Although both tobacco and alcohol excise duty rates were higher this year than last, tobacco excise revenue over the first 10 months of the year came in €1.7 million higher than during the same period in 2024. Revenue from alcohol excise, on the other hand, was lower year-over-year, largely due to stockpiling at the end of last year.

According to Jekaterina Nikitina, head of the Tax and Customs Board's excise department, the bulk of that stockpiling involved spirits, which also account for the largest share of excise revenue. In terms of consumption, the quantities released for sale have not decreased year-on-year.

"In our work, we primarily follow the Ministry of Finance's forecasts, which are adjusted throughout the year. This year, tobacco excise revenue came in as expected. Alcohol excise revenue is still somewhat below forecast, but that's mainly due to the stockpiling effect," she said.

An increase in excise duty always brings with it the risk that more people may seek cheaper or even illegal alternatives.

"Consumers need to be aware that tobacco products and alcohol are harmful to health. At least in the case of legally produced excise goods, manufacturers are required to meet certain standards. Illegally traded tobacco and alcohol on the black market are unregulated, which means the health risks from consuming these products are significantly higher."

Changes in consumer behavior are also being observed in tobacco use.

"Although traditional cigarettes remain the most popular tobacco product, we're seeing a growing trend in the use of alternative tobacco products. This suggests that instead of turning to the black market for cheaper and unregulated goods, some consumers are seeking legal but more affordable alternatives."

As for efforts to curb the black market, the MTA conducts inspections across the board: warehouses and manufacturers are audited, stores are visited, vehicles and postal parcels are checked.

These same cigarette alternatives are also subject to excise duty.

"When we talk about alternative tobacco products, we mean items like electronic cigarettes, nicotine pouches, solid tobacco and heated tobacco products. These alternatives to traditional cigarettes are already on the market and their popularity is growing year after year. Our recent shadow economy survey shows that younger consumers — roughly aged 18 to 50 — are more likely to opt for alternative tobacco products, while older consumers tend to stick with traditional cigarettes."

Latvia is set to increase its alcohol excise duty starting in March next year, with a more significant hike planned for 2028. A gradual increase in tobacco excise is planned for the next two years. When comparing excise rates between Estonia and Latvia by product category, some categories are taxed more heavily in Latvia than in Estonia.

According to Nikitina, buying tobacco or alcohol from Latvia may not necessarily be cheaper, depending on consumer preferences.

"We monitor both Estonian border-area store turnover and alcohol sales volumes, as well as data from Latvian stores near the border. We've compared figures from 2024 and 2025 and found no noticeable increase in cross-border shopping this year compared with previous periods. Of course, that could still change and we'll continue to monitor the situation, but it's worth noting that as of August 1, Latvia introduced stricter sales restrictions, which may impact border trade."

Data from October show that stocks of strong alcohol have gradually been replenished in warehouses, similar to previous years. These reserves typically hit the market in the early months of the new year, which will have a notable effect on alcohol excise revenue, Nikitina noted. No such stockpiling trend exists in the tobacco sector, due to sales restrictions.

"This means that when an excise duty hike coincides with a change in the excise stamp design, products with the old stamp and old excise rate may only be sold for three months. So if the rate increases and the new design takes effect in January, those products can be sold until the end of March. After that, they must be pulled from the market, have their stamps replaced and the higher excise duty paid. This measure is specifically in place to ensure that tax revenue reaches the state budget," Nikitina explained.

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