2020 tax take exceeded forecasts made at start of pandemic

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

Data released by the finance ministry and tax authority reveal 2020, despite being a pandemic year, did not see as severe an economic decline by the end of the year as had been forecast when the coronavirus first arrived in spring, at least as far as tax receipts go. Labor tax and also fuel excise duties – despite a cut in diesel duties – were the major drivers, and the overall tax take fell less than 3 percent between 2019 and 2020.

While 2020's tax take fell 2.4 percent on year, tax revenue exceeded that forecast in spring 2020, reaching 111 percent of the predicted sum.

Labor tax in particular contributed to the higher figure than forecast. The forecast was made simultaneously with the supplementary budget issued in spring during the initial coronavirus wave.

€7.7 billion in taxes taken in 2020

As of December 2020, €7.7 billion had been paid to the Tax and Customs Board (MTA), €761.3 million, or nearly 10 percent, of this coming in December alone, the finance ministry says – though December's figure was lower than December 2019, at €814.7 million.

Tas revenues, however, fell 2.4 percent on year for 2020 as a whole, and 6.5 percent on year to December, primarily the result of the pandemic, and also reduced tax rates in the energey sector.

Salary fund, which has an influence on labor tax, rose over 2 percent in 2020, while unemployment compensation also rose. Employment fell by 2.8 percent in 2020.

Salaries grew by 5.3 percent in 2020.

The forecast for both salary and (un)employment issued in spring 2020 was more pessimistic than the eventual figures.

Social and income tax receipts rose in 2020 despite pandemic

Social tax receipts rose 2.5 percent, while personal income tax receipts (both nationally and for local government) rose nearly 8 percent on year in 2020, primarily from wages but also on benefits and pensions.

The corporate income tax take, however, fell, by 11.7 percent in 2020, both again due to the pandemic and relating to reduced tax dividends from companies that redistribute profits (banks did not distribute profits last year, per a recommendation by the European Central Bank, though this was offset by income tax on other corporate distributions, ERR reports.

VAT payments were buoyed by relative economic recovery in the later part of the year and the reduction of tax debt as the year went on, and totaled €2.4 billion (a fall of 1.7 percent on year).

Companies saw very small level of growth in revenue by end of 2020

Sales by enterprises rose on year in December for the first time in the coronavirus-hit year.

The total turnover of companies also reached a small growth level at year end, of 0.1 percent on year.

Retail trade contributed the most to the growth of VAT payments in 2020 at 13.3 percent, while wholesale trade slowed down, falling 11.2 percent on year to 2020.

Excise duty receipts also exceeded the spring forecast, by 6.5 percent, even as diesel excise duties were reduced.

Although fuel excise duties fell by 31.5 per cent year-on-year due to the lower excise duty rates, declared diesel fuel duties has increased by 12.4 per cent on year every month from May to December 2020, a phenomenon mainly explained by commercial hauliers in the Baltic region refilling in Estonia more while the reduced rate was in place.

Conversely, fuel purchases fell in much of the rest of the region, particularly in Latvia, the MTA says.

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Editor: Andrew Whyte

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