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PRESS RELEASE: 18.11.2008 Finland's alcohol tax hike hurried and excessiveToday, the Government in Finland announced its decision to implement a 10 per cent increase in alcohol taxation in 2009. This rise is both hurried and unnecessarily large, as the previous major increase in alcohol taxation at the beginning of 2008 has led to a growth in private imports of alcohol by travellers and a contraction of sales in Finland in almost all beverage categories. For example, by the end of October, beer sales in Finland have fallen 2.4% on the previous year. Private imports by travellers have increased by a comparable amount during the same period.
Alcohol policy does not require increases in taxation – the Government seeks to patch holes in its budget with this tax solution.
“During the budgetary process in August, postponement of this taxation decision was proposed on the grounds that the full-year effects of the previous increase should be analysed first. This did not, however, happen,” says Timo Jaatinen, Managing Director of the Federation of the Brewing and Soft Drinks Industry.
“This increase will have an unavoidable impact on grey markets and on increasing private imports by travellers. Inflation in Finland will also remain high in 2009.
“Finland already has the highest beer tax in the European Union, and a new hike will add further shine to this dubious gold medal,” adds Jaatinen.
Alcoholic beverage prices are lower in Estonia than in Finland, and the coming tax rise will further emphasise the difference in tax levels between the two countries. The possible devaluation of the Estonian crown in the coming weeks would lead to a further significant reduction in alcohol prices, increasing travellers’ private imports to Finland.
“In 2004, Finland’s decision to lower alcohol taxation succeeded in preventing the grey market economy and private imports from Estonia from getting out of hand. But if Finland continues to follow its current route of large tax increases, in only a few years, it will find itself in the same situation as Sweden: imports with higher alcohol content, grey markets, and domestic job losses. Overall alcohol consumption and any associated detrimental effects will remain at current levels, but the State will lose tax revenue and the economy jobs. Finland will simply deepen its own recession,” says Jaatinen.
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