Rising alcohol prices spur imports from Estonia once again

Alcohol tax goes up 10% from today; VAT on food comes down to 12%

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Plum or Mai Tai flavour, or a tequila mix. Mira Hänninen from Kouvola is picking out individual long drinks or alco-pops and strong ciders and putting them into her shopping cart at the “Super Alko” liquor store warehouse in the Estonian capital Tallinn.
      “There are so many flavours that they don’t have in Finland”, Hänninen says.
     
In fact, sales of these ready-mixed bottled long drinks, or lonkero as they are known in Finnish, have been buoyant in Tallinn recently.
      With taxes on alcoholic beverages on the rise, imports of alcohol from abroad have been growing steadily from the early part of the year, with long drinks showing the greatest amount of growth.
      This year imports in this category have been about 70% higher than at the same time last year.
     
The trend is not likely to turn around in the near future, considering that today, October 1st, sees a third alcohol tax increase within a short time.
      At the beginning of this year the alcohol tax was raised by 10 per cent, and in 2008 the tax on mild drinks rose by 10 per cent, and the tax on spirits went up by 15 per cent.
     
The hikes are aimed at patching up the 33 per cent drop in the alcohol tax in 2004, which was followed by a surge in alcohol-related social and health problems.
      The tax cut was enacted at that time to prevent passenger imports from getting out of hand, after Estonia’s EU membership had led to an elimination of restrictions on personal imports.
     
In Tallinn, Finnish student Jenni Jäntti says that like many student friends, she will sometimes go to Estonia to stock up on drinks.
      “Actually I don’t know anyone who wouldn’t do it”, she ponders.
     
Prices in Estonia are very cheap when compared with Finland.
      A half-litre bottle of the Finnish Koskenkorva neutral spirit, which costs 12 euros in Finland as of today, can be had for just 9 euros.
      However, researcher Thomas Karlsson does not believe that tourist imports of alcoholic beverages are getting out of control.
      The numbers of passengers sailing between Helsinki and Tallinn have not increased, he notes.
      “Perhaps the same people are just bringing more”, he says.
     
The Super Alko manager Imre Poll also does not expect a surge of booze cruisers.
      “Sometimes Finland raises taxes, at times Estonia does the same."
      In fact, Imre Poll says that at Super Alko at least, the recession has reduced the average size of the purchases.
      “People have less money in their pockets”, Poll notes.
      Karlsson agrees with the Estonian merchant. He expects total consumption of alcohol by Finns to decline by one or two per cent this year - a trend he attributes both to the recession and the increase in the alcohol tax.
      The two young people from Kouvola, Mira Hänninen and Simo Kuparinen, are at least doing their bit to buck the trend, stacking the car boot high with bottles.
      They are not planning to visit Tallinn very often, however.
      “Now since we are on holiday here, then we also thought we'd buy some stuff!"
     
Today also witnesses a tax development on the foodstuffs front.
      In this case the direction is downward, as VAT on food is reduced by 5%-points to 12%.
      Retailers have promised to pass on the reduction as such to consumers.
     
The new prices were put on labels from the beginning of last week, and one chain - the Lidl discount stores - actually adopted the new lower prices from last Thursday.
      Where stores have chosen to show both prices - old and new - on labels, the procedure will continue probably until year's end.
      But it will all begin again next summer, when the 12% VAT rises to 13%.


Previously in HS International Edition:
  Significant increase in alcohol consumption among older age groups (15.6.2009)
  Alcohol tax going up next year (19.11.2008)
  Finnish alcohol consumption tops list of Nordic countries (18.5.2009)
  Rise in alcohol tax leads to surge in personal imports from Estonia (22.8.2008)

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