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ESTONIAN TAXES AND
TAX STRUCTURE
Tax Policy Department
Revised in April 2014
Population (01.01.2014) 1 311 870
Total area 45,227 km2
Average salary (2013) 948 EUR
Average pension (April 2014) 354 EUR...
Outline of the presentation
• The main principles of the Estonian tax system, the current
tax structure
• Taxation Act
• D...
Estonian Tax System
The main principles of Estonian tax policy:
• simple tax system
• broad tax base, low rates
Estonia is...
5
Taxation Act
Estonian Tax System
• To achieve sustainable, socially and regionally
balanced economic growth Estonian tax
system consist...
1) excise duties;
2) income taxes;
3) gambling tax;
4) value added tax;
5) land tax;
6) social tax;
7) customs duty;
8) he...
Taxation Act
• Taxation act specifies
– Estonian tax system
– main definitions used in all tax acts
– requirements for tax...
Taxation Act
“Tax” is
• a single or periodical financial obligation
• imposed by an Act or by a local government council
r...
Taxation Act
Requirements for Act concerning tax
1) name of the tax;
2) object of taxation;
3) tax rate;
4) taxpayer;
5) r...
Tax authority
• The tax authority for state taxes is the Tax and
Customs Board with its regional offices. The tax
authorit...
• Corporate income tax – 21% on distributed profit
• Personal income tax – 21%
• Social tax – 33% (payable by employer)
• ...
Tax structure
0
5
10
15
20
25
30
35
40
2000 2002 2004 2006 2008 2010 2012 2014* 2016* 2018*
Direct taxes Indirecttaxes Social security c...
Tax burden ( % of GDP)
Source: Statistical Office of Estonia, Ministry of Finance
31,0
30,2
31,0
30,8
30,6
30,6
30,7
31,4
...
Structure of tax revenue
0%
20%
40%
60%
80%
100%
Personalincometax Corporateincometax
Social contributions VAT
Exice dutie...
State Budget Tax Revenue 2014
Total tax revenue 6,559.8 million EUR
Total revenue 7,880.9 million EUR
5,1% 5,0%
25,5%
12,6...
Tax Revenue 2013, million € (collected)
* - The amount received by the state + local governments
State taxes 6 140,4
Direc...
Direct taxes
• Income tax (personal and corporate income
tax both stipulated in the Income Tax Act)
• Social tax
• Land tax
Direct taxes
Reasons for introducing flat rate
in Estonia
Reasons for introducing flat rate in Estonia
• High inflation rate - in case of flat rate there is no
need of frequent adj...
The outcome…
Personal income tax revenue 1994-2018
million €
0
200
400
600
800
1 000
1 200
1 400
1 600
1994 1996 1998 2000 2002 2004 20...
Corporate income tax revenue 1995-2018
0
50
100
150
200
250
300
350
400
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 ...
Personal income tax
Personal income tax
• Residents pay tax on their total worldwide income.
• Non-residents pay tax only on their income rece...
Income Tax Act
Period of taxation: a calendar year
Tax rate: 21% (separate tax rate 10% for certain pensions
and payments ...
Income Tax Act
Non-taxable minimum (annual basic exemption): 1728 EUR
Additional exemption for state pensions: 2520 EUR
si...
26
24
23
22
21
2019
32
51
64
89
109
128
144
154
0
20
40
60
80
100
120
140
160
180
18
20
22
24
26
28
1994 1996 1998 2000 20...
Personal income tax
For non-residents there is a limited list of taxable income in the
Income Tax Act:
• income from work ...
Personal income tax
For non-resident individuals
• Period of taxation is a calendar year
• Tax rates: 21% and 10%
• Estoni...
Personal income tax
Tax allocation of personal income tax paid by
residents
• The amount received by local governments (fr...
Personal income tax
Avoidance of double taxation
Individuals
• Exemption method for foreign dividends and
certain salary i...
Corporate income tax
Corporate income tax
• Corporate tax reform in year 2000
• The ultimate goal of the reform was
promotion of business and a...
Corporate income tax
Elimination
of technical
shortcomings
Additional
funds available
for investment
Stricter
regulation
o...
Corporate income tax
The moment of taxation of corporate income is
postponed until the distribution of the profits
The sys...
Tax rate 26 %
(on gross
profit)
Income tax
26 EUR
Dividend
payment
74 EUR
Profit
earned
100 EUR
Time
The taxation of profi...
Income tax
26 EUR
Dividend
payment
74 EUR
Profit
earned
100 EUR
Tax rate 26/74 (on
net amount,
equals to 26% of
gross prof...
Corporate income tax
• Tax rate in 2014: 21% (21/79 of the net amount of the
dividend or other profit distribution)
• Peri...
Corporate income tax
Tax base
• corporate profits distributed in the tax period;
dividends and other profit distributions,...
Corporate income tax
+ qualified
dividend
received
100 EUR
+ foreign
interest
received
100 EUR
(source state
WHT 10)
Donat...
Corporate income tax
There are 3 main methods introduced in the Estonian Income
Tax Act, the goal of which is to minimize ...
Corporate income tax
Avoidance of double taxation
Companies and non-resident’s PEs
• Exemption method for qualified (thres...
Structure of declared corporate income
tax 2003-2018
0
100
200
300
400
2003 2005 2007 2009 2011 2013 2015* 2017*
Paymentst...
Social tax
Social tax
Tax Base
• Employers' payments to individuals (wage
income) – tax payable by employers
• in cash
• in kind (fri...
Social tax
Period of taxation
• Calendar month for wage income
• Calendar year for business income of self-
employed
Social tax
• Tax rate is 33 % of the taxable amount
• Social tax payable is personificated and
will be taken into account ...
• Tax allocation IF the person has joined the II
pension pillar (compulsory for the persons who
have born in 1983 or later...
Social tax revenue and structure
million €
0
500
1 000
1 500
2 000
2 500
3 000
1994 1996 1998 2000 2002 2004 2006 2008 201...
Indirect taxes
Indirect taxes
• Value added tax
• Alcohol excise duty
• Tobacco excise duty
• Energy products excise duty
• Packaging exc...
Value-added tax (VAT)
Taxable person
• Person whose taxable supply (excluding
import) exceeds 16 000 EUR in a calendar
year
• Voluntary complian...
Tax base
VAT is charged on:
• transactions of goods and services within
Estonia
• intra-Community acquisitions of goods an...
Tax rates
• Standard rate is 20%.
• Reduced rate is 9% (books, newspapers,
medicines, accommodation).
• Zero rated: export...
Exempted goods and services are:
• postal services
• health services
• social services
• insurance services
• services for...
VAT revenue 1994-2018
million €
0
500
1000
1500
2000
2500
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014* 2016* 20...
Excise duties
Excise duties
Excise duties are levied on:
• Alcohol
• Tobacco
• Fuel
• Electricity
• Packaging
Duty rates on alcohol, tob...
Excise duty rates on alcohol
Unit
Excise duty rates
01.01.2014
EU minimum
excise duty
rates
Wine and
fermented
beverage
He...
Excise duty rates on tobacco products
Product Excise duty rates
01.01.2014
EU minimum
excise duty rates
CIGARETTES:
46,50 ...
Excise duty rates on motor fuels
ENERGY
PRODUCT
Excise rates in Estonia
01.01.2014
EU minimum excise duty rate
Unleaded
pe...
Excise duty rates on heating fuels and
electricity
Energy
product
Excise rates in
Estonia
01.01.2014
EU minimum excise dut...
Excise duty revenue 1994-2018
million €
0
100
200
300
400
500
600
700
800
900
1000
1994 1996 1998 2000 2002 2004 2006 2008...
Packaging excise duty
Object of taxation:
Excise duty on packaging shall be imposed on
packaging of goods placed on the ma...
Packaging excise duty
Exemption from excise duty incidentally are:
1) packaging concerning which a deposit has been
establ...
Gambling Tax
Gambling Tax
Objects of gambling tax
1) gambling tables and gambling machines used for organising
games of chance and on g...
Gambling Tax
Tax rates:
1) for the gambling table – 1 278.23 euro per table in month;
2) for the gambling machine – 447.38...
Plans for the future
Future Plans for Tax Policy
• Lower labour-related taxes and increase
consumption-related and other indirect taxes
– incre...
Background information
Average Economic Growth in 2001–2011
Estonian real convergence with the EU
76
70
69
30
35
40
45
50
55
60
65
70
75
80
1995 1997 1999 2001 2003 2005 2007 2009 20...
Growth expectations
GDP growth,
%
Consumerprice
index, %
2014 2015 2014 2015
IMF 2.4 3,2 3,2* 2,8*
OECD 1,3 3,3 0,8* 1,7*
...
General Government budgetary balance 2003-2018
1.8 1.6 1.6
2.4
2.4
-3.0
-2.0
0.2
1.1
-0.3 -0.2
-0.7 -0.8
-0.7
-0.1
0.9
-4
...
General Government tax burden 1995-2018
36,3
34,3 34,3 34,0
32,5
31,0 30,2 31,0 30,8 30,6 30,6 30,7 31,4 31,9
35,9
34,0
32...
General Government debt in 2012
9,8
0
20
40
60
80
100
120
140
160
180
Estonia
Bulgaria
Luxembourg
Romania
Sweden
Lithuania...
Tax rate on low wage earners: Tax wedge
on labour cost (single, 67% average wage)
32
34
36
38
40
42
44
46
1996 1998 2000 2...
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Estonian taxes and tax structure (april 2014)

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Estonian taxes and tax structure (april 2014)

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Estonian taxes and tax structure (april 2014)

  1. 1. ESTONIAN TAXES AND TAX STRUCTURE Tax Policy Department Revised in April 2014
  2. 2. Population (01.01.2014) 1 311 870 Total area 45,227 km2 Average salary (2013) 948 EUR Average pension (April 2014) 354 EUR Currency EUR GDP (2013) 18 434,7 million EUR Economic growth (2013) 0,8% (forecast for 2014) 2,0% GDP per capita (2013) 13 784,2 EUR Inflation (2013) 2.8%
  3. 3. Outline of the presentation • The main principles of the Estonian tax system, the current tax structure • Taxation Act • Direct Taxes – Reasons for introduction of the flat rate in Estonia – The outcome of the reform – Personal Income Tax – Corporate Income Tax – Social Tax • Indirect taxes – VAT – Excise duties – Gambling tax • Plans for the future
  4. 4. Estonian Tax System The main principles of Estonian tax policy: • simple tax system • broad tax base, low rates Estonia is a European pioneer in income taxation: • Flat income tax rate since 1994 (followed by Lithuania, Latvia, Russia, Ukraine, Serbia, Slovakia, Georgia, Romania, ..) • Unique corporate tax system since 2000
  5. 5. 5 Taxation Act
  6. 6. Estonian Tax System • To achieve sustainable, socially and regionally balanced economic growth Estonian tax system consists of state taxes provided and imposed by tax acts and local taxes imposed by a rural municipality or city council in its administrative territory pursuant to law
  7. 7. 1) excise duties; 2) income taxes; 3) gambling tax; 4) value added tax; 5) land tax; 6) social tax; 7) customs duty; 8) heavy goods vehicle tax. State taxes Local taxes 1) advertisement tax; 2) road and street closure tax; 3) motor vehicle tax; 4) animal tax; 5) entertainment tax; 6) parking charge.
  8. 8. Taxation Act • Taxation act specifies – Estonian tax system – main definitions used in all tax acts – requirements for tax acts – rights, duties and liability of taxpayers, withholding agents, guarantors and tax authorities – regulations of the tax procedure and procedure for resolution of tax disputes – penalty interest rate 0,06% per day
  9. 9. Taxation Act “Tax” is • a single or periodical financial obligation • imposed by an Act or by a local government council regulation according to Local Taxes Act • for the performance of the public law functions or to obtain revenue to perform these functions • subject to performance pursuant to the procedure, in the amount and on the due dates prescribed by an Act • collected without direct compensation therefore.
  10. 10. Taxation Act Requirements for Act concerning tax 1) name of the tax; 2) object of taxation; 3) tax rate; 4) taxpayer; 5) recipient of or place of receipt of the tax; 6) due date or term for payment of the tax; 7) procedure for payment of the tax; 8) procedure for implementation of the Act concerning a tax; 9) possible tax incentives.
  11. 11. Tax authority • The tax authority for state taxes is the Tax and Customs Board with its regional offices. The tax authority operates within the area of government of the Ministry of Finance. • Tax authority verifies the correctness of tax payments, assesses amounts of tax and interest due in the cases provided by law, collects tax arrears and implements sanctions against persons who violate tax Acts.
  12. 12. • Corporate income tax – 21% on distributed profit • Personal income tax – 21% • Social tax – 33% (payable by employer) • Unemployment insurance payment – 2,0 % payable by employee and 1,0% payable by employer (from Jan 1, 2013) • Contribution to the mandatory funded pension system - 2% (payable by employee) • Value added tax - 20% (standard rate), 9% (reduced rate) Main tax rates
  13. 13. Tax structure
  14. 14. 0 5 10 15 20 25 30 35 40 2000 2002 2004 2006 2008 2010 2012 2014* 2016* 2018* Direct taxes Indirecttaxes Social security contributions Structure of tax burden (% of GDP) Source: Statistical Office of Estonia, Ministry of Finance
  15. 15. Tax burden ( % of GDP) Source: Statistical Office of Estonia, Ministry of Finance 31,0 30,2 31,0 30,8 30,6 30,6 30,7 31,4 31,9 35,3 34,0 32,3 32,5 32,3 32,4 31,9 31,6 31,6 31,7 29 30 31 32 33 34 35 36 37 2000 2002 2004 2006 2008 2010 2012 2014* 2016* 2018*
  16. 16. Structure of tax revenue 0% 20% 40% 60% 80% 100% Personalincometax Corporateincometax Social contributions VAT Exice duties Land tax Other taxes Source: Statistical Office of Estonia, Ministry of Finance
  17. 17. State Budget Tax Revenue 2014 Total tax revenue 6,559.8 million EUR Total revenue 7,880.9 million EUR 5,1% 5,0% 25,5% 12,6% 0,1% 0,4% 33,8% 0,3% 17,1% Personal income tax Corporate income tax VAT Excise duties Heavyvechile tax Customs duty Socialtax Gambling tax transmittable taxes Source: Ministry of Finance
  18. 18. Tax Revenue 2013, million € (collected) * - The amount received by the state + local governments State taxes 6 140,4 Direct taxes 3 652,7 Personal income tax* 1 030,6 Corporate income tax 326,6 Social tax 2 071,2 Unemployment insurance 167,1 Land tax 57,2 Indirect taxes 2 397,7 VAT 1 550,6 Excise duties 792,8 Heavy vehicle tax 4,0 Customs tax 28,7 Gambling tax 21,6 Local taxes 10,9 Source: Ministry of Finance
  19. 19. Direct taxes
  20. 20. • Income tax (personal and corporate income tax both stipulated in the Income Tax Act) • Social tax • Land tax Direct taxes
  21. 21. Reasons for introducing flat rate in Estonia
  22. 22. Reasons for introducing flat rate in Estonia • High inflation rate - in case of flat rate there is no need of frequent adjustment of tax brackets • Flat rate system is easier to administer (for both taxpayers and tax administrators) • More transparency The new law entered into force on 1 January 1994.
  23. 23. The outcome…
  24. 24. Personal income tax revenue 1994-2018 million € 0 200 400 600 800 1 000 1 200 1 400 1 600 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014* 2016* 2018* Local government State millionEUR Source: Statistical Office of Estonia, Ministry of Finance
  25. 25. Corporate income tax revenue 1995-2018 0 50 100 150 200 250 300 350 400 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015* 2017* 67,1 56,9 78,5 122,3 104,5 54,6 47,8 86,2 137,8 161,2 159,5 199,6 261,0 266,3 256,3 193,8 201,1 252,4 326,6 329,0 316,0 328,0 355,0 373,0 million EUR * - includes revenue under the prior Income Tax Act (taxable period 1999) million €
  26. 26. Personal income tax
  27. 27. Personal income tax • Residents pay tax on their total worldwide income. • Non-residents pay tax only on their income received from Estonian sources. • Individuals are Estonian residents if they: - have a permanent home in Estonia, or - stay in Estonia 183 days or more during any 12- month period.
  28. 28. Income Tax Act Period of taxation: a calendar year Tax rate: 21% (separate tax rate 10% for certain pensions and payments to non-residents) Decrease of the income tax rate (both for individuals and legal persons): Until the year 2004 – 26% Income of the year 2005 – 24% Income of the year 2006 – 23% Income of the year 2007 – 22% Income of the years 2008-2014– 21% Since income of the year 2015 – 20%
  29. 29. Income Tax Act Non-taxable minimum (annual basic exemption): 1728 EUR Additional exemption for state pensions: 2520 EUR since 2015 2640 EUR for calendar year Increase of the non-taxable minimum (per year): Income of the year 2003 – 12 000 EEK (767 EUR) Income of the year 2004 – 16 800 EEK (1074 EUR) Income of the year 2005 – 20 400 EEK (1304 EUR) Income of the years 2006- 2007 – 24 000 EEK (1534 EUR) Income of the years 2008- 2010 – 27 000 EEK (1726 EUR) Income of the years 2011- 2014 – 1728 EUR Since income of the year 2015 – 1848 EUR
  30. 30. 26 24 23 22 21 2019 32 51 64 89 109 128 144 154 0 20 40 60 80 100 120 140 160 180 18 20 22 24 26 28 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014* 2016* 2018* % Income tax rate (left scale) Monthly basic exemption (€, right scale) Income tax reduction
  31. 31. Personal income tax For non-residents there is a limited list of taxable income in the Income Tax Act: • income from work under a labour contract or contractor's agreement in Estonia; • directors' fees paid by Estonian enterprises; • income from a business carried on in Estonia; • gains from disposal of assets located in Estonia; • income from the lease of assets located in Estonia; • royalties; • interest received from the holding in a contractual investment fund, whose property was made up more than 50 per cent of immovables in Estonia (in certain conditions); • income of a sportsman or an artist from his activities in Estonia • pensions and scholarships.
  32. 32. Personal income tax For non-resident individuals • Period of taxation is a calendar year • Tax rates: 21% and 10% • Estonia has 56 treaties for the avoidance of double taxation (income and capital taxes) in force
  33. 33. Personal income tax Tax allocation of personal income tax paid by residents • The amount received by local governments (from Jan 1, 2014) is 11.6% of taxable income (deductions are not taken into account), the excess amount is received by the state • Income tax paid on pensions and capital gain is received by the state Non-residents: • income tax is received by the state
  34. 34. Personal income tax Avoidance of double taxation Individuals • Exemption method for foreign dividends and certain salary income • Credit method for all other types of foreign income
  35. 35. Corporate income tax
  36. 36. Corporate income tax • Corporate tax reform in year 2000 • The ultimate goal of the reform was promotion of business and acceleration of economic growth by making additional funds available for investment
  37. 37. Corporate income tax Elimination of technical shortcomings Additional funds available for investment Stricter regulation of transfer pricing Acceleration of economic growth Introduction of the CFC rules Transparency and exchange of information
  38. 38. Corporate income tax The moment of taxation of corporate income is postponed until the distribution of the profits The system applies to: • Estonian resident companies - legal persons that are established pursuant to Estonian law • permanent establishments (PE) of non-resident companies - PE is an entity through which the business of a non-resident is carried out in Estonia
  39. 39. Tax rate 26 % (on gross profit) Income tax 26 EUR Dividend payment 74 EUR Profit earned 100 EUR Time The taxation of profit until 1999 Corporate income tax
  40. 40. Income tax 26 EUR Dividend payment 74 EUR Profit earned 100 EUR Tax rate 26/74 (on net amount, equals to 26% of gross profit) No tax Time The timing of tax payment under the new system (since 2000)* The tax rate has been decreased since 2005 Corporate income tax
  41. 41. Corporate income tax • Tax rate in 2014: 21% (21/79 of the net amount of the dividend or other profit distribution) • Period of taxation: a calendar month
  42. 42. Corporate income tax Tax base • corporate profits distributed in the tax period; dividends and other profit distributions, incl. liquidation proceeds and payments made on reduction of company’s equity or redemption or return of shares • taxable gifts, donations and representation expenses; • expenses and payments unrelated to business. Fringe benefits are taxable at the level of employer. Losses – taken into account (the Estonian Commercial Code does not allow to distribute profits if the company has losses from previous years)
  43. 43. Corporate income tax + qualified dividend received 100 EUR + foreign interest received 100 EUR (source state WHT 10) Donations 200 EUR Expenses unrelated to business 300 EUR Gifts 100 EUR 1400EURpotentiallytaxableincome Taxliabilitydeferred Profit earned in 2010 200 EUR + Profit earned in 2011 1000 EUR Dividend / liquidation 640 EUR Exemption method Taxable amount 640 – 100 = 540 CIT (21/79) 27 CIT (21/79) 80 CIT (21/79) 53 CIT (21/79) 144 Credit method 144 – 10 = 134 Total CIT liability 294 Time
  44. 44. Corporate income tax There are 3 main methods introduced in the Estonian Income Tax Act, the goal of which is to minimize the possibilities for tax fraud and evasion – CFC (Controlled Foreign Corporation) rules: residents have to declare and pay tax on the income of off-shore companies under their control – Stricter regulations for minimising the use of transfer- pricing schemes – Withholding tax of 21% on all payments to so-called off- shore companies for services
  45. 45. Corporate income tax Avoidance of double taxation Companies and non-resident’s PEs • Exemption method for qualified (threshold 10%) profit distributions the income tax will not be charged on dividends or on payments upon reduction of share capital or contributions, redemption of shares or liquidation of a legal person on certain conditions. • Credit method for all other types of foreign income
  46. 46. Structure of declared corporate income tax 2003-2018 0 100 200 300 400 2003 2005 2007 2009 2011 2013 2015* 2017* Paymentsto non-residentlegal persons Non-businessexpenses Charitable gifts and donationsexceedingnon-taxableamount Fringe benfits Distributedprofit (dividendspaidout) million EUR Source: Statistical Office of Estonia, Ministry of Finance
  47. 47. Social tax
  48. 48. Social tax Tax Base • Employers' payments to individuals (wage income) – tax payable by employers • in cash • in kind (fringe benefits) • Business income of self- employed– tax payable by self- employed persons
  49. 49. Social tax Period of taxation • Calendar month for wage income • Calendar year for business income of self- employed
  50. 50. Social tax • Tax rate is 33 % of the taxable amount • Social tax payable is personificated and will be taken into account in making pension payments or health insurance benefits.
  51. 51. • Tax allocation IF the person has joined the II pension pillar (compulsory for the persons who have born in 1983 or later; voluntary for older people) Social tax Social tax, rate 33% (payable by employer or self employed person) State health insurance system 13% 16% State pension insurance system (I pillar) Personal pension account of the person (II pillar) 2% + 4%= 6% 4% Contribution to the II pillar (made by employee) 2%
  52. 52. Social tax revenue and structure million € 0 500 1 000 1 500 2 000 2 500 3 000 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014*2016*2018* Employers' payments to natural persons Fringe benefits State (according to social tax law §6) Business income of sole proprietors Social tax million EUR Source: Statistical Office of Estonia, Ministry of Finance
  53. 53. Indirect taxes
  54. 54. Indirect taxes • Value added tax • Alcohol excise duty • Tobacco excise duty • Energy products excise duty • Packaging excise duty (budget revenues insignificant) • Heavy goods vehicle tax • Gambling Tax
  55. 55. Value-added tax (VAT)
  56. 56. Taxable person • Person whose taxable supply (excluding import) exceeds 16 000 EUR in a calendar year • Voluntary compliance possible for anyone, who carries out economic activity in Estonia VAT
  57. 57. Tax base VAT is charged on: • transactions of goods and services within Estonia • intra-Community acquisitions of goods and services • importation of goods and services • provision of services which are taxable in Estonia, supplied by the foreign taxable person VAT
  58. 58. Tax rates • Standard rate is 20%. • Reduced rate is 9% (books, newspapers, medicines, accommodation). • Zero rated: export; intra-Community supply; vessels and aircrafts used on international routes, including equipment and fuel; goods and services for consumption supplied on board of vessels and aircrafts. VAT
  59. 59. Exempted goods and services are: • postal services • health services • social services • insurance services • services for the protection of children • transportation of sick, injured or disabled persons • supply of immovables • the leasing and letting of immovables, etc. VAT
  60. 60. VAT revenue 1994-2018 million € 0 500 1000 1500 2000 2500 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014* 2016* 2018* million EUR Source: Statistical Office of Estonia, Ministry of Finance
  61. 61. Excise duties
  62. 62. Excise duties Excise duties are levied on: • Alcohol • Tobacco • Fuel • Electricity • Packaging Duty rates on alcohol, tobacco and energy products meet the EU minimum levels
  63. 63. Excise duty rates on alcohol Unit Excise duty rates 01.01.2014 EU minimum excise duty rates Wine and fermented beverage Hectolitre (up to 6 %): 36,71 EUR (> 6 %): 84,67 EUR 0 Beer 1 % alcohol in hectolitre 6,28 (yearly production up to 3000 hl): 3,14 EUR 1,87 EUR Intermedi- ate product Hectolitre 180,81 EUR 45 EUR Other alcohol Hectolitre of pure alcohol 1643 EUR 550 EUR
  64. 64. Excise duty rates on tobacco products Product Excise duty rates 01.01.2014 EU minimum excise duty rates CIGARETTES: 46,50 EUR 90 EUR per 1000 cigarettes, but not less than 60% from weighted average price of cigarettes Specific rate (1000 cigarettes) Ad valorem rate (% of the retail selling price) 34 % Minimal amount of excise to pay (1000 cigarettes) 90,00 EUR Unlimited CIGARS, CIGARILLOS (1000 cigars or cigarillos) 211 EUR 12 EUR or 5% from the retail selling price SMOKING TOBACCO (1 kg ) 61 EUR 47 EUR or 43% from the retail selling price
  65. 65. Excise duty rates on motor fuels ENERGY PRODUCT Excise rates in Estonia 01.01.2014 EU minimum excise duty rate Unleaded petrol 422,77 EUR/ 1000 l 359 EUR/ 1000 l Leaded petrol 422,77 EUR/ 1000 l Gas oil 392,92 EUR/ 1000 l 330 EUR/ 1000 l Gas oil for specific purposes 110,95 EUR/ 1000 l 21 EUR/ 1000 l LPG 125,26 EUR/ 1000 kg 125 EUR/ 1000 kg Petroleum 330,1 EUR/ 1000 l 330 EUR/ 1000 l
  66. 66. Excise duty rates on heating fuels and electricity Energy product Excise rates in Estonia 01.01.2014 EU minimum excise duty rate business non-business Light fuel oil 110,95 EUR/ 1000 l 21 EUR/ 1000 l 21 EUR/ 1000 l Heavy fuel oil 15,01 EUR/ 1000 kg 15 EUR/ 1000 kg 15 EUR/ 1000 kg Petroleum 330,1 EUR/ 1000 l - - Natural gas 23,45 EUR/ 1000 m3 0,15 EUR/ GJ 0,3 EUR/ GJ Coal, coke and oil shale 0,3 EUR/ GJ 0,15 EUR/ GJ 0,3 EUR/ GJ Electricity 4,47 EUR/ MWh 0,5 EUR/ MWh 1 EUR/ MWh
  67. 67. Excise duty revenue 1994-2018 million € 0 100 200 300 400 500 600 700 800 900 1000 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014* 2016* 2018* Alcohol Tobacco Fuel million EUR Source: Statistical Office of Estonia, Ministry of Finance
  68. 68. Packaging excise duty Object of taxation: Excise duty on packaging shall be imposed on packaging of goods placed on the market in Estonia or acquired in and imported from another Member State of the European Union.
  69. 69. Packaging excise duty Exemption from excise duty incidentally are: 1) packaging concerning which a deposit has been established under the Packaging Act, except metal packaging of beverages, and from which at least 85 percent of each class of packaging material is recovered as of 1 January 2012; 2) metal packaging of beverages of which of which at least 50 percent is recovered as of 1 January 2010; 3) as of 1 January 2009, other packaging recovered to the extent provided for in § 36 of the Packaging Act.
  70. 70. Gambling Tax
  71. 71. Gambling Tax Objects of gambling tax 1) gambling tables and gambling machines used for organising games of chance and on gambling machines used for organising games of skill; 2) in the event of organising a lottery, the total amount received from the sale of lottery tickets; 3) in the event of organising a commercial lottery, the winning pot whose value exceeds 10 000 euros; 4) in the event of organising a toto (betting + totalisator), the total amount net revenue of bets; 5) in the event of organising an online game of chance or an online game of skill, the net revenue of bets; 6) in the event of organising a tournament of a game of chance, the total amount of participation fees. Gambling tax is paid by gambling operators.
  72. 72. Gambling Tax Tax rates: 1) for the gambling table – 1 278.23 euro per table in month; 2) for the gambling machine – 447.38 euro per in month euro per gambling machine; 3) 31.95 euro per gambling machine of game of skill; 4) 18 % from the sale of lottery tickets; 5) 18 % from the winning fund of the commercial lottery; 6) 5 % for the toto, amount received from net revenue; 7) 5 % for the online game, amount received from net revenue; 8) 5 % for the tournament of a game of chance (amount received from participation fees).
  73. 73. Plans for the future
  74. 74. Future Plans for Tax Policy • Lower labour-related taxes and increase consumption-related and other indirect taxes – increase of excise duties – increase of environmental taxes – decrease of income tax • Maintaining the current simple tax system • Broadening the tax base and reducing tax incentives • Improving tax administration
  75. 75. Background information
  76. 76. Average Economic Growth in 2001–2011
  77. 77. Estonian real convergence with the EU 76 70 69 30 35 40 45 50 55 60 65 70 75 80 1995 1997 1999 2001 2003 2005 2007 2009 2011 % of EU27 GDP per capita in PPS Comparativepricelevel Labour productivityper person employed
  78. 78. Growth expectations GDP growth, % Consumerprice index, % 2014 2015 2014 2015 IMF 2.4 3,2 3,2* 2,8* OECD 1,3 3,3 0,8* 1,7* European Commission 1,9 3,0 1,5* 3,0* Ministry of Finance (April 2014) 2.0 3.5 1.7* 2.9* * Harmonised Consumer Price Index (HICP)
  79. 79. General Government budgetary balance 2003-2018 1.8 1.6 1.6 2.4 2.4 -3.0 -2.0 0.2 1.1 -0.3 -0.2 -0.7 -0.8 -0.7 -0.1 0.9 -4 -2 0 2 4 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013* 2014* 2015* 2016* 2017* 2018* % of GDP Central Government Local Government Social Security General Government Source: Statistical Office of Estonia, Ministry of Finance
  80. 80. General Government tax burden 1995-2018 36,3 34,3 34,3 34,0 32,5 31,0 30,2 31,0 30,8 30,6 30,6 30,7 31,4 31,9 35,9 34,0 32,3 32,5 32,3 32,4 31,9 31,6 31,6 31,7 0 10 20 30 40 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013* 2015* 2017* Direct taxes Indirect taxes Social security contributions Tax burden % of
  81. 81. General Government debt in 2012 9,8 0 20 40 60 80 100 120 140 160 180 Estonia Bulgaria Luxembourg Romania Sweden Lithuania Latvia Denmark CzechRepublic Slovakia Finland Slovenia Croatia Poland Malta Netherlands Austria Hungary Germany Spain Cyprus UnitedKingdom France Belgium Ireland Portugal Italy Greece % of GDP
  82. 82. Tax rate on low wage earners: Tax wedge on labour cost (single, 67% average wage) 32 34 36 38 40 42 44 46 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014* 2016* 2018* % Estonia Latvia Lithuania EU 27

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