Baltic States should discuss tax on alcohol together, prime ministers agree

Latvia’s Prime Minister Krišjānis Kariņš has discussed with Estonia’s Prime Minister Jüri Ratas the need to resolve the alcohol excise tax issue by all Baltic States together, said the leader of Latvia’s government at a press-conference on Tuesday, 25 June.

Estonia’s prime minister agreed that this would be an appropriate solution, said his Latvian counterpart.

Kariņš explained that «everyone should understand that this is not a primarily a health issue – this is more a budget issue,» adding that he needs to keep in mind public health and tax revenue.
The politician said ‘at a speed uncharacteristic for Estonians’ the country’s parliament approved amendments on reduction of excise tax by 25% to help better combat cross-border alcohol trade with Latvia.

Kariņš said that because of current excise tax rates a separate business sector has formed and allowing it to be «chopped off» would mean a loss of tax revenue worth upwards of EUR 100 million. This money mostly comes from VAT.

Entrepreneurs will have to adapt to the changes one way or another, but this should happen gradually, not immediately, said the head of the government. The prime minister said he hopes his Estonian colleague will sit down with him to find a formal and joint solution without losses for the labour market and state budget.

As reported, on 21 June, Latvia’s Saeima supported in the first reading amendments on excise tax, reducing excise tax on strong alcohol by 15%.

Changes are associated with Estonia’s previously adopted law with which excise tax will be reduced 25% for a number of alcoholic drinks – beer, cider and strong drinks – starting with 1 July.

Saeima’s Budget and Finance Committee’s chairperson Mārtiņš Bondars had previously said that excise tax on strong alcohol could be reduced for a limited amount of time.

Proposals for law amendments were allowed to be submitted until 21 June. Opposition deputies not associated with political parties proposed reducing excise tax for beer, too.

Estonian and Latvian heads of government said they are prepared to meet and discuss the matter on coordinating excise tax policies of both countries. As reported by Estonian public broadcaster ERR, during their meeting in Brussels, Kariņš and Ratas said they want to resolve the alcohol price difference as good neighbours.

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