March tax intake down 23 percent on year at €405.4 million

Tax and Customs Board (MTA) logo.
Tax and Customs Board (MTA) logo. Source: Siim Lõvi/ERR

The Tax and Customs Board collected €405.4 million in taxes in March 2020, 23 percent, or €122 million, less than during the same month in 2019.

The main reasons behind the decline were the excise duty on fuel and value-added tax, the inflow of which in March decreased by €52.8 million, or 65.8 percent, and by €51.3 million, or 25.6 percent, on year, respectively, ERR reported.

The payment of excise duty on fuel has been lower than last year's level for the entire start of this year, totaling almost €108 million less during the first quarter compared with the same period last year. 

The drop is largely caused by stockpiling of fuel last year, according to the Ministry of Finance. 

"As to the excise duty on fuel, this year's receipts are affected by the stockpiling of fuel in December of last year and one fuel supplier terminating its economic operation and selling all its stockpiles," Kadri Klaos, analyst for the Finance Ministry's fiscal policy department, told ERR.

Under ordinary circumstances, such stockpiling would affect four to five months' tax receipts.

"As a result of the movement restrictions established as part of the emergency situation, the realization of stockpiles is extended as consumption is in decline and tax receipts will be affected by stockpiles until the middle of summer," she said.

Klaos projects that in addition to stockpiling and movement restrictions, fuel consumption this year will also drop as a result of the overall economic situation, which has caused a decline in the real growth of added value for the main sectors affecting fuel consumption.

"On a more positive note, consumption will be affected by a 25-percent reduction on excise duty rate on diesel fuel from May 1. As a result of the combined effect of the said indicators, declaration of diesel fuel is expected to decline 11.8 percent and that of gasoline 12 percent compared with last year," Klaos said, adding that tax inflow is to drop 39 percent on year to €392 million.

VAT inflow was still higher than a year earlier in January 2020 and did not start declining until February, when it dropped 7.7 percent, or by €13 million.

The Ministry of Finance expects VAT receipts to decline by €224 million this year compared with 2019, prompted by the unexpected emergency situation as businesses' revenue is falling in many sectors due to restrictions imposed both on people and entrepreneurs.

"At the same time, VAT inflow will significantly be affected by growth in VAT liability, which is in part linked to tax deferral and optimization, but also to businesses' real liquidity-related need," Klaos said. Households' consumer confidence will also decline as a result of the outbreak, undoubtedly reaching its deepest decline within the next few months, she added.

The payment of social tax moved down 5.7 percent, or by €15 million, on year in March. The Ministry of Finance expects that social tax receipts will fall 9 percent this year, or by a total of €300 million, with the decline estimated to be sharpest in April.

The inflow of excise duty on tobacco increased 0.6 percent on year in March, even though the tax receipts were lower in yearly comparison during the first two months of 2020. The Ministry of Finance said that this is due to the phasing out of menthol cigarettes and the increased excise duty rates stepping into effect from the start of the year. 

Total tax intake inclusive of carryovers in 2020 will be lower by €1.3 billion than the sum planned in the state budget, and by €1.5 billion, or 15.5 percent, lower together with aid measures in the supplementary budget, according to the spring economic forecast of the Finance Ministry. This year's tax inflow will be lower by 11 percent, or close to €1 billion, compared with last year.


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Editor: Helen Wright

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