NIEUWS

Cross-border shopping negatively impacts the national economies of the Baltic States

jul '18
Of all EU Member States that increased their excise duties on beer in 2017, Lithuania incorporated the highest excise duty rate increase (+112% in comparison with 2016), while the excise duty increases on beer by Estonia and Latvia were also significant that year (+87% and +7% respectively). On behalf of Carlsberg, Regioplan and EY conducted a study on the effects of high excise duties on beer in the Baltic States Estonia, Latvia and Lithuania. Our study shows that high excise taxes play an important role in cross-border shopping for beer by Baltic people and has negative consequences for the national economies.

Government revenue losses due to cross-border shopping
We estimate that inhabitants of Lithuania, Estonia and Latvia respectively buy 49.5, 17.6 and 9.4 million litres of beer outside national borders annually. This means that for all three Baltic countries, approximately 255 million euros worth of beer volume in total is bought outside national borders. This cross-border shopping behaviour results in a direct loss of beer generated VAT and excise duty revenues of approximately 40, 25 and 11 million euros for the Lithuanian, Estonian and Latvian national governments respectively.
The total tax losses would be significantly higher if cross-border shopping behaviour for all alcoholic products (including wine, liquors etc.) would be taken into account. 

In addition, we estimate that Baltic people spend over 1 billion euros on products other than beer when travelling abroad to buy beer, resulting in additional losses of VAT revenue of approximately 131 million euros, 39 million euros and 22 million euros for the Lithuanian, Latvian and Estonian national governments respectively. Cross-border beer shopping is co-responsible for these losses. 

Consequences for employment and environment
Cross-border shopping for beer also leads to employment losses in the retail sector. This decrease of retail employment is most noticeable in Lithuania (estimated loss of 960 retail jobs). Also in Latvia and Estonia, jobs in the retail sector are lost because of cross-border shopping (a loss of 230 and 80 jobs respectively).

In addition to the negative economic effects of cross-border shopping for beer, the phenomenon has a seriously negative impact on the environment. We estimate the total additional CO2 emissions resulting from the extra kilometres travelled for cross-border shopping (3.7 billion kilometres by car alone) to be approximately 487,400 tonnes.

Interested in more information?
The results of the study can be found here.
Contact Jerzy Straatmeijer for more information.

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