According to a press release from the Ministry of Finance, €1.14 billion in tax revenue was paid to the Tax and Customs Board in January, indicating an acceleration of tax revenue growth in January by 9.7 percent compared to the previous year.

"January's budget performance exceeds forecasts. More than expected has flowed into the state budget, particularly from corporate income tax, but also from value-added tax and tobacco excise tax," said Margus Tuvikene, analyst at the Ministry of Finance's fiscal policy department, via the press release.

He noted that the growth of the wage fund compared to the average of the previous year has significantly slowed down, which also affected the payment of labor taxes – the growth in social tax payments in January was almost 3 percent lower than the near-record average of the previous year.

In January, the growth rate of the wage fund accelerated compared to December, while the number of jobs fell slightly. The impact of public sector wage increases that drove the wage fund growth last year – a general 5 percent wage increase at the beginning of 2023 and additional funding directed towards education, healthcare and internal security for further wage increases – is expected to partially recede starting from February, explained Tuvikene.

The decline in the number of jobs compared to the previous year continues to be deepest in the manufacturing and construction sectors, which have been most affected by the economic downturn.

Personal income tax from the state budget decreased in January due to the increase in the tax-free income for 2023; this effect will partially recede in February. Together with the local government's share, the collection of personal income tax still increased. Starting from February, the distribution of personal income tax between the state budget and local governments will be affected by a 2.5 percent tax rate on pension income, which is allocated to local governments to increase their financial autonomy.

The growth in corporate income tax receipts in January by 30.5 percent, similar to last year, was the fastest among the taxes. The collection increased by €29 million, nearly half of which came from income tax paid on the distributed profits of the State Forest Management Center (RMK). The corporate sector's distributed profit tax grew by €13 million, nearly half of which was paid by banks. The largest growth was seen in wholesale and retail trade, manufacturing and the financial and insurance sectors.

VAT payments increased in January compared to the same period last year, supported by the increase in the standard rate. The 22 percent standard VAT rate, effective from January 1, 2024, is expected to bring an additional revenue of €235 million this year according to the budget forecast, significantly boosting VAT payments for the year.

Despite the rapid growth in VAT, consumer confidence remains low, leading to limited consumption spending. This is characterized by a deepening decline in retail sales in January. Although wage growth in January was nearly double the rate of inflation, the purchasing power is limited by both price increases and a decrease in disposable income due to high Euribor rates.

Conversely, in uncertain conditions, people's savings are increasing – the growth of Estonian households' deposits accelerated again in January. Economic activity and business confidence at the beginning of the year remain quite low. As a positive sign, businesses reduced their VAT debt by over one million euros, and the number of debtors remained stable compared to the previous month. The increase in VAT payments was most driven by the energy sector, supported by the cold January and high electricity exchange prices.

Excise duty payments in January were boosted by more active consumption of all excisable goods than expected. Alcohol excise duty payments decreased compared to the previous year, but this was anticipated and resulted from the realization of stocks. Stocks are estimated to affect the entire first quarter, and payments will be lower than last year.

Conversely, fuel excise duty payments increased significantly in January. The high growth was supported by lower energy prices compared to the previous year and colder weather. The most significant impact on payments came from a higher declaration of motor fuels, which grew by 4.4 percent year-on-year, and a decrease in fuel excise debt. Consumption continues to be supported by the decline in retail prices of motor fuels. After more than a year of decline in wholesale diesel fuel sales, January saw a strong increase, though there have been no signs of improvement from the industry side, suggesting the growth may be temporary.

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