Estonia's Prime Minister has refused to increase his government's planned 20% hike in strong alcohol duty rates, despite pressure from neighbouring Finland for a steeper rise.

Visiting Helsinki, Juhan Parts heard arguments that next year's planned tax change would add only a few cents to a bottle of strong grain liquor which retails for about €3 in Estonia, while selling for €9 a bottle in Finland.

The contrast has fuelled personal Finnish alcohol imports, especially since Estonia joined the EU in May. Finnish officials say the proposed tax increases would add just "a few tens of cents" to a 50cl bottle of cheap spirits. However Estonia and the other Baltic states, Latvia and Lithuania, have just announced a working group tasked with jointly reaching minimum EU excise rates by 2008.

The Estonian government has also launched formal reforms to its excise system, although starting with fuel and petrol, recently tabling a bill in its parliament.