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Association: alcohol market will decline and people will lose jobs in the industry

The planned introduction of increased excise tax rates within the context of Finance Ministry’s tax reform could cause the alcohol market in Latvia to decline by approximately 7% next year, says CEO of Latvian Alcohol Industry Association Davis Vitols.

He adds that the local alcohol market could decline 12% to 13%. It will, however, be balanced out by cross-border trade. As a result, the overall market decline in Latvia may be 7%. «Local market may decline 12-13%, but cross border trade would give a 5% increase. And so the general market decline would decline 7%,» said Vitols.

LANA CEO mentions that raising excise tax rates would negatively affect strong alcoholic drinks producers. «We will suffer more than the beer industry, because the cost of every beer bottle will increase by nine cents, whereas the price of our products will increase by seventy two cents per 0.5 litres,» said Vitols.

At the same time, Vitols predicts excise tax rise will impact small companies the most. «Of course small companies will have it harder than large companies, because price rise will make competition steeper,» said Vitols.

He adds that the aforementioned legislative changes will also increase the size of the illegal market, because some buyers will likely turn to illegal alcohol when prices rise. «The biggest concern is that many people will turn to the illegal market, which will facilitate its growth,» said Vitols.

He adds that local companies will be forced to cut jobs. Fiscal revenue from excise tax increase will likely be non-existent, and businessmen are the ones who will suffer the most.


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