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On the frontline of the Estonia-Latvia booze tax war

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On the frontline of the Estonia-Latvia booze tax war
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A booze tax war has broken out between Estonia and Latvia, but, at a border town on the frontline, there is little sign it’s had much impact.

When Estonia introduced a 25% alcohol duty cut on July 1, traders in Valka-Valga may have feared a drop off in trade.

The town, which straddles the Latvia-Estonia border, is a magnet for Estonians and Finns on the hunt for cut-price alcohol.

Indeed it was fears of a loss in revenue that prompted the government in Riga to bring in its own booze tax cut.

When Euronews visited Valka-Valga in late July there was little sign the lowering of taxes by Estonia had hit business, prompting questions over whether the Lativian reduction — which came in on August 1 — was necessary.

Critics of the booze tax war fear instead of protecting income it will hit people’s health in a region that is already one of the heaviest-drinking in Europe.

“The Estonian reduction of taxes had no effect nor on our turnover, nor types of clients coming,” said Estonian Lauri Uibo, the man behind one of the most successful alcohol shops in the town.

Uibo is a purchasing manager and member of the board at the Estonian-owned company Aldar Latvia. It’s registered in Latvia and has three big “SuperAlko” shops all along the Estonian border.

He told Euronews what the chain is doing to keep it’s customers: Estonians and Finish alco-tourists.

“We publish and disseminate client magazines and support various cultural activities,” he said.

The alcohol booklets were visible on the seats of the Finnish and Estonian cars we saw coming into Latvia.

The chain also has other ways of being noticed by Estonians, added Uibo.

There is a dark comedy theatre performance called “On the Border”, which runs shows daily and four times at the weekend. It features two famous Estonian actors and is produced by a well-known theatre group.

The open-air stage is decorated with alcohol brands and alcohol retailers provide the VIP zone. Supported by SuperAlko, the theatre show revolves around the story of cross-border trade and ridicules alcohol tourists.

Read more: Will a booze tax war in the Baltics leave Latvia & Estonia with a bad hangover?

The show’s producer Gerli Tiganik thinks that: “the spectacle invites people to discuss alcohol and this makes them consume it more wisely”.

Vents Armands Krauklis, mayor of the Latvian side of Valka-Valga, said the town is an example of what can be achieved in the European single market.

Krauklis proudly talks about the town's multiple identities in the empty square in front of the municipality building.

He said the town had a German past and its inhabitants now use the double name Valka-Valga to emphasise their collaboration

“Valka-Valga owes its success to the alcohol trade,” he concluded.

Around 2-3,000 cars, mostly Estonians and Finnish, pour into the Latvian side of the town each day for its alcohol shops, added the mayor.

Vents Armands Krauklis

Officially, Valka-Valga’s population is around 20.000. But except for the buzz around the alcohol outlets, the town looked very empty.

Three-quarters of Valka-Valga inhabitants live on the Estonian side of the city. However, all five alcohol shops are on the Latvian side.

The two biggest alcohol supermarkets dominate.

One of them, Alko1000, sits where the former border control buildings used to be. At 8 am on Saturday, just after opening, everyone here is rushing. Most of them are Estonians. Some have piles of beer boxes as high as themselves.

"We are just passers-by, not alcoholics,” they say. Clients here seem to see the cross-border alcohol trade as something shameful.

People arriving at another alcohol outlet in the centre of the town, called SuperAlko, are much more open.

“Estonian reduction of taxes is too small and is nothing comparing to the low prices in Latvia,” said Johann from Estonia.

All buyers here unequivocally claim they are coming to Latvia because the beer here is twice cheaper than in their home countries.

Heikki Piiparinen, a tourist from Finland, planned his trip to Valka-Valga in advance. He has travelled to Tallinn many times before. However, today he is visiting Valga-Valka on the way back from Riga, where he spent a few days with his friend.

Piiparinen came here because alcohol prices in Finland and Estonia have increased.

“These few small items are our excuse for coming to Latvia,” he says, pointing to two 30-litre packs of beer.

“It is very useful to know how the cross-border trade in Latvia works.”

Krauklis said local businesses profit from the cross-border alcohol trade. But economic and political decisions made in Tallinn and Riga are not about the local population.

Local businesses and ordinary people in Valga do not benefit from the alcohol trade. The majority of sellers here are outsiders. Buyers are just passing by and benefits of the trade flow back to the capitals.