Cross-border trade
By Thomas Karlsson, THL, Finland
Travellers’ alcohol imports has during the 2000s transformed from a ”race to the bottom” regarding alcohol taxes towards increasing taxes both in the Baltic countries and Finland.I'm a paragraph.
In Lithuania taxes on beer and wine were increased in March 2017 by 112 % and 111 % respectively and taxes on distilled spirits by 23 %.
Estonia has and will continue to increase their taxes on alcohol until 2020. As a drawback, the tax increases have sparked cross-border trade of alcoholic beverages from Latvia.
However, also in Latvia there are plans to increase the alcohol taxes annually between 2018 and 2020.
In Finland a new, more liberal alcohol Act came into force at the beginning of 2018. At the same time alcohol excise duties were raised by 10 % in average. The increases in excise duties were:
15.4 % for ciders,
12.7 % for wine,
10.6 % for intermediate products, and
4.8 % for distilled spirits.
The fairly low increase for distilled spirits is explained by the fact that price differences between Finland and Estonia are the biggest in distilled spirits.
The increase in excise duties is expected to generate an extra 100 m€ in revenues. According to our estimate the new Alcohol Act will increase alcohol consumption by approx. 4%.
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Several factors determine the extent of travellers’ alcohol imports. These are:
- the magnitude of price differences,
- geographic circumstances at the borders,
- existence of import quotas (indicative or legally binding),
- strictness of border controls,
- traffic infrastructure, the am
ount of population residing near the border, and
- travellers’ motives for crossing the border.
Alcohol import figures in the countries surrounding the Baltic Sea are the highest in Europe.
In these countries also drinking into intoxication is far more common than for instance in the Mediterranean countries.
Lower alcohol taxes and liberal alcohol policies are, however, not the ideal solution to tackle problems related to travellers’ alcohol imports.
