Corporate income tax, an area in focus at present LNK, saw receipts fall by 25.8 percent in August, or by approximately €11 million, due to a lack of distributed profits of state-owned companies this year.

In August 2020 by contrast, €13.8 million in income tax was received from state real estate body the RKAS, and the part-state owned Port of Tallinn (Tallinna Sadam).

Private sector income tax on distributed profits increased by more than €2 million in August, while income tax on fringe benefits fell by approximately €1 million.

In August 2021, VAT payments increased at a12 percentage-point slower rate than the average growth for the first half of the year, but was still rapid, at 8.3 percent, largely due to the higher reference level of VAT payments in the second half of last year, versus a slump in the first half of the year.

The sharp increase in the total turnover of companies, of 25 percent, was the result of a broad-based growth in activities, which also reflects a 15-percent-higher recovery level over the pre-crisis level of 2019.

At the same time, the increase in VAT payments is boosted by inflation, accelerating month-to-month and reaching 5 percent in August.

The increase in receipts slowed in summer compared with the previous year, mainly due to consumption taxes, the finance ministry says.

VAT debt showed a positive trend, as the indicator decreased by €2 million, to €175 million, in August. VAT receipts in January to August this year stood at €1.77 billion, which exceeds both 2020 and 2019 levels, by 16.3 percent, and 10.6 percent, respectively.

Retail and wholesale trade and sales of motor vehicles, contributed the most to the increase in VAT payments in August, seeing a 12 percent rise (retail and wholesale trade) and 27 percent rise (motor vehicles) respectively.

Retail and wholesale sales of motor fuels exerted the greatest effect, supported by an annual increase in the prices of diesel and gasoline, by 23 percent, and 16 percent, respectively. The sales of passenger cars and minibuses contributed the most to the increase in the sales of motor vehicles.

August tax take further quick facts on year to August 2021 (unless otherwise stated):

• Salary fund grew by 10.3 percent.
• Average wage rose by 6.3 percent.
• Number of jobs increased by 3.8 percent - 23,800 more than August 2020, but 3,500 lower than the same month in 2019.
• Information and communications exerted strong growth here (23.3 percent).
• The sector is also the leader of three- and 12-month average salary fund growth, with 22.1 and 15.9 percent, respectively.
• Payment of social tax increased by 10.7 percent, while growth remained high despite the end of the Unemployment Insurance Fund's salary compensation package, thanks to positive developments in labor market.
• Personal income tax receipts increased by 10.8 percent in August, also in part supported by what is happening in the labor market.
• Excise duties growth more more modest than at the beginning of the year, but still growing, thanks more to domestic than foreign consumption, as foreign tourism remains in doldrums (shipping line Tallink Grupp reported a 38.6 percent fall in passenger numbers on year in summer 2021 as a whole).
• Alcohol excise duty receipts increased by 4.5 percent, mainly due to an increase in the declaration of spirits.
• Strong alcohol excise receipts increased by 6.6 percent, though beer moved in the opposite direction with a 2.3-percent fall.
• Fuel excise duty payments fell by 2 percent, partly to be offset by the peculiarity of last summer, where people traveled more by car, due to coronavirus restrictions primarily.
• Retail prices, which in August increased by 16 percent for gas and 23 percent for diesel, also had an effect here.
• Diesel and gas are also moving along the same trajectory; gas sales fell by 7.2 percent and the growth rate of diesel slowed to 5 percent.

Cross-border refueling

It is estimated that the refueling of 25-30 million liters of diesel fuel moved back to Estonia, from the other two Baltic States, Latvia and Lithuania, last year. The ministry estimates that the share of other countries' refueling volumes brought back to Estonia due to lower prices is rather marginal.

 Cross-border refueling should not be taken to equate to cross-border trade, which can be affected by changes in Estonian fuel excise duty rates.

Transport companies refuel on a demand basis or have targeted their refueling logistics to a specific country. In general, refueling volumes in various countries have remained relatively stable for years and annual growth has moved in line with overall economic growth.

Cross-border refueling quick facts

• Refueling volumes have increased the most in Latvia and Lithuania, where they have multiplied since 2016.
• Refueling in Latvia and Lithuania accounted for approximately 9 percent, or 7 million liters of all cross-border refueling, in 2015, but by 2019, their share of total refueling already stood at 43 percent, or 65 million liters.
• In 2016 and 2017, excise duty rates on diesel fuel were raised in Estonia, which led to the emergence of additional cross-border trade with neighboring countries, a trade which increased each year.
• Refueling fell in most countries in 2020 due to the pandemic, but refueling in Latvia and Lithuania decreased significantly more, and their share of the total refueling volume in the European Union fell to 33 percent. The 2020 diesel excise duty cut in Estonia also played a role.

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