Estonia was the biggest mover in the 2019 Index, rising from mid-table to third place, and it remains in the red zone in the new, expanded Nanny State Index.

The government’s thirst for sin tax revenue has backfired and offers a salutary lesson to other countries. Taxes on beer, wine and spirits have been higher than the EU average for years and have risen sharply since the first Nanny State Index was published. Between 2016 and 2018, spirits duty rose by 30 per cent, wine duty rose by 50 per cent and beer duty doubled. This led to a textbook illustration of the Laffer Curve as Estonians travelled to neighbouring Latvia for their booze shopping and Finns – who have long made the trip to Estonia for theirs – went elsewhere. The government expected alcohol revenues to rise from €251 million in 2016 to €276 million in 2017. In fact, the tax rise caused revenues to fall to €229 million in 2017 and by 2018 they were 30 per cent lower than expected.

This had a devastating impact on small shops in poor regions close to the Latvian border which relied on alcohol sales and it was a sobering experience for the Estonian government which abandoned its plans to introduce further tax hikes on alcohol in 2019 and 2020. The country still has the EU’s third highest beer tax, after adjusting for income, but its spirits and wine duties are closer to the EU average.

Estonia’s Tobacco Act views e-cigarettes as ‘products used similarly to tobacco products’ and includes them in the smoking ban. E-cigarette flavours were banned in June 2019, with the exception of tobacco flavour. This ban, along with a vape juice tax of €0.20 per millilitre, led to another surge in cross-border trade and smuggling. As a result, the government partially relaxed the flavours ban to permit menthol in May 2020. Heated tobacco was legalised and in December 2020 the Estonian Parliament announced that it would temporarily stop collecting the vape tax between April 2021 and 31 December 2022.

A tax on soft drinks was introduced in January 2018. Although the Estonian president, Kersti Kaljulaid, claimed that the aim of the tax was ‘to guide the people of Estonia, and first and foremost children and youth, to consume less sugar’, it applies to artificially sweetened drinks which contain no calories as well as to sugary drinks. It is a tiered system with artificially sweetened drinks and drinks containing up to 10 grams of sugar per 100ml taxed at €0.10 per litre and drinks with more than 10 grams of sugar taxed at €0.20 per litre. For reasons that are not entirely clear, if a drink contains more than 10 grams of sugar per 100ml and also contains artificial sweeteners, the tax rate is €0.30.

Estonia’s smoking restrictions are less severe than in most EU countries, but a ban on smoking in cars with children was introduced in 2016 (with maximum fines of €300) and a ban on smoking in prisons came into effect in October 2017. Estonia has the highest tobacco taxes in Eastern Europe although they seem less punitive once adjusted for income. There is a full ban on tobacco advertising, and cigarettes cannot be sold from vending machines. A tobacco display ban came into effect in July 2019.

Estonia’s Advertising Act, introduced in January 2018, bans all outdoor advertising for alcohol, and the watershed for TV and radio advertising was pushed back to 10pm. What little alcohol advertising remains can only provide minimal, factual information about the product. Happy hours and alcohol tastings in shops have been banned. Shops must display their alcoholic drinks away from the rest of their groceries and away from shop windows.