DIFFERENT MODELS OF APPLYING ALCOHOL EXCISE TAX CHANGES IN THE BALTIC STATES
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Abstract
The dynamic nature of alcohol excise policy in the Baltic states makes it essential to understand how administrative transition models influence fiscal stability and public health. This study addresses a critical gap in economic literature by examining the operational mechanics of tax implementation, which often determine the real-world success of legislative changes. This research project aims to evaluate and compare the distinct approaches to increasing alcohol excise tax rates in Latvia, Estonia and Lithuania over the last decade. Employing a multi-methodological framework, the authors integrate comparative legal analysis with quantitative econometric modelling and qualitative expert assessments to examine the impact of these transitions on state budget revenues. The investigation reveals significant differences in national practices, which are driven by competing economic and political priorities. Latvia enforces a model of immediate inventory re-taxation, which secures a revenue increase within the first quarter of implementation. In contrast, Estonia and Lithuania adopt a deferred model, applying new rates only to products released after the legislative date. Although this approach enhances legal predictability for businesses, it causes a fiscal lag of approximately three to nine months, which temporarily reduces the effectiveness of health-motivated consumption reduction goals. Thus, choosing a transition model creates a measurable trade-off between administrative expediency and the efficacy of immediate policy. Furthermore, the absence of a unified track-and-trace system hinders the precise quantification of cross-border trade fluctuations, which can result in substantial revenue leakage in border regions. These findings offer EU policymakers practical value by introducing the Excise Tax Transition Efficacy (ETTE) model, which provides a novel framework for optimising tax implementation strategies in emerging European markets.
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alcohol excise tax, Baltic states, fiscal policy effectiveness, tax implementation models, taxation efficiency
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