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Tax receipts rise 3.4 percent on year to July 2020

An MTA service center.
An MTA service center. Source: ERR

The Tax and Customs Board (MTA) took in a total of €725.5 million in taxes in July, a rise of 3.4 percent on year.

60.8 percent of the full-year tax revenue target set with the supplementary budget had been met between January and July, the Ministry of Finance says.

Over the past four months, labor tax receipts have been buoyed by a government support scheme chaneled via the Unemployment Insurance Fund (Töötukassa) which provided 70 percent of an employee's monthly wage and was aimed at mitigating the effects of the coronavirus pandemic.



VAT receipts rose by €20 million on year, mainly due to a change in the structure of sales and purchases which resulted in a significant decrease in corporate purchases and input VAT, the finance ministry says.

This made VAT obligations increase by year-on-year comparisons, rising most in real estate (120 percent increase).

Company total turnover was 7 percent lower in July 2020 than in July 2019, though VAT debts of €189 million, €3 million less than the previous month, were paid.

Excise duties

Excise duties fell 20 percent in the first seven months of 2020 compared with the same period in 2019, to €494.1, though, the ministry says, over summer these recovered from the worst of the pandemic's effects.

The government slashed excise duties on beer and wines in July 2019, and fuel excise duties on diesel early on this year.

Motor fuel market supply rose during the period, the ministry says, and diesel consumption both due to the excise cuts and, with fuels in general, as a result of the pandemic causing more Estonians to vacation at home.

Tobacco excise duties fell in part due to the reduced number of tourists.

Cross-border trade with Latvia declined during the same period, again partly the result of the slashed alcohol excise duties – Latvian border towns were traditionally a destination for not only Estonians, but also Finns and others, in search of cheaper alcohol.


As noted the wage compensation scheme had the effect of distorting wage statistics, though in July the salary fund had fallen 2.1 percent on year.

Average wages, however, grew 3.5 percent on year to July (a figure which excludes the wage compensation factor).

Education (7.7 percent), healthcare (7.6 percent) and public administration (5.9 percent) saw the largest rises among major employment sectors, with IT and communications seeing a 23.2 percent rise, among sectors employing smaller numbers of the work force.

Average wages in the accommodation and food services sector were hit by the pandemic, declining 15.7 percent on year to July.

Jobs fell by 6.1 percent on year to July, particularly in accommodation and food services (28.7 percent) and administration (12.8 percent).

The share of working-age population stood at 57.8 percent in July, a slight rise, the MTA says.

The salary fund continued to decline, at 2.1 percent compared with July 2019; again, accommodation services and food service activities saw the greatest fall, at 39.9 percent, while education and health care saw 11 percent and 8.7 percent rates of growth respectively.

Social tax

Social tax receipts rose 2.5 percent on year to July, buoyed by a €2-million debt reduction in the sphere and a rise in special cases where social tax is due, to €3 million.

The social tax paid by the Unemployment Insurance Fund on wage compensation amounted to €6.2 million in July.

Income Tax

The receipts of personal income tax -- the share of the state budget and local governments in total -- decreased by 2.7 percent compared to the previous year. The reason was the postponement of the due income tax payment deadline to October, which reduced the July receipts by approximately 11 million euros compared to the previous year.

The receipts were supported by income tax on salary compensation in the amount of 13.2 million euros and a decrease in tax debt by 1.6 million euros. In three months, approximately 34 million euros of income tax has been paid on salary compensation.

Corporate tax

Corporate tax receipts are affected by the crisis, which has reduced the income tax paid on private sector's distributed profits. In July, corporate income tax receipts amounted to €55.4 million, marking an increase of 20.8 percent or 9.6 million euros compared to the same period last year.

The receipts were supported by the state companies' income tax on dividends, which increased by more than €13 million compared to the previous year. Private sector corporate income tax on distributed profits decreased by approximately €4 million.

Factors affecting tax revenues

According to the Ministry of Finance, tax revenue is affected by both the volume of dividends and the lower income tax rate on regularly distributed profits - 14 percent. Since the beginning of the year, €87.1 million of income tax has been declared at a lower rate, which is €35.5 million more than last year.

The negative effect of the lower tax rate on tax revenues is reduced by the additional 7 percent income tax of resident shareholders on dividends taxed at 14 percent. Since the beginning of the year, this has been paid in the amount of €15.6 million as personal income tax, which is €6.7 million more than last year.

Public sector deficits

By the end of July, the general government sector deficit reached 3.3 percent of gross domestic product (GDP), or €887 million. In July, the deficit was mainly increased by the deficit of the Unemployment Insurance Fund, which increased by €40 million euros. The deficit was also increased by the combined position of the Health Insurance Fund and local governments.

As in June, the central government was in surplus due to better-than-expected tax receipts and dividend payments to the state budget.

However, compared to the end of July 2019, the general government sector deficit is nevertheless approximately €850 million higher, mainly from the central government and mainly due to both increased expenditures due to crisis relief disbursements and a reduced revenue base.

Tax revenue has fallen by around €180 million compared to the previous year, in addition, the state budget has received lower revenues from environmental charges and the sale of emission quotas.

The impact of the crisis is also reflected in the position of the Unemployment Insurance Fund, which was in deficit by €294 million at the end of July.

Local government is in surplus compared with the previous year, as the result of state support measures and spending cuts.


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Editor: Andrew Whyte

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