Estonia will reduce taxes on alcoholic beverages sold in the country by 25 percent on 1 July, in an effort to keep Estonians from travelling to buy cheaper booze in neighbouring Latvia.
Nearly two years ago, Estonia raised alcohol taxes by a whopping 70 percent, aiming to reduce alcohol-related problems in the country. The move reportedly helped to reduce alcohol consumption levels in the country but also stemmed the flow of tourism from Finland and cut into state coffers.
At the moment, a 24-pack of Karjala-brand Finnish beer costs 15.99 euros at a shop in the port of Tallinn while an eight-pack of the same beverage costs 14.72 euros at state-alcohol monopoly Alko in Finland.
Many Estonians – as well as people visiting from Finland – simply began travelling further south to Latvia to buy cheaper alcohol.
According to news outlet Bloomberg, Latvia is watching developments in Estonia very closely and may well cut booze taxes after its northern Baltic neighbour does.
Managing director of the Finnish Grocery Trade Association (PTY), Kari Luoto, said Finland needs to react to Estonia’s booze tax reforms, because he thinks Finns will increasingly head to Estonia rather than buy it at home.
“[Following the tax increase] Estonia lost a third of their alcohol tax revenue last year, mainly to Latvia. There are clear parallels to Finland, where alcohol taxes have been raised two years in a row,” Luoto said.
