A 10% increase in taxation on alcohol was resoundingly approved by the Finnish parliament last week for the second time this year. The hikes aim to tackle excessive drinking, which continues to be Finland’s biggest killer. The hike, which will provide the government with EUR90m additional revenues per annum, will see average alcohol prices rise by 4.5% commencing October.
The hike will be introduced progressively with spirits attracting a 7% increase, while taxation on beer and wines will increase by 3.5% and 3%, respectively.
Consumption of alcohol increased dramatically in 2004 after the government reduced taxation by 30% to combat the significance of the grey market, and deter people from importing less expensive alcohol from lower-tax Estonia.
Although the hike was passed unanimously, many members of the government questioned the effectiveness of the hike warning that it may have a nominal or adverse effect – higher domestic prices are expected to reduce consumption by 2%, but will also substantially increase imports.
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