Signs of recovery as tax take rises 14.6 per cent on year to May 2021

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

Tax take in May 2021 was up close to 15 percent on year, the finance ministry says, at €727.3 million in total going to the Tax and Customs Board's (MTA) coffers as recovery from the coronavirus pandemic and its economic effects continued.

The strong increase in tax revenues was mainly thanks to the low base level caused by the COVID-19 pandemic in the first half of last year, followed by the recovery of economic activity this year.

The rapid economic recovery continued through spring this year, while total company turnover reached 30 percent growth in May.

First quarter 2021 (Q1 2021) economic growth, at 5.4 percent, beat forecasts, while retail sales and exports of goods have recovered to the extent they exceed pre-crisis levels.

Estonia has been boosted also by the fact that its main trading partners are geographically nearby and have also fared better than many other EU states.

Continued development in company turnover will hinge partly on continued vaccinations and also the situation with restrictions, which in Estonia have largely been lifted.

VAT payments saw a rapid rise to May, partly due to the low base level set a year earlier, when the coronavirus emergency situation was still in place.

In the first five months of 2021 €1.05 billion have been paid to the MTA, exceeding the levels of both 2020 and the last pre-crisis year of 2019, by 20.1, and 8.7 percent, respectively.

Monthly payments have been higher on an annual basis than last year since January this year.

In May of this year, €47 million more was paid than in May 2020, and €39 million more than May 2019.

Excise duty take is expected to rise over summer as tourism starts to recover and mobility rises.

Strong alcohol and beer excise takes for May this year were significantly higher than the same period in previous years.

Compared to the previous year, the quantities of strong alcohol increased by 33.3 percent and of beer by 9.7 percent in May.

In five months, the volumes of beer grew faster than for strong alcohol, at 4.5 percent and 2.2 percent respectively, compared with the previous year, largely due to the easing of restrictions.

Tobacco excise duty payments increased by 4.6 percent on year to May. Despite the increase in excise duty rates at the beginning of this year, the declaration of tobacco products has not decreased compared with the previous year.

Tobacco-free snuff is also reportedly still gaining popularity, and in the last five months, declarations on it have increased by 77 percent on year.

The increase in the payment of fuel excise duty remained modest in May, on the other hand, at 1.8 percent.

The effect of the easing of restrictions is also noticeable in the receipt of fuel excise duty, especially in the declaration of petrol as in sales, the growth of which is accelerating from month to month.

May tax revenue quick facts

  • For the first five months of 2021, 41.6 percent of the budget was realized, 1.2 percentage points higher than at the same time in 2020.
  • VAT debt increased by €9 million in one month, to €188 million euros, which is 4 percent lower than in May 2020. The VAT debt makes up the largest part of the total tax debt, at 54 percent.
  • Retail sales by mail and online rose the most, by 36 percent, accounting for 5 percent of total retail sales as of May. The increase in VAT payments on this was supported by faster-than-expected price growth in May at 3.6 percent.
  • Total turnover of enterprises also exceeded 2019's level by 3.8 percent, at almost €222 million.
  • Growth of salary fund, which affects labor taxes, accelerated to 19.5 percent in May, or to 9.1 percent when wage compensation is taken into account, mainly thanks to the acceleration of average wage growth to 16.7 percent, while the number of jobs increased by 2.7 percent.
  • Growth of social tax receipts slowed down to 8.8 percent in May compared with the previous year, partly due to higher Unemployment Insurance Fund compensation in 2020.
  • In May 2020, €28 million of social tax was paid on the unemployment benefit, compared with €7 million for May this year.
  • Payments in the first five months were primarily supported by the better-than-expected development of the labor market in 2020, and also by bonuses and overtime pay.
  • Personal income tax receipts rose by 14 percent in May 2021, while €5.1 million in income tax was refunded, plus €6 million was received from retirement-age people leaving the second pillar who are able to collect their funds immediately.
  • Excise duties payments rose by 3.6 percent in May 2021 on the previous year; the increase was driven by alcohol excise duty, which rose 7.4 percent on year.
  • Debts increased the most in arts and entertainment activities (by €8 million) and fell the most in plant and animal husbandry (by €2 million).
  • Wholesale trade and sales of motor vehicles contributed significantly to the increase in VAT payments in May, where payments increased by 26.1 and 77.7 percent, respectively, on year.
  • This increase in wholesale trade was the result of broad-based growth of the industry, including an increase in the wholesale of grain, construction materials and tools and equipment.
  • In May, the growth of motor vehicle sales was mainly due to growth in passenger car sales at 86 percent. Total turnover of the industry rose compared even with the pre-crisis year of 2019.
  • In key sectors such as retail and real estate, VAT payments increased by 9 percent and 55 percent respectively, January to May 2021, with the real estate market particularly buoyant in 2021 so far.

The above data was reported by BNS based on Ministry of Finance-reported figures.

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Editor: Andrew Whyte

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