Report: State budget revenues from alcohol and tobacco excise duties in Estonia are among the greatest in the EU

The taxes on alcohol and tobacco in Estonia are among the greatest in the European Union, the brief report of the Foresight Centre of the Riigikogu (Parliament of Estonia) shows. Alcohol and tobacco excise duties form 4.8% of the tax revenue in the state budget of Estonia.

“As the annual deficit of the Estonian health care system will reach 900 million euro by 2035, Estonia has used mainly one-sided possibilities of taxation to promote healthy behaviour,” Expert of the Foresight Centre Magnus Piirits said. “Currently, the main emphasis of taxes that support healthy behaviour is on alcohol and tobacco excise duties.”

For example, the income from alcohol excise duty in Estonia reached 225 million euro in 2019, and it formed 2.4% of all tax revenues of the state budget (the European Union average is 0.4%. “At the same time, overweight has become the greatest health risk, which means that it is necessary to promote healthier diet and physical exercise,” Piirits said. “If health behaviour were promoted through taxes and incentives, the savings on health expenses resulting from improved public health could be remarkable.”

Piirits thinks that the taxes supporting healthy behaviour should be used more extensively because it helps reduce the upcoming deficit in the financing of the health care system. “For example, some countries have used sugar and fat taxes; also, tax incentives and derogations on vegetables have been granted,” Piirits remarked.

The sugar tax planned in 2017 would have brought 15–17 million euro per year to the state budget Estonia. “In 2011, the so-called junk food tax was established in Hungary, which is imposed on many foods and drinks containing sugar, salt, caffeine and carbohydrates. 0.3% of the tax revenues of Hungary were collected through this tax in 2019, which in Estonia would amount to 30 million euro in a year,” Piirits added.

In 2018, the expenses made on the health and sports activities of employees in the amount of 400 euro per year were exempted from the fringe benefit tax, which has increased the contribution of employers to the health of the employees. “In 2019, every 16th company made use of that opportunity, and on the average, they financed the health and sports expenses of employees in the amount of 131 euro per employee. The role of employers could be increased even further, for example, by expanding this scheme,” Piirits said.

You can download the brief report “Tervisekäitumist mõjutavad maksud Eestis 2021” (“The Taxes Influencing Health Behaviour in Estonia in 2021”) here

In 2021, the research focuses of the Foresight Centre include “A future-proof tax structure”, which seeks solutions for covering the costs in an ageing society, and the opportunities to change the tax system over the next 15 years.

The Foresight Centre is an advisory board at the Chancellery of the Riigikogu that analyses long-term developments in society and economy. The Centre conducts research projects to analyse the long-term developments in the Estonian society, and to identify new trends and development directions.

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