Latvian Excise Revenues Drop as Legal Tobacco Market Shrinks, NRA Reports

Latvian excise revenues dropped as the legal tobacco and e-cigarette market shrank, raising alarms across the Ministry of Finance.

Excise tax revenues from cigarettes have failed to reach last year’s levels, nra.lv reported on November 13, 2026. Finanšu ministra padomnieks Guntars Vītols said that the government must ring alarm bells over the plunging receipts.

Data from Valsts ieņēmumu dienests shows that the legal volume of electronic cigarette liquids dropped by 42.5% in 2025. Meanwhile, a Nielsen empty cigarette pack survey conducted in the second quarter of 2026 found that illicit cigarettes reached 22.1% of the market, with counterfeits making up 17.1%.

“Mums ir jābūt aktīvākiem,” Vītols told nra.lv, pointing to institutional responsibilities handled by the Ministry of Foreign Affairs.

Vītols explained that when excise rates increase too rapidly, a shock occurs and triggers a swift shift to the black market. He questioned whether the policy of raising excise duties by 15% annually should continue given these negative economic impacts.

The European Commission has repeatedly postponed the revision of the Tobacco Products Directive led by Health and Animal Welfare Commissioner Olivér Várhelyi. The Regulatory Scrutiny Board issued another negative opinion on the impact assessment.

This scrutiny board evaluates the quality of impact assessments for new EU regulations. Vītols warned that tighter prohibitions across the European Union often fail to curb consumption due to the single market and lack of internal border controls.

“Man personīgi ir bažas, ka likumdevēji dažādās valstīs ne vienmēr apzinās šo nelegālā tirgus faktisko spēku,” Vītols told nra.lv, adding that illegal manufacturing operations cannot keep up with current illicit demand.

Law enforcement authorities in Lithuania and Estonia report that Latvia has become a primary hub for counterfeit cigarette production and distribution.

Luminor bank economist Žigimants Maurics warned that stricter rules encourage consumers to turn to cross-border shopping and illicit channels. Vītols said that illicit operations require transporting tobacco from southern European nations rather than relying solely on local excise levels.

Budget discussions in late 2026 will include concrete proposals regarding excise tax adjustments. Vītols said that officials plan to introduce these measures themselves to address the shrinking legal trade.