Why this story matters:
Everyone talks about beer these days. Not because it's exceptionally good in Estonia (it's pretty decent), but because people can't afford it anymore. Many Estonians cross the border to Latvia to stock up on alcohol. Hence the abundance of new shops along the border.
Those who cannot be bothered to take the trip, simply drink less. The consumption of alcohol has fallen significantly, especially among youth. But this has been gradually happening over the years anyway.
To the government it seemed like increased taxation would bring more funds to the annual budget. Today, however, it's clear that things have not worked out that way -- Estonians simply refuse to buy expensive alcohol.
Alcohol has become almost as expensive here as in Helsinki. Consequently the Finns, who have been taking the ferry to Tallinn to buy bags full of liquor since the 90s, are disappearing from Estonian streets.
The situation is about to get worse. Though the government increased the excise tax on alcohol this July, they plan to continue raising it. If that happens, then by next February it will be twice as high as one year ago.
The effects are palpable. In the old town of Tallinn, a pint costs between five and eight euros!
Naturally, this angers the Estonian alcohol producers who have been critical of the government’s optimistic predictions that higher taxes would bring more funds to the budget.
Analyses shows that these initial forecasts were wrong. The set back from this extremely sharp tax hike will hit Estonian economy harder than initially expected.
At least the Latvians seem pleased...
Details from the story:
- A beer excise duty will double by February 1, 2018.
- At that point, a pint of beer in Estonia will cost 1,50 euros, which would be one of the highest prices in the EU. In Latvia, it costs 50 cents.
- New alcohol shops are popping up near the Latvian border.
- Finns come to Estonia less to buy liquor.
- In turn, Estonians started to travel to Latvia to stock up on alcohol.