Lat­vian al­co­hol in­dus­try has an of­fer to in­crease ex­cise tax rate

Baltic News Network - - News -

Ex­pe­ri­ence shows – rapid in­crease of ex­cise tax re­sults in rapid in­crease of prices and rapid de­cline of rev­enue for the state trea­sury. Based on care­ful cal­cu­la­tions, Lat­vian Al­co­hol In­dus­try As­so­ci­a­tion asks the gov­ern­ment to stick with the cur­rent ex­cise tax in­crease plan.

At the same time, LANA offers a com­pro­mise – if the planned tax vol­ume is not col­lected in full amount in the first half-year, busi­ness­men of this in­dus­try will sup­port the in­tro­duc­tion of a higher ex­cise tax rate for al­co­holic bev­er­ages in the sec­ond half of 2018 to com­pen­sate lost taxes.

«The un­planned tax in­crease of­fered by Fi­nance Min­istry comes as a spon­ta­neous re­ac­tion with hopes of gain­ing fund­ing to af­ford the re­al­iza­tion of the tax re­form. But our cal­cu­la­tions show that it will not hap­pen,» says LANA CEO Davis Vi­tols.

He con­tin­ues: «The in­dus­try pre­dicts a ma­jor de­cline of turnover for le­gal al­co­hol, a ma­jor in­crease of the il­le­gal mar­ket, as well as lost op­por­tu­ni­ties when com­pared with neigh­bour­ing coun­tries. This will cre­ate ad­di­tional pres­sure for su­per­vi­sory in­sti­tu­tions. We are con­fi­dent in our cal­cu­la­tions. This is why we ask de­ci­sion mak­ers to give us six months to prove their worth.»

Busi­ness­men re­mind his­toric ex­pe­ri­ence when rev­enue dropped for the state and busi­nesses af­ter a rapid in­crease of ex­cise tax for strong al­co­holic bev­er­ages. Tax rate grew 41% over the course of 200 – 2011. Dur­ing this pe­riod of time le­gal sales declined 44% and ex­cise tax rev­enue dropped 16% (EUR 16 mil­lion). ON top of that, the state lost EUR 35.6 mil­lion in VAT. Ex­pe­ri­ence of other coun­tries also shows that ex­cise tax pol­icy is an im­por­tant in­stru­ment for con­trol­ling rev­enue. For ex­am­ple, Es­to­nian buy­ers brought Latvia’s econ­omy EUR 8.5 mil­lion in ex­cise tax rev­enue and EUR 5 mil­lion in VAT rev­enue af­ter ex­cise tax was in­creased in their coun­try in 2016. Rep­re­sen­ta­tives of the as­so­ci­a­tion also men­tion that Bel­gium per­formed ex­cise tax in­crease over a course of two years, hop­ing to thereby find an ad­di­tional EUR 200 mil­lion. In­stead the mar­ket suf­fered a 30% de­cline. The to­tal amount col­lected in ex­cise tax was EUR 50 mil­lion, whereas losses ac­counted for EUR 70 mil­lion.

Aus­tra Helēna Žag­gere/LETA

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