Merliin Laos, analyst from the ministry’s fiscal policy department, said: “In the first half of the year, €6.6 billion in taxes were paid to the Tax and Customs Board (MTA), of which June’s tax revenue accounted for nearly €1.2 billion.”
“The tax take for June was 6.6 percent higher compared with the same month last year,” Laos went on.
Despite a prolonged economic downturn, wages have continued to grow, while the number of jobs has not significantly decreased, buoying the payment of labor taxes.
The burden of the rise in corporate income tax revenue has been driven by the taxes paid by banks, the ministry noted.
The ministry also stated that the payment of consumption taxes has been affected by rate rises, while a low consumer confidence has hindered volume growth.
The wage fund grew by 6.4 percent in the first half of the year when compared with previous year. The main driver here was the rise in average wages, which stood 7.5 percent in the first half of the year, while the number of jobs fell by 1.0 percent fell by the same period.
Laos said: “Despite the prolonged economic downturn, wages have continued to grow, and the number of jobs has not significantly decreased, which has supported the payment of labor taxes.”
The share of registered employees among the working-age population (60.2 percent) has risen in recent months but remains below the average for the whole last year (60.5 percent).
The biggest growth in the wage fund in the first half of the year came in the healthcare sector, at 16.4 percent. This means the payment of social tax in the first half of the year was up by 6.5 percent on year.
The proportion of personal income tax set aside for the state budget was impacted upon by changes in the wage fund, tax rebates, and individuals leaving the option second pillar of the Estonian pension system, the ministry noted.
In the first half of 2024, rebates of €230 million in income tax were made; €12 million more than the previous year. Income tax revenues from individuals leaving the second pillar of the pension system (both of working-age and pension-age) amounted to €29 million in the first half of the year – €4 million less than in the same period last year.
Income tax revenue within the state budget is also affected by the shrinking rate of eligibility for tax-exempt income – the number of working-age individuals eligible for tax-exempt income fell by nearly 10 percent in the first half of the year.
Local government personal income tax revenues grew by 10.5 percent in the first half of the year, the ministry added.
According to the ministry, the significantly faster growth of social tax is the result of the 2.5 percent income tax on pension income, which has been affecting the distribution of personal income tax between the state budget and local governments since February.
The ministry reported that corporate income tax revenues have been boosted by the income tax paid by banks.
The analyst said: “Corporate income tax revenue grew by 27.0 percent in the first half of the year compared with the previous year.”
“The strong growth has primarily been driven by credit institutions, which paid both advance income tax and income tax on distributed profits,” Laos said.
“A total of €70 million in advance income tax was paid in the first half of the year, nearly €20 million more than in the same period last year,” she went on.
€54 million in income tax was collected from the distributed profits of banks in the first half of 2024, while €20 million was amassed from the dividends of state-owned enterprises: A fall of €4 million on year.
The growth in VAT payments in the first half of this year was driven by the rise in the standard rate (from 20 percent to 22 percent – ed.), but was hampered by a lower-than-forecast consumer confidence and consumption activity, the finance ministry noted.
This year’s VAT payments over the first six months (of €1.82 billion) exceeded the 2023 level by €152 million, largely thanks to the rise in the standard rate.
The VAT rise has been almost fully passed on to the prices of goods and services (up to 95 percent) in anticipation of economic growth.
VAT payments in the first half of the year were influenced by the slow improvement in consumer confidence, which may lead households to limit their spending.
The European Commission’s consumer confidence indicator reflects the same low rating as was seen in the spring of 2009, the ministry reports.
Laos said: “On the other hand, consumer purchasing power is getting better, since wage growth in June outpaced price rises more than two-fold. While corporate turnover fell in the second quarter due to challenging economic conditions compared with the previous year, the slump was not as deep as that seen in the first quarter.”
Excise duty payments in the second quarter were in a somewhat better situation mid-way through the year than at the beginning of the year, but overall first-half payments still fell 1 percent short of last year’s levels.
Excise duty payments varied between categories. The second quarter was clearly better for alcohol excise duties, where the decline has slowed month-on-month, and for fuel excise duties, which were influenced by several rate rises on May 1.
The ministry outlined that alcohol excise duty payments have been largely influenced by the selling off of stocks, and neither declarations nor payments have yet fully returned to their usual levels.
In addition to several fuel excise rate hikes, payments have been positively affected by the better-than-expected level of motor fuel declarations, supported by slightly improved confidence in the road transport and pipeline transport sectors in recent months.
Wholesale diesel sales have also proved significantly better this year, which sends a positive message, particularly to sectors which rely heavily on static engines.
Tobacco excise duty payments were the only sector to decline in the second quarter.
Most of this decline was due to a 6.5 percent fall in the release of cigarettes into free circulation, indicating possible changes in consumption or purchasing habits, the ministry notes.
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