Estonia - Alcohol and tobacco tax to rise in Estonia next year

The increase, anticipated to enter into force in January 2008, was motivated by public health concerns, said the Estonian Finance Minister Ivari Padar.

Estonia postponed plans to raise its taxes on tobacco and alcohol in previous years for fear that it might spur inflation and prevent Estonia from joining the euro zone. As Estonia's switching over to the euro is already being delayed, the government decided to raise the taxes.

Estonia's decision to hike its duty on alcohol by 30 per cent will have a bearing on Finnish alcohol taxation.

Cheap alcohol has been a major draw for Finnish travellers visiting Estonia, and was a key reason why Finland felt forced to lower its taxation of alcohol by an average 33% in March 2004 before Estonia joined the EU; indeed, Estonian EU membership meant that Finland could no longer maintain personal import quotas for travellers arriving from that country.

The unprecedented alcohol tax cut in Finland was followed by a sharp rise in consumption and alcohol-related problems.

The Finnish government is to discuss possible higher taxation of alcoholic beverages in the autumn. Mr Hannes Manninen, the chairman of the Finnish parliamentary Finance Committee, said that Estonia's decision would lay the groundwork for a hike in Finnish alcohol duties, to be implemented already next year. Finnish Prime Minister, Matti Vanhanen, praised Estonia's decision.

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