The fight against drunkenness in the Baltic countries has spawned a new type of tourism – alcohol tourism
“Finns used to come to Estonia for alcohol, and now we go to Latvia together with Finns. Beer here is twice as cheap as at home. I’ll take 100 liters,” Indrek, a resident of the Estonian island of Hiiumaa, whom we met in an alcohol store in the Latvian city of Valka, told a BBC journalist. By the way, the store itself is also Estonian, but more on that later.
Indrek does not plan to limit himself to alcohol: both Finns in Estonia, and Estonians in Latvia, and Lithuanians in Poland buy everything that is cheaper than at home – from food to bricks. But the price difference is perhaps most evident in alcohol. A can of Danish beer in Estonia costs two and a half times more than the same can of Danish beer in Latvia.
The price difference is a direct result of Estonia’s tax policy, which is fighting drunkenness by raising excise tax rates. Lithuania and Latvia are waging the same fight. True, Latvia is doing it more slowly. And Poland is not doing it at all. As a result, special tax zones have emerged in the region – peculiar alcohol offshore zones. They attract travelers, tourist buses, and even entire retail chains like a magnet.
There are no borders in the EU, and it is only a few hours’ drive from the capital of one country to the territory of another. And the higher the excise tax, the more expensive the bottles in stores, and the stronger the temptation to buy alcohol from neighbors. The result is mass alcohol tourism.
To see this for ourselves, we visited five countries: Finland, Estonia, Latvia, Lithuania, and Poland. In each country, we went into several stores with completely different pricing policies to compare prices on four types of whiskey, one type of rum, two types of vodka, and two types of beer. And here is what we saw.
Finland: €34.28 for a bottle of whiskey
Let’s start from the north. Buying alcohol in Finland is a rare display of nonconformism: very expensive and very inconvenient.
First, the excise tax rate here is one of the highest in Europe (in neighboring Estonia it is almost twice as cheap). Second, strong spirits (over 5.5%) in Finland are sold by only one retail chain – the state monopoly Alko.
As a result, 0.7 liters of American whiskey costs about €35 here, and a ticket on the ferry to neighboring Estonia is €6 if you plan ahead. The price difference of even one bottle will cover the round trip, because the same American whiskey in Estonia can be bought for €21.
More than ten ferries run daily between Helsinki and Tallinn. In general, Finns and Estonians have long drawn conclusions.
Estonia: €26.97 for the same bottle
The first thing a passenger (at least every second one) on the Helsinki–Tallinn ferry does is take a sofa on which they will later fall asleep. When the sofa is taken, the passenger can go to the bar or duty-free – queues form there even before departure.
On the ferry, whiskey and vodka are cheaper than in Helsinki, but more expensive than in Tallinn: a liter of American whiskey on the ferry is €36.90, in the Estonian port – €31.99. Passengers either do not know this or ignore it, because an hour after departure, half the bar is asleep, and the other half continues drinking.
“Vitya, let’s drink to the house!” – from snippets of conversation in the bar, it becomes clear at least that Finns are not the most noticeable crowd there. A passenger makes a toast, puts the glass on the table, and falls into the arms of another passenger. At the next table, they nod and raise glasses “to the house,” at other tables they continue to sleep, the bartender behind the counter apologizes – there is no espresso, the machine is broken. Today, waking up will have to be without coffee.
“Mostly Estonian workers going home from earnings,” neighbors explain. “In summer it’s different, not so quiet. In summer they drink more,” says the bartender.
On board the ferry, Finnish tourists are hardly heard – but they are easily spotted on shore. “There are groups that come just to drink, but they don’t even leave the ferry – they stay there. And others come to us: for Finns it’s twice as cheap, and Russians just like it. Half the customers are tourists,” says Imre Poll, director of one of Tallinn’s alcohol stores.
The neon sign of his store is the first thing a passenger on the Helsinki–Tallinn ferry sees when leaving the terminal in the port of the Estonian capital. And there are two such stores in the port. Another alcohol store is right in the terminal building. And when you leave it, you can find not only alcohol stores, but also a tavern and several bars. And this is still the port.
“No, what are you saying, we didn’t come for alcohol. We came to walk around Tallinn, and alcohol is just along the way. But in general, Finns very often shop here, they take a lot, a lot,” says Katy from Finland. Her husband pushes a cart with bottles, next to them are two children. Every second family in this store speaks Finnish. And every second cart is packed to the brim.
“Finns buy everything. Although now it’s becoming more popular to go to Latvia – it’s cheaper there, and you can see Riga,” says Imre Poll.
And again, it’s cheaper with the southern neighbors. Excise tax rates in Latvia are one and a half to two times lower than in Estonia. It is for this reason that Estonian chains have opened several alcohol stores in Latvia, right at the border with Estonia – now Estonians go there for drinks.
According to estimates by the Estonian Tax and Customs Board, in 2017 alcohol tax revenues fell by €32 million – and this after Estonia raised excise tax rates twice in a year. In protest against high taxes, Estonians organized a car rally: on Independence Day, about five thousand people drove in a column from different Estonian cities to stores in the Latvian city of Mazsalaca. Estonian Foreign Minister Sven Mikser called the action “the most unpatriotic thing you can imagine.”
Literally two weeks after the car rally, Latvia also raised excise rates: they are still lower than Estonia's but have already caught up with Lithuania's.
Latvia: €20.48 per bottle
From Tallinn we move to the Estonian-Latvian town of Valga. It lies in two countries at once: the border between Estonia and Latvia runs right through the center, ducks stroll along the border, and locals cross it for groceries – without customs or passport control. Excise duties in Estonia are one and a half to two and a half times higher than in Latvia, and whiskey is a quarter more expensive. The distance between stores is 200 meters.
Here we meet Indrek from the Estonian island of Hiiumaa, who bought 100 liters of beer. Every other car in the parking lot of the alcohol store has Estonian license plates. "Yes, now Estonians shop here. They take whole pallets home," says Indrek.
"Local Latvian customers make up about ten percent of ours. Before, it was mostly Estonians, now more Finns. Sometimes whole buses stop. Probably on the way to Riga," says Matis, director of a Latvian alcohol store.
Lithuania: €17.49 per bottle
Next – Lithuanian Kaunas, the second largest city in the country, located an hour and a half from the Polish border. People from other countries don't come here for alcohol, and Lithuanians themselves have recently – after the excise increase in Latvia – been turning south to Poland.
"They're fighting drunkenness here – since the government changed, they said Lithuanians drink too much. They banned everything. And everything is expensive. But in Poland it's cheap, everyone goes there," says a taxi driver in Lithuanian Kaunas.
And again, the further south, the cheaper. A can of Danish beer can be bought in Lithuania for 90 cents, in Poland for 70 cents. And the excise on strong alcohol in Lithuania is almost a quarter higher than in Poland. Add to that age restrictions: since January 1, alcohol is sold in Lithuania only from age 20, and sales hours have been reduced – to 3 p.m. on Sundays and 8 p.m. on other days.
Unsurprisingly, on weekends caravans of tourists head south – for alcohol, groceries, clothing, furniture, and even building materials – almost everything is cheaper in Poland.
Poland: €19.11 per bottle of whiskey
Further south – Poland, the tax haven of the Baltic region, a grocery-alcohol "offshore" and a headache for Lithuanian politicians. Cars and buses of shoppers come here, taxes flow, and Lithuanian stores relocate.
One Lithuanian alcohol chain opened two stores near the Lithuanian-Polish border – 25 and 13 kilometers away. Almost all cars in the parking lot of one of them – in the Polish town of Suwałki – have Lithuanian plates, the shelves hold Lithuanian sparkling wines, and between the shelves are Lithuanian shoppers.
"I only buy matches and bread at home, but for groceries I come here, every week. Many of us do that," says Saulius, standing next to the packed trunk of his car. "I don't even count how much I save. I know it's cheaper here," says Laimutis from Lithuanian Kaunas. "At home it would cost twice as much," adds Eva from Kaunas.
Poland has a reduced VAT rate on food, and some of the lowest excise duties on alcohol in the EU. Poles carefully calculate how much their neighbors spend in local stores. There is even separate statistics on how many kilometers from the border they are willing to travel for shopping.
According to the Polish Statistical Office, in 2016 Lithuanians left €340 million in local stores, a quarter of which was spent on food. Germans lead, however – they spent ten times more in Poland than Lithuanians.
So where is it cheaper to drink?
Now to the results – the alcohol basket. We calculated the average price of each bottle in each country and compiled a basket of nine items.
The first thing that stands out: the cost of the basket depends on the size of the excise, but not always. For example, in Latvia and Lithuania tax rates are almost the same, but actual prices in Lithuania are significantly lower.
As practice shows, traders can easily use an excise increase as an excuse to raise prices far higher than required by law. For instance, on March 1, Latvia raised the excise on strong alcohol by 15%. And the price of a bottle of the same Jack Daniel's in some stores rose by 21%.
Second: alcohol (like a wide range of food products) is not a perishable product; it can be bought in bulk. And if the border is very close, it can be bought in bulk from neighbors. Moreover, when the whole country can be crossed in a few hours, not only residents of border areas can shop from neighbors.
According to Dāvis Vītols, head of the Latvian Alcohol Industry Association, cross-border trade in Latvia last year accounted for three million liters out of twenty million – and that's only for strong alcohol. Vītols is convinced: raising excise duties is not a very good solution for Latvia.
Supporters of excise increases in the Baltic governments say it's not about money. According to the head of the budget committee of the Latvian parliament, Jānis Vucāns, in the long term, raising the excise will not bring greater revenue to the Latvian budget: initially the total amount of tax collected will increase, but sooner or later people will reduce consumption. And that means budget revenues will also decrease.
The head of the Latvian Alcohol Industry Association, Dāvis Vītols, does not believe in the effectiveness of such a method of reducing consumption. He cites the example of Finland: the excise is high, but alcohol is bought in Latvia and Estonia. "This increase will be especially felt by people with low incomes. Most likely, they will buy moonshine or make it themselves. Or they will start buying in Germany and Poland."
New Lithuanian Health Minister Aurelijus Veryga declared reducing alcohol consumption one of the priorities of his ministry. At the same time, the minister spoke cautiously about raising excise taxes. "The excise tax should increase so that there is no threat of smuggling. It should not be like now, [when] people's incomes are rising, but alcohol is actually becoming cheaper," Veryga said at a conference of the DELFI portal.
Estonian Health Minister Jevgeni Ossinovski, who also considers anti-alcohol policy a priority, estimated the indirect costs of alcohol consumption and related diseases and deaths at 2% of the republic's GDP.
The World Health Organization named price increases among 10 measures to combat problems caused by alcohol abuse.