August tax revenues higher than forecast

Price of gasoline 95 at an Alexela filling station on June 16, 2022.
Price of gasoline 95 at an Alexela filling station on June 16, 2022. Source: ERR

The Estonian State Treasury received €1.0018 billion in tax revenue for August 2022, nine percent more than the amount forecast. According to the Ministry of Finance, tax revenue remained 15.1 percent higher on average during the summer months, mainly due to continued price increases.

Salary fund growth, which affects labor taxes, was similar to the previous month. On year, salary growth remained at a similar level to August 2021, at 12.6 percent, with average earnings rising to 9.3 percent and jobs slowing to 2.9 percent.

The share of  registered workers amongst the working-age population was 62.7 per cent, close to its historical high.

Wage growth was highest in accommodation and food services, with an increase of 27.7 percent in August. This sector was also the leader when it comes to the figures for three and 12-month average salaries at 44.1 percent and 36.1 percent respectively.

Social tax receipt growth slowed to 9.7 percent in August. While this is the slowest growth rate so far this year, it should also be noted that an amendment to the social tax law came into force in April, reducing the social tax rate from 33 percent to 20 percent in certain cases. The amendment reduces the amount of social tax paid by the state by €5 million per month.

Continued solid individual income tax receipt (state budget and local government portions combined) still relies on strong salary fund growth. Receipt was up 16 percent in August on year.

The growth in corporate income tax receipts slowed to 18.5 percent. Most of the increase came from private sector companies' distributed profits, while nearly €1 million was also collected from the distributed profits of state-owned enterprises.

The accelerated rise in VAT payments was driven by strong economic activity, a new peak in price increases and the low  benchmark from last year against which August 2022's figures are compared. After the first eight months of 2022, payment (€2.13 billion) is 20 percent, or €356 million, higher than at the same point in 2021.

In August, VAT payments grew at an even faster pace than on average during the first half of the year, with only April seeing a higher rate of increase.

VAT payments were boosted by a new peak in price increases, which reached 24.8 percent in August. This acceleration in August is also explained by the low benchmark level of VAT payments for the same month last year. Last August's low figures were a result of both the economy's gradual recovery and the coronavirus restrictions that came back into force at that time.

Growth in total business turnover also picked up in August this year, reflecting a continuation of strong economic activity, according to the Ministry of Finance. The sectors contributing most to the increase in VAT payments for August were trade, retail and wholesale trade, and energy.

Growth in excise duties paid in the summer months lower than in previous year

While excise duty receipt increased more in August than during the other summer months, they were still significantly lower than the growth seen at the start of 2022. During the summer period as a whole, excise duty receipts were considerably lower than in the previous year, due to general price increases, which mainly affect domestic consumption.

Excise duties on alcohol up 14.4 percent on year

While during the previous two months the declaration of non-alcoholic beverages was down compared to the same months in 2021, in August the revenue from both fermented beverages and beer increased. The summer months are traditionally characterized by the popularity of light alcohol in particular, with receipts usually at their highest levels for the year. This year, however, spirits and wine have also been declared more than average during the summer months, with the figures up by 14.8 percent and 15.6 percent respectively over the first eight months of 2022.

Fuel excise duty payments in August were virtually unchanged from last year, up by just 0.3 percent on year. Fuel excise duty receipts have declined significantly in recent months, with cumulative increases dropping each month and payments already down 1.1 percent on year by the end of August.

The main reason for the decline is the fall in natural gas consumption, which has been cut by more than 19 percent this year.

Declarations for motor fuels remain slightly up on year. Both petrol and diesel volumes increased in comparison to a year earlier, with only diesel declarations up for the year as a whole.


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Editor: Michael Cole

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