Alcohol, Estonia, Financial Services, Latvia, Legislation, Markets and Companies

Liviko's manager Janek Kalvi told Public Broadcasting said it is an activity meant to preserve the competitiveness of the company. "We're not doing this to undermine the Estonian state but to save our company," he stressed.

Kalvi said that the Estonian state leaders do not realize that Estonia is not an island. "We have neighbours in Finland, Latvia and the cross-border trade of neighbours works. It is a pity to watch how it is being spit on and the competitiveness of Estonia is lost in such a low way. As a business manager I have to adjust my business. For us, this is an issue of survival rather than undermining the state."

Without going into the details, Kalvi explained that the company's survival plan envisions bottling the vodka in Estonia, but a part of it is moving in the future to Latvia, where Latvian tax stamps are put on it. It reaches to Estonians or Finns via cross- border trade.

Kalvi confirmed that this is not just a plan, but the company is taking real steps. "Naturally, the preparations take some time, but we work hard for it today."

Liviko claims that Latvian strong alcohol excise tax is 29% lower than in Estonia and in the light of Estonian government's proposed 15% excise tax increase, the tax gap will be 37.2% since Latvia is planning to raise the excise duty on strong alcohol by only 2%.

Liviko anticipates that after implementing the new business model, it will pay next year to Estonian state 10-15 million euros less in taxes than in 2014, most of it is excise tax redirection.

Liviko paid 49 million euros in excise taxes and a total 64.2 million euros of taxes in 2014.