Gov. looking at alcohol war defeat

Head of the Social Democrat Party Jevgeni Ossinovski has been repeating the mantra of the positive effect of alcohol excise duties for years.

“Statistics and studies show that alcohol consumption can be reduced through higher prices and restrictions to advertising and availability,” Ossinovski told Äripäev in October of 2015. “More stringent alcohol policy will surely improve public health,” he promised ERR in an interview in October 0f 2017.

Ossinovski’s answer to the chancellor of justice, who found the government’s rapid excise duty hikes unconstitutional, was that hiking the price of alcohol has been shown to have considerable effect on containing alcohol damages in society.

Ossinovski was less enthusiastic about speaking yesterday, after a study by the Estonian Institute of Economic Research revealed that alcohol consumption has grown in Estonia year-over-year. The party chairman told the journalist to ask current Minister of Health and Labor Riina Sikkut instead.

Ossinovski said that the matter was in the administrative capacity of Sikkut and that he would not comment for her as the previous minister. “Of course, I have ideas. I’m a sentient being,” he said but did not wish to share his ideas with the journalist.

Reluctance to accept results

“No, we have not learned today that consumption has grown. An increase of 0.7 percent cannot be interpreted as growth; rather the statistical conclusion is that consumption remains the same,” said Maris Jesse, deputy secretary general of the social ministry. Leaving aside the question whether an increase of 0.7 percent constitutes growth or not, state officials cannot ignore other worrying trends the new study highlights.

Even though the goal of the excise duty hike was to change people’s attitudes and make them drink less, the result is the opposite. If in 2015 only 7 percent of people questioned found that alcohol consumption should not be reduced at all, that figure had grown to 14 percent by 2016 and 17 percent by 2017. “We interpret this as a protest,” said Director of the Estonian Institute of Economic Research Marje Josing. She added that aggressive alcohol policy is visibly sparking defiance in Estonians.

Jesse does not believe Estonians’ positive attitudes toward alcohol consumption could make them drink more. “I would not like to believe that people express protest by harming themselves and their health,” Jesse said. The deputy secretary general added that border trade would have been created regardless of the hikes. “Border trade with Latvia was always going to happen due to certain motivators and business interests,” Jesse said and added that maintaining low excise duties would simply have made cheap beer available for people who do not go to Latvia.

Jesse also said that the price of alcohol and its excise duty component make up just one part of alcohol policy and that the government is taking other measures to contain consumption.

June 1 saw the entry into force of new alcohol advertising restrictions, with limiting the visibility of alcohol in stores soon to follow. Asked whether soft measures can have any effect on the habits of Estonians in a situation where they are willing to drive to another country to buy alcohol, Jesse said that alcohol policy activities have a scientific base. “We have no reason to believe Estonians are somehow more immune to advertising,” she said.

A much more important change than advertising is the fact excise duty hikes have resurrected the black market. “Talking about the gray area, it is alcohol bought in Latvia and sold in Estonia,” Josing pointed to the worrying trend. The study found that 24 percent of people who bought alcohol in Latvia last year also filled orders for others and 1 percent bought alcohol with intent to resell. Filling orders for others has grown by 7 percent compared to last year. Josing said that a lot of people do not realize the activity is illegal.

Even though traditional trafficking is showing signs of abatement, transport of alcohol over the Latvian border that is basically also illegal nullifies the effect. It is estimated that people who bought cheap alcohol brought from Latvia made up 40 percent of all buyers of smuggled alcohol last year. “We are not just talking about vodka anymore, but also cider and beer,” Josing said.

Future looking bleak

“Unfortunately, we cannot forecast volumes will fall,” Josing said. As Estonia’s excise duty on beer is the fifth highest in Europe and one can buy twice as much beer from Latvia than in Estonia for the average salary, it is clear why the institute does not expect cross-border quantities to dry up.

Even though Latvia has embarked on the road to higher excise duties, it plans to follow a much more relaxed pace than Estonia. Beer was 17.4 percent more expensive in Estonian shops in 2017, with the price of light beer climbing 15.8 percent and that of strong beer 20.5 percent. The prices of vodka and gin grew more than those of other strong beverages – 9.6 and 10 percent respectively. The price of liqueur grew by 7 percent.

Every other person who has bought alcohol from Latvia plans to do so again this year. 41 percent of moderate consumers and every tenth occasional consumer plans to make the trip. 11 percent of people said they will not partake in the Latvian vodka rally irrespective of amounts consumed.

Excise duty revenue is also missing targets: alcohol sales have taken a serious hit in Estonia compared to 2017. If in 2016 17.3 million liters of strong alcohol and 121 million liters of light alcohol was sold, the figures had come down to 13.4 million liters of strong alcohol and 103 million liters of beer respectively by 2017.

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