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

International Internet Magazine. Baltic States news & analytics Tuesday, 28.05.2024, 23:03

More tobacco products bought by Estonians in Latvia

BC, Riga/Tallinn, 16.10.2017.Print version
Although the market for counterfeit and contraband cigarettes in Estonia has contracted to 13.3% of total consumption, cross-border flows from Latvia are increasing, a survey by KPMG indicates, cites LETA/BNS.

The market for counterfeit and contraband cigarettes in Estonia has stagnated in recent years mainly as a result of extra measures taken by the Tax and Customs Board and investments in technology, which allow to detect and prevent offenses related to the illicit market, KPMG said. Also Estonia's stable economic environment has had a positive effect on the contraction of the illicit market, it added.


"Despite the positive trend, pressure to turn to the illicit market remains high," said Taavi Salumets, chairman of the Estonian Tobacco Producers Association. He said that in Russia a similar product costs less by two-thirds and in Belarus less by more than four-fifths than in Estonia.


"Security measures introduced on the Estonian-Russian border reduced the volume of illicit products arriving from Russia by 39%, which is an important achievement. Yet it is a fact that an estimated 70 million cigarettes still arrive in Estonia via Russia per year and 100 million cigarettes via Belarus. The share of Latvia has grown to 20 million," Salumets said.


He said that in total some 260 million illicit cigarettes on which no Estonian tax has been paid flow into Estonia annually, costing the country 31 million euros in foregone taxes.


The amount of tobacco products bought by Estonians in Latvia is estimated to have grown by 18% last year as a result of the price difference with Latvia, which has expanded to 35 cents per pack.


"There's a clearly visible correlation between the increase in excise duties and increase in the volumes of contraband, just like the rise in the alcohol and fuel excise duty has steeply increased the import of these products, including as contraband. Therefore it's important from the standpoint of governance to find the balance that supports the country's consistent development," said Joel Zernask, partner and head of taxes at KPMG.


The study of the illicit cigarette market in the European Union, Norway and Switzerland was prepared by KPMG for the Royal United Services Institute for Defence and Security Studies (RUSI).


In addition to estimating the scale of the illicit cigarette market, the study aims to assess the nature and dynamics of illicit cigarette flows, covering the origins of illicit products and the main brands involved. The industry contributed data and insights, which were used in analyzing market trends.


The survey has been conducted since 2006.

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