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Finnish trade sector worries about looming booze tax cuts in Estonia

As Estonia prepares to slash booze taxes, industry advocates in Finland are concerned business could head south.

File photo of "booze cruise" tourist pulling a cartload of beverages. Image: Mauri Ratilainen / AOP

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 (siirryt toiseen palveluun), 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.

Booze tax affect imports, but not travel plans

Finland's Federation of the Brewing and Soft Drinks Industry agrees, and has told lawmakers involved in government formation talks to refrain from raising taxes, according to business newspaper Kauppalehti.

Finnish travellers imported the equivalent of 7.1 million litres of pure alcohol to Finland last year, according to the Institute for Health and Welfare (THL), a slight increase compared to the previous year, when the figure stood at 6.9 million litres.

THL senior researcher Thomas Karlsson said there is a clear link between the price of booze and how much of it Finnish travellers bring home.

"When Estonia raised the tax on beer by 70 percent in July 2017 [personal] imports clearly dropped," Karlsson said.

However, he said he doesn't anticipate a deluge of Finns heading to Estonia in search of cheaper alcohol following the tax cut, saying that alcohol has played a significantly smaller role for Finnish international travellers over the past 15 years.