Excise tax revenue €11.2m short of target by September

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Excise tax revenues have shrunk steeply this year, before and after the excise tax was lowered on August 1. Finance Minister Jānis Reirs (New Unity) is however sure that revenues are set to increase as sellers will start stocking alcohol with the lowered tax, reported LTV September 10.

This year the planned revenue from the excise tax on alcohol is at €223m. Revenues were as planned until July but are now €11.2m short of the target, according to the State Revenue Service. After Latvia reduced the excise on strong alcohol by 15% after the example of Estonia, the Finance Ministry forecast that tax revenues will fall only next year. Even now Finance Minister Reirs thinks revenues are to be recouped by year-end.

"Entrepreneurs are selling their old stock and therefore are not buying new batches of alcoholic drinks and aren't paying the excise tax. When the old stock with the old excise tax will be sold off, there'll be an increase. [...] The shortfall will be compensated through October, November and December," said Reirs.

Henriks Danusēvičs, the head of the Latvian Retailers' Association (Latvijas Tirgotāju asociācija), said that in August retailers were still selling alcohol taxed with the old excise rate, but by now the most popular drinks should be stocked with the new rate. But Danusēvičs is reluctant to agree that the tax shortfall will be recouped by year-end.

"We do see that alcohol trade has gone down. I think that we have lost more cross-border buyers than we'd anticipated. [...] Of course, there's hope that September will show better indices, as concerns the state budget. We have to wait what happens in the long term. It's difficult to say anything just after a month," said Danusēvičs.

The lowered excise tax rate will be in force until March 2020; it is to grow steeply afterward if the current laws remain unchanged. Earlier the Finance Ministry said that budget income is to shrink €92 million due to decreased cross-border trade if the country didn't lower its excise tax rate. 

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