Experts sceptical over impact in Finland of planned Estonian alcohol tax hikes

Tallinn decision could give Finnish government leeway to raise taxes here

print this

According to the Estonian Prime Minister Juhan Parts, Estonia plans to implement tax increases on spirits and tobacco from next year. Parts was in Helsinki on Wednesday and confirmed that his government was looking at an increase of around 20% on the existing tax on strong alcohol. The rise would not affect beers or wines.
      In practice the tax hike would mean that the price of a 50cl bottle at the cheaper end of the spirits market would go up from around EUR 3.00 by a few tens of cents. The increase on a one-litre bottle might be slightly over EUR 1.00. In Finland a 50cl bottle of the popular Koskenkorva neutral grain spirit retails for EUR 9.20.
     
Experts in Finland do not believe that the planned increases would have any significant impact on Finnish imports from Estonia. The argument runs that anyone going to Estonia for cheap booze would still be able to get what they are looking for, even after the increases.
      At the same time, any decision by Estonia to raise its taxes on spirits reduces the need for Finland to further cut its taxation from the downward moves made in March.
      Reportedly the planned Estonian increases are driven by economic as well as social pressures. Prime Minister Parts noted on Wednesday that it was a question of rendering the country’s alcohol policy "more efficient" and making it a tool of health policy.
     
Hitherto the Estonian government  has taken a more cautious line on proposals to raise the level of taxation, as it was feared that any price rises would prompt an increase in sales of illegal moonshine alcohol. Estonia experienced a horrific case in September 2001 in which more than 40 people died after drinking contaminated bootleg liquor.
      Finnish PM Matti Vanhanen (Centre) commented that the new direction in Estonia was good from Finland’s perspective, and that he had encouraged the idea.
      "If Estonia plans to increase its alcohol taxation, this also eases Finland’s position. In fact both parties could benefit from this", said Vanhanen.
     
The Finnish government has no immediate plans to reverse its cuts of two months ago, but Vanhanen has commented that the situation could be re-examined when more experience of the new situation is available. He said the government would be returning to the issue after the summer.
      There has been much discussion in the media since prices fell, both on the question of imports from new EU-member Estonia (which are now practically unlimited following Estonian accession) and over fears that Finnish consumption will soar, bringing attendant health and social order problems.
      In March the government in Helsinki reduced taxes on alcohol by an average of 33%, with the emphasis on the stronger end of the range, in order to stave off an anticipated rush to import cheap spirits from Estonia.
      The abandonment of earlier policies "encouraging" the use of milder forms of alcohol like wines and beers has been questioned by observers pointing to a dramatic increase in public drunkenness and also in drink-driving cases.


Previously in HS International Edition:
  HS survey: Almost a third of young men admit to having driven under influence of alcohol (24.5.2004)
  Tax cut boosts domestic sales of strong spirits more than expected (18.5.2004)
  Cheaper alcohol reflected in increased public drunkenness (5.5.2004)
  Record liquor sales in Tallinn stores over weekend as Finns hoard cheap alcohol (3.5.2004)
  Programme aimed at reducing harm of increased alcohol consumption (28.4.2004)

Helsingin Sanomat