Each increase of the excise tax increases pressure on consumers of excise goods and the higher the prices of such goods, the bigger the motivation to use contraband goods, says EY representative in Baltic States and tax practice manager Ilona Butāne.
This also motivates smugglers to continue their illegal activities. This means that supervisory institutions have to put more effort into battling smuggling groups and disrupting their logistics. It is also important to keep in mind that not all illegal goods are carried over the border – a portion of them are manufactured locally, says Butāne.
Since the excise goods included in the scope of the changes are not essential goods, the increase of the excise duty will not affect the amount of resources of the population for the purchase of essential goods, says Butāne.
EY does mention as a positive factor that the excise tax policy is coordinated on the level of Baltic States. Lithuania and Estonia have plans for a gradual increase of the excise tax rate for alcohol, tobacco, petrol and gas products in the next three years as well.
Additionally, when developing the legislative draft, the Ministry of Finance took into account the rates applied by neighbouring states. This coordinates tax policy in the Baltic region helps ensure equal competition conditions for all companies working in affected sectors, says Butāne.
The 1st of March marks the increase of the excise tax rate for alcoholic beverages, tobacco products, liquids used in electronic smoking devices, ingredients used in the preparation of liquids used in electronic smoking devices, tobacco substitutes.
Also read: Estonian economy contracted by 3% last year
Follow us on Facebook and X!
Excise tax for alcohol and tobacco increased; EY concerned about growth in contraband
