Alcohol excise duty receipt to fall short by tens of millions

Alcohol excise duty receipt forecasts have never missed the mark by as much as they will in 2017. While we will learn the truth in early February, it is clear forecasts are too optimistic by some €40-50 million. It is probable that even the adjusted summer estimate will not be met - writes

Receipt of alcohol excise duty has been growing steadily in recent years, taking annual leaps of around €14 million on average since 2010. However, last year will probably be the first 12-month period in the past decade that will see lower revenue than the year before. If alcohol excise duty receipt amounted to €251 million in 2016, it is likely that this year proceeds will be more like the €222 million result from 2015.

Back then, the budget fell €18 million short as the government had decided to postpone the hike from January 1 to February 1. If otherwise traders would have acquired stockpiles toward the end of the year, they now did it in early 2016. This in turn meant that receipt for 2015 fell short.

The finance ministry forecast alcohol excise duty receipt at €276.4 million in the 2017 state budget. The forecast was cut to €237.5 million in summer. That the ministry’s initial forecast was mistaken became clear toward the start of the year when it was apparent excise duty rates would be doubled for several product groups, while it was difficult to forecast the effect of the hike on consumer behavior and receipt of tax.

Actual receipt for last year will become clear in early February. The tax board calculates receipt on cash basis, when the state will collect the money, which would have given the state €226 million in excise duty revenue last year. The problem with this method is that it no longer ties in with the finance ministry’s data as the latter calculates receipt on accrual basis, or when the trader was obligated to pay the duty. This means that data from the tax board and the finance ministry cannot be compared on a month-to-month basis.

Having taken this into account, we compared the tax board’s calculations for the past 11 months to receipt in previous years and concluded that actual revenue will also fall short of the ministry’s summer forecast.

Because the duty was hiked in February and June last year, one might think receipt will grow; however, the annual receipt pattern gives no reason for such optimism. There is another variable to

consider – consumer behavior. Flourishing border trade does not speak of generous tax receipt, at least according to traders.

Postimees proposes three scenarios of alcohol excise duty receipt for 2017.

Scenario A

The finance ministry’s summer forecast of €237.5 million will miraculously be met. This would require tax receipt of around €40 million in December, which would count for 16 percent of annual receipt (December made up 12 percent in annual receipt in 2016). Receipt was a little better in January of last year when traders stockpiled alcohol in anticipation of the February hike.

Scenario B

Alcohol excise duty receipt will roughly match that of last year, coming to around €30 million in December. This would be good enough for annual revenue of €227 million. That would match the tax board’s 2017 estimate and the difference with the ministry’s forecast could be explained through different methodology. This scenario is made more likely by the fact the duty was hiked twice last year.

Scenario C

The relative importance of December in annual receipt will be the same it was the year before last. That would put December receipt at €26.7 million and the annual at €224 million. The result would fall €13.5 million short of even the adjusted summer forecast.

None of the three scenarios is accurate; however, it is likely the truth will fall somewhere around scenarios B and C, which means that excise duty receipt will be some €40-50 million short of the initial forecast included in the state budget. It will not burn a hole in the state’s wallet as other taxes have contributed at least twice the deficit.

However, the extent of the miscalculation is noteworthy as the ministry has at most erred by 11 percent in the past. This happened in 2010 when the ministry’s underestimated receipt of tax. This time, the deficit will amount to 20 percent. Enough money to construct the four-lane Ardu-Kose section of the Tallinn-Tartu highway or procure 12 K9 Thunder mobile artillery pieces from South Korea.

Read more news of Tallinn on our site.
alcohol tax
If you notice an error, highlight the text you want and press Ctrl + Enter to report it to the editor
2 views in december
I recommend
No recommendations yet


Post your comment to communicate and discuss this article.

Political news portal Politico published its list of the most influential people in Europe next year last week, with fifth place going to Estonia’s cybersecurity ambassador Heli Tiirmaa-Klaar. Tiirmaa-Klaar takes her place in between well-known Europeans, after Secretary General of the European Commission Martin Selmayr and in front of Ukrainian presidential hopeful Yulia Tymoshenko. Politico believes Italy’s populist interior minister Matteo Salvini will...
Representatives of the transport ministries of the Baltic states, Finland and Poland who met in Tallinn on Monday were of differing opinions regarding whether to remain in summer or winter time once the practice of changing the clocks twice per year comes to an end. A recent survey indicates that more than half of Estonians would prefer permanent summer time. Estonia, Latvia, Lithuania, Finland and Poland jointly acknowledged that the agreement to end the...
Ida-Viru Central Hospital is having trouble with patients not showing up to scheduled specialist appointments. To combat this issue, beginning next year, the hospital will start charging visit fees for no-show appointments as well. Last year, patients at Ida-Viru Central Hospital failed to show up for scheduled appointments a total of nearly 9,500 times, accounting for some 5% of all hospital visits, reported ETV news broadcast Aktuaalne kaamera. "Patients...
Tallinn city government finds that it is not reasonable to relocate the Tallinn Bus Station to the Ülemiste district near Tallinn Airport and that it should be left in its current location on Lastekodu Street. In connection with the preparation of an architectural idea competition and the drawing up of a detailed plan for the Ülemiste terminal in the framework of the Rail Baltic railway project, the city is drawing the attention of the Ministry of Economic...
A criminal investigation has been launched into the Medita Clinic, one of the largest private sector bidders in public procurement tenders in the health sector in Estonia. The Northern District Prosecutor's Office initiated the investigation in accordance with the Penal Code section concerning the transmission of false information, according to ETV investigative show Pealtnägija. The Medita Clinic was the largest private provider of specialist medical care...
The Tax and Customs Board (MTA) has signed an agreement with Online accommodation and hospitality marketplace Airbnb which enables hosts to automatically report earnings. The MTA and Airbnb held a joint press conference on Wednesday, announcing the agreement's signing as well as the new system and its rationale. The main premise, according to MTA deputy director Rivo Reitmann, is to keep things simple, meaning that Airbnb hosts who declare their income in...
Luminor notified its clients that as of 1 January, the bank will be closing the accounts of Estonian e-residents that fail to fulfil due diligence. Hannes Oja, head of Anti-Money Laundering at Luminor Estonia, said that based on the Money Laundering and Terrorist Financing Prevention Act, banks are required to update the data of all of their customers, writes daily Eesti Päevaleht (EPL). As a result, all existing clients have to do so themselves on a regul...
The Russian Embassy in Tallinn on Tuesday published a statement criticising the statement in support of Ukraine adopted by the Riigikogu on Monday. Commenting on the statement with which the Riigikogu on Monday condemned the attack on Ukrainian vessels in the Kerch Strait, the Russian Embassy referenced the famous quote by Roman statesman Cato the Elder, who used to conclude his speeches in the Senate by saying, "Furthermore, I consider that Carthage must...
A widely-read travel magazine, Condé Nast Traveler, has declared the Christmas market in Tallinn as one of the most charming in Europe. “Why we love it: In addition to Estonian Christmas dishes like black pudding and sour cabbage (it’s better than it sounds, we swear), Tallinn’s market in the Town Hall Square also has a Santa who arrives by reindeer-pulled sleigh,” the magazine says. “The highlight, though, is its Christmas tree, which the city has been pu...