A proposal by the Ministry of Finance for a reduction of the tax on alcoholic beverages is likely to be approved in the government's budget talks which begin on Wednesday.

   

Helsingin Sanomat has learned that the tax on strong spirits is going down 44% and that of beer is to be cut by 32%. The reduction of retail prices will not be as great.

   

On Tuesday there was increasing acceptance among Members of Parliament and ministers of Prime Minister Matti Vanhanen's Centre Party that the price cut was necessary. The tax cut is being prompted by Estonia's anticipated entry into the European Union next year, which would allow Finns to bring in more cheap alcohol from that country than present quotas allow.

   

The cut in the alcohol tax is expected to be reflected in the duty free prices on the passenger ferries operating between Southern Finland and Sweden. The reduced profitability resulting from the price cuts may well lead to higher ticket prices.

How to apply the cut

in alcohol taxes to the various groups of beverages is one of the few remaining bones of contention in the budget talks, which have otherwise proceeded quite harmoniously.

   

The Ministry of Finance and the Ministry of Social Affairs and Health have been in disagreement over the price of beer.

   

On Tuesday Social Services Minister Liisa Hyssälä (Centre) pointed out that beer in Estonia is only 20-25% cheaper than in Finland. Helsingin Sanomat has learned that the Ministry of Social Affairs and Health wants to bring down the beer tax by just ten percent, that of strong spirits by 35%, and leave the tax on wine unchanged.

   

If the Finance Ministry's view wins out, the government says that it will seek to mitigate the social impact of cheaper alcohol by enacting measures to reduce the availability of alcoholic beverages to those under 18.

The Federation of the Finnish Brewing

and Soft Drinks Industry says that the planned 32% cut is not sufficient, and that the cut should be 70%.

   

The breweries' proposal would lead to a reduction in the retail price of beer of more than 30%. According to the federation's managing director Risto Saarinen only a very large cut would significantly reduce the incentive to travel to Estonia to get beer.

   

When Estonia joins the EU the beer import quota will go up from the previous 16 litres to 110 litres.

   

Saarinen says that even now Finns are bringing in a total of 40 million litres of beer from abroad each year. Much of that amount comprises Finnish export beer that is re-imported by the travellers, but the share of foreign-brewed beer is increasing all the time.

The likely reduction in alcohol taxes

will be reflected in the duty free prices on ships sailing between Southern Finland and Stockholm. The ships were able to maintain their lucrative duty free sales by making a port call on each crossing in the semi-autonomous Åland Islands.

   

The shipping lines carrying thousands of passengers every day between the two countries will have to lower their on-board prices for alcoholic beverages in order to remain competitive with prices on land.

   

The shipping lines will probably have to compensate for the decreased profit margins by raising passenger ticket prices.

Estonia's entry into the EU

will deprive vessels sailing between Finland and Estonia of their duty free concession.

   

"After that we will sell alcohol with Estonian taxes", says Keijo Mehtonen, CEO of the Tallink shipping line. He says that this will reduce the profit margin by about 20%, which will lead to higher ticket prices on the Helsinki-Tallinn route.