Growing revenue result of VAT receipt

2023 state budget  explanatory memorandum.
2023 state budget explanatory memorandum. Source: ERR

State budget revenue will grow by €1.4 billion, or 10 percent compared to the 2022 forecast, to €15.57 billion next year. Growth of revenue owes most to VAT receipt pushed by rapid inflation.

83 percent of revenue or €12.92 comes from taxes, with non-tax income amounting to €2.2 billion.

The tax burden will be 33.3 percent of GDP in 2023, up 0.6 percent from 2022 but on par with 2021. The tax burden will grow as a result of additional labor and consumption tax receipt the effect of which is nevertheless kept in check by growth of basic exemption.

Labor taxes (52 percent) make up the largest group in tax structure, with the relative importance of consumption taxes to hit 41 percent. The share of capital taxes will fall to 7.1 percent.

Because of inflation, revenue from VAT is growing the fastest. The forecast sees tax revenue outstrip this year's by 15 percent for €12.92 billion.

The Ministry of Finance expects individual income tax receipt to fall by 1 percent in the wake of growth of average salary and employment and basic exemption applying to the average old-age pension. The forecast puts individual income tax receipt at €2.2 billion next year.

Corporate tax (legal persons income tax) receipt is estimated at €600 million, which is roughly on par with 2022.

The ministry expects VAT receipt to grow by 11.3 percent, based on growth of consumption and investments, to €3.77 billion.

Even though no excise changes are in store, revenue from the duty on alcohol is forecast to grow by 4.3 percent, mainly based on tourism bouncing back to pre-crisis levels.

The ministry forecasts revenue from the duty on tobacco to grow by 7.5 percent. The excise duty on tobacco is set to go up from January, while increasingly popular alternative tobacco products are expected to yield most of the growth.

Fuel excise duty receipt will grow by 3.8 percent to €510 million.

Gambling tax receipt is forecast at €45.6 million or up 2 percent from this year. Revenue from customs tax should fall by 8 percent to €69.8 million.

Growth of non-tax income is pulled by support and CO2 quota revenue. Non-tax revenue will grow by 24.7 percent compared to this year.

Estonia's loan burden will grow to 19.8 percent of GDP in 2023. The country could use a short or long-term bond issue or new loans to bridge the gap.


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Editor: Marcus Turovski

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