The share of people who buy alcohol from Latvia increased by more than half within one year
Study of the Estonian Institute of Economic Research revealed that the share of people from Estonia buying alcoholic beverages from Latvia increased by 66 percent within one year. The share of those people who went to Latvia to specifically buy alcohol increase by more than 2.5 times when comparing the years 2016 and 2017.
21 percent of the respondents to the survey conducted in 2016 had purchased alcoholic beverages from Latvia. In 2017, the number had increased to 35 percent. According to Marje Josing, director of the Estonian Institute of Economic Research, this is a significant increase.
“The share of the people who went to Latvia to specifically buy alcohol, increased by more than 2.5 times if we compare the years 2016 and 2017,” explained Josing. The most trips to buy alcohol are made by the people living in South and West Estonia. The ones who are the most active to go to Latvia are middle-aged and younger people. “For example, an average buyer purchased 18 litres of vodka or 93 litres of beer from Latvia in 2017, and 34 percent of the 18-29-year-old buyers spent over 500 euros in one trip,” he said.
As a result of border trade, people have accumulated stocks at home, for example, a person who has beer stocks, has in an average 28 litres of beer, and the ones who have vodka, have in an average 6 litres of vodka. A third of the ones who responded to the questionnaire thought that they consume more alcohol, because they have stocks.
Mait Palts, director general of the Estonian Chamber of Commerce and Industry said that the results of the study are worrying. “In addition to excise duties, Estonia will lose on the value added tax, the under-collection of which has been a topic they have not wanted to speak about so far. In 2017, in the opinion of the producers, an estimated 17.9 million euros of value added tax was lost as a result of alcohol trade on the southern border, in 2018, it is estimated that it will be 29 million euros. Additionally, it is clear that we are no longer talking about only excise goods and movement of the related taxes to Latvia,” he explained. Palts said that the impact of the state’s excise policy so far has be assessed incorrectly. “The impact has been negative on the state’s revenues, and today we cannot say that increasing the excise duty has decreased alcohol consumption.”
“According to the estimations of alcohol producers, approximately 110 million euros less than planned will be received in the state budget in 2018, and in 2019 the number will be approximately 141 million euros. If the building of the Estonian eastern border will cost, according to estimations, approximately 200 million euros, then we can figuratively claim that for the excise revenue that we will lose during the following years, we could build a safer EU and NATO external border and there would be money left over,” Palts compared. “To prevent additional significant decrease of tax revenue and worsening of the competitiveness of the exporting sectors (including tourism, accommodation, alcohol, shipping and trade sectors), it would be reasonable to give up the plan of further excise increases and consider decreasing the excise duties to a more competitive level,” he emphasised.
The Estonian Institute of Economic Research conducted a survey among Estonian residents in December 2017 with which they studied the cross-border purchases from Latvia in 2017. There were in total 1,074 respondents.