Ministry of Finance: Tax revenues up 9.8 percent on year to May 2023

Stacks of euro bills (photo is illustrative).
Stacks of euro bills (photo is illustrative). Source: Siim Lõvi/ERR

The first five months of 2023 have seen a tax take of 10 percent more than the figure for 2022, data from the Ministry of Finance reveals.

As of May, tax revenues stood at €1.087 billion, while growth in tax take between April and May also accelerated.

A rise in corporate income tax revenues was mainly the result of Eesti Energia's income tax on its distributed profits.

While growth of sales tax revenue accelerated in May, it remained below the rise in inflation.

For the second month in a row, tobacco excise contributes the most to the payment of excise duties.

On the other hand, the growth in the wage fund slowed, and the number of workplaces is close to a fall on year to the first five months of 2023.

The five-month budget exceeds forecasts, though the pace of its execution is somewhat slower than last year, Margus Tuvikene, analyst at the Ministry of Finance's fiscal policy department, said.

Personal income tax receipts rose by 9.1 percent on year to May; the rise in local government income tax receipts reached 12.4 percent. 

State budget revenues are however set to fall this year, as a result of a coalition government policy to increase the income tax-free threshold - to €654 per month for working-age people, and to €704 per month for pensioners.

In May of this year, corporate income tax receipts of €59.5 million were reported, a rise of 36.1 percent on year.

Close to €13.5 million in income tax was collected from the distributed profits of state energy firm Eesti Energia. 

In May last year, receipts from state-owned enterprises were €11 million lower.

VAT payments in May went up by one percentage point, compared with the previous month, to 6.7 percent.

While May 2022 was characterized by high economic activity, soaring energy prices in the wake of Russia's invasion of Ukraine led to inflationary peaks (CPI in May 2022 was over 20 percent), against the background of this year's cooled economic situation and the fall in households purchasing power, a single-digit VAT growth percentage in May was expected. 

As with the previous month, retail trade reflected a decrease in real growth (of -10 percent), i.e. a quantitative fall in consumption.

VAT payments for the first five months of this year (of €1.365 million) were up 8.2 percent, €103 million, on the year.

Income tax on distributed profits from the private sector rose by nearly five million euros. Among the various sectors, energy (in the form of Eesti Energia) led the way in income tax receipts at €13.6 million, followed by wholesale and retail trade with at €9.1 million, and real estate at €8.6 million.

Companies' profits rose by 33 percent in 2022, despite the difficult economic situation last year.

This has bolstered this year's income tax take, while rises in the Euribor rate in turn exert an upward pressure on banks profits, in turn raising the payment of advance income tax of credit institutions

The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) in the last quarter of 2022 rose by 44 percent, while growth in the first quarter of 2023 reached 71 percent.

Social tax payments' growth slowed to 11.3 percent in May, while the wage fund, which affects labor payments, grew at 10.6 percent; the growth of average salaries slowed down to 10.5 percent, and the growth jobs to just 0.2 percent.

Education led the growth of wage fund by sector, at 19.8 percent, due to the salary rises enjoyed by teachers at the beginning of the year.

Compared with last year, the largest fall in jobs was experienced in the manufacturing industry (down by around 4,400, primarily in woodworking, and furniture production), construction (down around 1,700, primarily residential and non-residential building construction) and in administration (down 1,350, primarily in the employment sector).

In May this year, nearly 7,400 people of working age left the so-called second pillar of the Estonian pension system, referring to employer/employee contributions.

This was less than a third of the number of people who left the second pillar in May 2022.

The tax take from second pillar leavers came to €14 million in income tax in June, which is €22 million less than the figure for the same month last year.

As of the end of May, more than 10,600 Ukrainian citizens who received temporary protection in Estonia had found work here

The total payment of excise duties increased by 6.6 percent in May on year, the fastest monthly growth for 2023 so far, driven most of all by tobacco excise duties, whose growth in May was again in double-digit figgures

Wheraes for January to May 2023, alcohol and tobacco excise payments exceeded the previous year's level, fuel excise payments have not yet done so.

The drop in the retail price of motor fuels in recent months is reflected positively both in excise declarations and in sales statistics, though the fall stands out most of all in the wholesale of diesel fuel, which has not yet returned to growth this year so far.

Wholesale of diesel fuel accounts for an average of 14 percent of all diesel fuel sales, and has decreased by 19.4 percent since the beginning of the year. 

Wholesale sales are affected, among other factors, by the manufacturing industry sector, which itself is noteworthy in in the cooling economic environment due to its suffering both a fall in jobs and a fall in revenues.

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Editor: Andrew Whyte

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