Impact of Changes in Excise Tax Rate for Strong Alcohol on Consumption and State Revenues in Latvia
World Academy of Science, Engineering and Technology 64 2012
Impact of Changes in Excise Tax Rate for
Strong Alcohol on Consumption and State
Revenues in Latvia
A. Strateičuks, V. Kaže, R. Škapars
Abstract—State tax revenues in most countries started to decrease during the recession. Government of Latvia decided to compensate the decline by increasing rates of several taxes including excise tax on strong alcohol. The total increase in 2009 constituted
42% and the rate increased from 896€ to 1 266€ for 100l of absolute alcohol. Since then this has had a negative impact on consumption volumes and the split between legal and illegal market. The legal alcohol sales decreased by almost 50% (by volume), consequentially having negative effect on the State revenues from VAT and excise tax. Estimated results for 2010 are indicating 54 million € decrease in
VAT, excise tax and other taxes versus 2008 (excise tax -19 million
€, VAT -30 million €, other taxes -5 million €). The paper aims to analyze impact of the increase in excise tax on consumption patterns,
State revenues and competitiveness of the local companies to draw up proposals for the state authorities regarding more effective tax policies. The analysis reveals a relationship between excise tax rate, illegal alcohol market and State revenues. The results can be used to improve excise tax system and effectiveness in Latvia.
Keywords—State revenues, competitiveness, consumption.
alcohol
market,
excise
S. Cnossen has shown that harmful alcohol use is a very important health and safety issue in the EU and suggested that earnings from excise tax should be as high as loss from the harm caused by the alcohol [6].
The paper aims to analyze impact of the increase in excise tax on consumption patterns, State revenues and competitiveness of the local companies to draw up proposals for the state authorities for more effective tax policy.
II. ALCOHOL MARKET AND CONSUMERS IN LATVIA
Impact of Changes in Excise Tax Rate for
Strong Alcohol on Consumption and State
Revenues in Latvia
A. Strateičuks, V. Kaže, R. Škapars
Abstract—State tax revenues in most countries started to decrease during the recession. Government of Latvia decided to compensate the decline by increasing rates of several taxes including excise tax on strong alcohol. The total increase in 2009 constituted
42% and the rate increased from 896€ to 1 266€ for 100l of absolute alcohol. Since then this has had a negative impact on consumption volumes and the split between legal and illegal market. The legal alcohol sales decreased by almost 50% (by volume), consequentially having negative effect on the State revenues from VAT and excise tax. Estimated results for 2010 are indicating 54 million € decrease in
VAT, excise tax and other taxes versus 2008 (excise tax -19 million
€, VAT -30 million €, other taxes -5 million €). The paper aims to analyze impact of the increase in excise tax on consumption patterns,
State revenues and competitiveness of the local companies to draw up proposals for the state authorities regarding more effective tax policies. The analysis reveals a relationship between excise tax rate, illegal alcohol market and State revenues. The results can be used to improve excise tax system and effectiveness in Latvia.
Keywords—State revenues, competitiveness, consumption.
alcohol
market,
excise
S. Cnossen has shown that harmful alcohol use is a very important health and safety issue in the EU and suggested that earnings from excise tax should be as high as loss from the harm caused by the alcohol [6].
The paper aims to analyze impact of the increase in excise tax on consumption patterns, State revenues and competitiveness of the local companies to draw up proposals for the state authorities for more effective tax policy.
II. ALCOHOL MARKET AND CONSUMERS IN LATVIA
References: Paper No. 1472, 2005. Vol. 317, 1998, pp. 312 – 318. P. Anderson, B. Baumberg. “Harmful drinking”, European commission, DG Health and Consumer Protection, 2007. working paper No. 1821, 2006. Journal of Consumer Marketing, Vol. 28 No. 1, 2011, pp. 5-18. (12.01.2011). 10.12.2008). Development, Vol. 18, No 7, 1990, pp. 989-1002. “Alcohol consumption report for Latvia (2010)”, Association of alcohol producers and distributors (ARTA), 2011. “Alcohol market in Latvia (2010)”, Association of Latvian alcohol producers and distributors, 2011. Nielsen, “Report on alcohol consumption in Latvia (2007, 2008, 2009, 2010)”, 2011.