The Estonian Ministry of Finance has presented a draft plan to the national parliament advocating a 20% increase in alcohol taxes effective from 1 January 2008.

The proposed tax increase forms one segment of a broader tax package that also endorses raising taxes on car fuels and tobacco products.

"The government had originally planned to increase the tax on alcohol products by 10%," Finance Minister Ivari Padar told the Estonian parliament yesterday (May 29). "There is a need to prepare Estonia's economy to join the Eurozone in 2011. These new tax measures are needed if we are to bring Estonia into line."

The alcohol tax hike could hurt inward tourism, however, especially from Sweden and Finland, Padar warned.