among the largest in the EU at almost 4.8% of the budget. In 2019, alcohol excise duty received was €225 million which accounted for 2.4% of all tax revenues in the state budget. Comparatively, the EU average is only 0.4%.
Given the annual deficit of the Estonian health care system will increase to €900 million by 2035, Estonia has used one-sided taxation options to promote healthy behavior,” said Magnus Piirits, an expert at the Foresight Center, as per ERR.EE.
Magnus Piirits, an expert at the Foresight Center
Unfortunately, these gains for health and development of Estonia are in jeopardy because of the Estonian government decision in 2019 to slash alcohol taxes by 25%. This move by Estonia sparked an alcohol tax race to the bottom in the region with Latvia responding with their own alcohol tax cuts.
Estonia cited cross-border trade as the reason for their tax cuts. However, since Latvia also responded with slashing taxes, alcohol still remains more expensive in Estonia. The result is that instead of resolving cross-border issues both countries weakened alcohol policy solutions, thus exposing citizens to increased harm.
The cross border alcohol issues between Estonia and Latvia demonstrate the need for prioritizing public health-oriented alcohol taxation in the region.
