Alcohol has been cheap in Estonia. At least for tourists coming from the north, from Finland. Booze rally between Helsinki and Tallinn has coloured the alcohol tax issue for the last 15 years.
 

Raising taxes has still been the primary alcohol policy measure that different governments in Estonia have used. Mainly for economic purposes, but public health arguments are right there as well.
 

In their 2011 study, Taavi Lai and Jarno Habicht wrote that "excise tax on alcohol has been increased on four occasions since 2005 for all alcoholic beverages except wine. Compared with the 2004 level, excise tax increased 45% by the beginning of 2010. The highest tax increases (30% altogether) occurred in 2008 when the economic crisis started to affect the Estonian economy. This was the first occasion when the affordability of alcoholic beverages decreased after many years." Lai and Habicht also indicated that the motives for these increases were mainly economic. "Changes in alcohol taxation had mainly fiscal and tax policy objectives arising from the economic crisis and a general preference for consumption taxation over income taxation."

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In 2012, the Estonian government laid out a more extended plan to raise alcohol excise taxes by 5% every year from 2013-2016. Until now, every tax increase was more or less a separate decision and lacked a longer plan. 5% was seen as too low by the public health organisations and experts but the more structured approach was mostly welcomed.

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Taavi Rõivas´s government

When Taavi Rõivas, from the Reform Party, became a prime minister in March 2014, the plan changed, and in May the same year, the government changed the excise tax plan for the following years: 2015 alcohol taxes were raised by 15% and in 2016 by 10%. In 2017 and 2018, alcohol taxes were planned to increase also by 10%. 

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Rõivas´s Governments plan changed one more time as in 2015 the minister of Finance Sven Sester introduced an amendment to 2016 tax increase which was now increased by 15% instead of 10% as earlier planned. “The decision to increase the excise duty on alcohol and tobacco earlier than originally agreed was born after it became clear that the current measures to increase excise duty do not have the expected impact on public health and the additional increase is appropriate. The government must prevent alcohol and tobacco from becoming more accessible as the economy and income grows, ”said Finance Minister Sven Sester in May 2015. 

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Also, the government decided that excise duties on alcohol would rise by 10 per cent in 2019 and 2020, except for the excise duty on wine, which would increase by 20 per cent. With these changes, the government wanted to reduce harmful consumption and improve the budget balance.

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That was a change in rhetorics as now public health was explained as the main reason for the tax increase. It is important to remember that at that time, the government approved the alcohol policy green paper which meant that there was a comprehensive and adopted understanding on how the alcohol policy should be developed in the future.

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Alcohol tax increases were the central alcohol policy development at the time, and it was repeatedly reminded that these have the most substantial evidence base for reducing alcohol consumption and related harm. These arguments came to play as the government and society were discussing health minister Ossinovski´s bold alcohol policy bill which was introduced already in October 2015. Other measures were downplayed as less effective and thus not reasonable. In October 2016, the bill was weakened and didn´t seem to go anywhere.

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Jüri Ratas´s first cabinet

Taavi Rõivas's cabinet ended on November 2016 when Social Democrats and the Union of Pro Patria and Res Publica joined the opposition's no-confidence vote against the cabinet. This was the first time since 1999 the liberal centre-right Reform Party were out of the government. The new government was formed between a Centre Party, Social Democratic Party and conservative Pro Patria and Res Publica Union, with Jüri Ratas from the Center Party becoming the new prime minister.
 

The new coalition agreement raised the alcohol policy as one of the priority themes and showed a green light to Ossinovski's bill.
 

The new government planned to focus on beer taxes and introduced an unprecedented increase of almost 90% in 2017. The first rise was done in February (17%) and then a major escalation of 70% in August of 2017. As to spirits, Estonia planned to stick to the original plan by increasing their tax rate 10 per cent every year until 2020.

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The cross-border trade between Estonia and Latvia started to grow, and it appeared that the earlier tax increase was much to be blamed. In October 2017, the Estonian Institute of Economic Research predicted that in 2018, alcohol excise duty would bring in some €80 million less than estimated by the Ministry of Finance. "The price difference with products sold in Latvia caused by increases in the alcohol excise duty has given rise to cross-border trade," EKI director Marje Josing said in a press release. "Cross-border trade has a major impact on the inflow of excise duty and VAT into the state budget."

 

In November 2017, the Government decided to reduce the increase in excise duties on beer, cider, and spirits scheduled for February by half to reduce the risks associated with border trade. It meant that the duty on beer and cider would go up by 9 per cent instead of 18, while the tax on strong alcohol would grow by 5 per cent instead of 10 in February 2018. The duty on wine would be hiked in the initially planned volume.

“On the one hand, we are committed to reducing the consumption of alcohol and the associated health risks, with alcohol prices being a crucial measure in this regard,” said Prime Minister Jüri Ratas. “On the other hand, an excessive increase in the excise duty on alcohol would significantly increase border trade.” The Cabinet decided to lower the increase in excise duties on beer, cider, and spirits by half of what was planned to reduce the involved risks. This means that the increase in excise duties will be lower in 2018 than in Latvia or Finland.”

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In September 2018 the Government approved changes that were to cancel increases in alcohol excise rates planned for 2019 and 2020. “To the extent that border trade between Latvia and Estonia takes place, it is neither normal nor economically feasible,” said Toomas Tõniste, Minister of Finance.

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Alcohol excise duty receipts in 2018 totalled 4.6%, or €10 million euros more than during the previous year, but still fell 32.1%, or €101 million, below budget. The main reason for the lower than expected receipts was the planned elimination of excise duties in 2019, which came to focus during the handling of the 2018 budget.

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