The tax burden in Estonia will increase from 35 percent this year to 35.8 percent, but then decline to 35.2 percent by 2020, Minister of Finance Sven Sester told the Riigikogu on Monday.
The tax burden in Estonia will rise to 35.8 percent from this year's 35 percent but will then decline to 35.2 percent by 2020, Finance Minister Sven Sester told the Riigikogu on Monday.
MPs from the opposition Reform Party asked Sester numerous questions regarding the increase in tax burden, spokespeople for the Riigikogu said. The MPs cited data on macroeconomic indicators handed out to journalists during a press briefing at the end of last year which state that the tax burden would grow by 0.6 percent to 35 percent of the GDP in 2017. The MPs asked whether the new state budget strategy also calls for increasing the tax burden in 2018 and the years following.
Sester said that the budget strategy for 2018-2021 will be based on the Ministry of Finance's spring 2017 economic forecast to be completed in April.
"So it is unfortunately too early to say yet what the size of the tax burden will be under the new forecast," Sester said. "Namely, the tax burden depends not only on the tax rate but also on actual tax receipts as well as the estimated size of the GDP, being the quotient of the two."
The minister added that, speaking of the adopted and planned tax measures of the current government, the lower tax rate for profit distribution by mature companies that is expected to result in bigger tax receipts during its first years of application is effectively a tax reduction which motivates businesses to distribute more of their profit, despite bringing more money into the state budget and statistically signaling an increase in the tax burden.
As some of the major measures affecting the tax burden last year and in 2017, Sester named the postponement of the increase in alcohol and ful excise duties to February, an additional increase to the alcohol excise duty, canceling the rise in excise duty on diesel next year, forgoing the cut in social tax and forgoing the increase in VAT for accommodation businesses.
The tax burden will be 35 percent in 2017, increase to 35.8 percent in 2018, decrease to 35.6 in 2019 and 35.2 percent in 2020. The effective labor tax rate will be 34.3 percent in 2017, 33.9 percent in 2018, 34.1 percent in 2019 and 34.2 percent in 2020, the minister added.
"The responses given to the question asked of the minister and the subsequent discussion gave rise to an emotional debate on matters related to the tax burden," spokespeople for the Riigikogu added.
Editor: Aili Vahtla