The current fights about alcohol excise duties and booze shopping in Latvia are mainly damaging Minister of Health and Labour Jevgeni Ossinovski (SDE). That the issue is turning into the third rail of Estonian politics could do great damage to the country in the long run, businessman and former top banker Indrek Neivelt said on ERR's Vikerraadio on Tuesday.
Neivelt: Alcohol policy mustn't become third rail of Estonian politics
If you follow the news, you'll know that apparently our most important issue for a good while now have been the alcohol excise duties, along with driving to Latvia to buy alcoholic drinks. Even on the day of the 100th anniversary of the Republic that is what people went and did - writes err.ee.
The ongoing media war began when excise duties on beverages with a lower alcohol content, such as beer and wine, were adjusted to those on hard liquor. The beer producers didn't like that, and the government was blamed for excise duties contributing a lot less to the state's budget than planned. That number, €54 million in lost revenue, was served to the public as if all of that money had gone straight into Latvia's coffers.
But the real problem drowned in the noise created by the media. There was talk about excise duties, and then there was talk about alcohol abuse.
A few years ago we were at the absolute top of the world in terms of alcohol consumption. And the producers of alcoholic beverages wanted to push it even more: They were looking at ever newer customer segments they could sell their production to, the young, the women. Cider on top of beer, not to mention hard liquor as well. More and more, just like capitalism calls for it.
Naturally, you sell more if the price is low. Alcohol was and still is cheap here. If we compare today's prices to those at the beginning of the 1980s, and taking into account the average salary then and now, alcoholic drinks have become three times cheaper, not even talking about their availability and quality. Back then there was a fight against alcohol abuse that produced noteworthy results as well.
All along, social policy experts went through surveys and experiences of different countries, and they presented their findings to different politicians. But none of them had the guts to deal with the issue. Jevgeni Ossinovski did, and he did it with true statesmanship. The adjustment of excise duties and raising them was just one measure taken to decrease alcohol consumption.
Unfortunately though, in all this noise we seem to have forgotten why the fight against alcohol abuse was begun in the first place. The producers didn't like the adjustment and the increase in excise duties, and they bombarded the media with all kinds of lies and half-truths.
And this attack was massive. I remember how a prominent alcoholic beverages producer tried to sell those lies to me as well some years ago. This outright war has been serious, and it still is. Neither the producers nor their PR teams could ever settle for defeat.
But let's talk about the facts some more.
Over the last few weeks I've gone through different analyses, including those of the Estonian Institute for Economic Research. What should be mentioned right on page one of the presentation is that the institute itself is owned 100 percent by the Chamber of Commerce and Industry. In addition to that, it should also be mentioned who exactly commissioned the analysis and hence funded it. In any case, it needs to be understood that the institute represents the interests of the producers.
One thing for example that the analysis shows is that a large part of Estonia's higher prices of alcoholic beverages is the markup of the local sellers. As our salaries are higher than those in Latvia, the costs of our sellers are higher as well. You couldn't blame the government or Minister Ossinovski for that, could you.
The institute's analysis is thorough, but it still doesn't explain e.g. how much of the lost excise revenue actually went to Latvia. The analysis only shows that almost three times more absolute alcohol was bought in Latvia in 2017 than in the previous year.
So how much of the excise money really did go to Latvia?
We don't have exact numbers, so the only thing we can do is deduce. For example, the volume of payments made in Latvia with cards issued by Estonian banks increased by €29 million last year, going from €37 million to €66 million. But there are other goods and services included in those numbers as well. For example staying at a hotel. More than half of all purchases are made using cards, in some areas even two thirds. Estonian residents bought goods and services in Latvia for altogether some €100 million last year.
The excise duties again make up between about a third and half of the price of alcoholic beverages, depending on alcohol content. This means that I'm not wrong when I say that the Latvian state made less than €20 million in alcohol excise duties off our people's shopping trips last year.
So the media war is about a sum that makes up some 0.2 percent of the state's annual income. And that in a situation where this is inevitable at least up to some degree simply because Estonia's living standard is higher than Latvia's. You'll probably agree that the noise made by the media has been out of proportion.
But let's go back to the basics. How are we doing there?
Alcohol consumption has gone down. The same applies for deaths and incidents of domestic violence caused by alcohol. The number of drunk drivers has gone down. This means that we are moving in the right direction, but we still have a long way to go. Meanwhile, not enough time has passed to make conclusions. We need more time, and we can't give up the fight half way.
Minister of Health and Labour Jevgeni Ossinovski has suffered the most from the ongoing media war. And this isn't good news for us as citizens.
Why? Because Ossinovski went against the alcoholic drinks producers. In the name of all our well-being. So that our children and grandchildren would consume less alcohol. That it would be less dangerous for us to move around in traffic. That we would be healthier, and healthcare costs lower. That we would live better.
Should Ossinovski lose the media war, it would mean that we as citizens have lost an even greater war. Because not a single politician would ever dare to tackle these issues in the future. Who, for example, would go against the pharmaceutical industry? And politicians are already staying away from the issue of pension funds. Despite the fact that a lot more money is taken out of the country there than by people buying booze in Latvia.
We as voters are currently giving the parties the signal that we would rather have them deal with more "fine-tuning," and use the law to protect the producers rather than stand up for the interests of the consumers. And the popularity of the fine-tuners is on the increase again (Neivelt is referring to recent party ratings; ed.).
Do we want that? Of course not. And because of that we can't lose this media war. We need to encourage politicians to continue the fight against alcohol abuse. So that they have the guts to defend our interests also in other areas.
--Indrek Neivelt (*1967) is an Estonian entrepreneur and businessman. Neivelt is a former CEO of Hansabank (today Swedbank) and one of the country's most notable commentators on politics and the economy.
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