Possible future developments at the Estonian-Latvian border

Responding to questions by MPs in the Riigikogu on Monday, Prime Minister Jüri Ratas (Centre) said that altogether €89 million in excise duty with VAT will be left unpaid into the Estonian state budget this year as a result of cross-border trade.

Ratas said that it has been rather typical that the rates of excise duty on alcohol are higher in Estonia than in Latvia. “Currently, the excise duty on beer is 149% higher in Estonia than in Latvia, but I’d emphasise that through the years, the excise duty on beer has been higher in Estonia than in Latvia,” he said, adding that the excise duty on hard liquor is 50% higher in Estonia than in Latvia.

The prime minister explained that the government on 26 September unanimously adopted and initiated in the Riigikogu a bill of amendments to the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act and other laws cancelling the alcohol excise duty hikes planned for 2019 and 2020. When the amendments enter into force, the difference of excise duty rates will decrease to 109% in 2020, while the excise duty difference on hard liquor may be reduced to 24% if Latvia increases the excise duty on hard liquor as planned in the next two years and Estonia does not.

Latvian cross-border trade makes up 24.7% of litres sold legally in Estonia along with the purchases of Estonians. According to Ratas, Latvian border sales also includes purchases by Finns. and it is likely that a large part of the amount of purchases that have not been made on Estonia’s northern border have instead been made in Latvia.

Read further from ERR News