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Latvia’s high-grade alcoholic beverages market declines every year

According to data from Estonian alcohol industry, more than 2.1 million litres of high-grade alcoholic beverages were sold at stores located in border regions in the first nine months of 2017. Thereby Latvia’s high-grade alcoholic beverages market has declined 1.5% in the first nine months of the year.

Estimates from Latvian Alcohol Industry Association show a continuing trend in the country – alcohol consumption declines with each passing year.

«Although registered alcohol consumption level in Latvia has increased 14% when compared with 2016, this increase was mostly thanks to sales of alcoholic beverages to buyers from Estonia and Finland in border region stores,» the association notes.

The latest data analysis shows that there is a risk for revenue from excise tax to decline next year even though the new excise tax rate will be nearly five times larger – from +3.5% in 2017 to +15.2% in 2018. «Because of considerable increase of excise tax, the price of high-grade alcohol may increase by EUR 1.5. This could potentially affect the line separating legal and illegal alcohol on the market, as some residents are likely to turn to illegal alcohol when prices inevitably increase.»

LANA emphasizes that Latvia’s alcohol industry has grown solely thanks to increased sales on the border with Estonia. This increase has secured Latvia’s budget an additional amount of EUR 40 million.

«Estonia has plans to slash excise tax growth by half. This means cross-border trade may decline next year because of the reduced difference in taxes. Considering the current situation and experience left from 2009, when taxes were rapidly increased, Latvia may collect less revenue in taxes (excise and VAT) than this year. LANA invites decision-makers to assess possible risks behind a more rapid excise tax rise than what is acceptable for the tax reform. LANA invites a review of tax rise for other alcoholic beverages in 2019 and 2020,» the association concludes.


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