Alcohol, Latvia, Markets and Companies, Taxation

The highest increase in prices is expected for hard alcoholic beverages (alcohol content of around 40 %) – the price of a liter bottle could rise by about EUR 1.5. The price of wine will rise by less than EUR 0.15 per wine bottle. The price of beer for a 0.5 liter bottle will increase by about EUR 0.10. For drinks with alcohol content from 15 % to 22 %, the price will increase by EUR 0.25 (for a 0.75 liter bottle).

Davis Vitols, the executive director of the LANA, said that the association regards this change as a very high risk for the boom in the trade in bootleg alcoholic beverages.

"For a long time, taxes on sales of alcoholic beverages have made a significant part of the total state budget. We believe that the government would be able to increase the income much more if the increase in the excise duty on alcohol would be what the government promised initially – a balanced and gradual increase. Unfortunately, it seems that we were promised the moon," Vitols commented on the government's sudden decision to raise the excise duty on alcohol at a surprising pace.

He said that the association believes the tax policy implementers should really revise the excise rate plan for 2019 and 2020. "We should not forget that the frontier area trade brought more than EUR 40 mln in 2017 from the current excise duty on alcohol and VAT," said Vitols.

"You can hear more and more about the increase in the price of alcoholic beverages, therefore most people probably have heard about the fact that the excise duty rate on alcohol has been sharply increased in hopes of acquiring additional revenue in the state budget," comments on the potential situation.

"This year, several factors will affect the price of alcoholic beverages. In addition to the increase in excise duties, glass material processing costs have also significantly risen, which could increase the cost and, accordingly, the price of products," said Pavels Filipovs, Member of the Board of the LANA and Head of Amber Distribution Latvia.

"At a time when the increase in product prices is so sharp, we want to remind consumers that it is still advisable to choose a high-quality and reliable alcohol brand and its manufacturer or distributor. Before deciding in favor of cheaper alcohol bought in a shady place, it is worth remembering that bootleg alcohol can be life-threatening," Filipovs warned, adding that the role of alcohol distributors is to provide consumers with tested products that meet the European Union quality regulations.

As reported, excise tax on alcohol will be raised as of March 1 as a part of the tax reform.