By the end of December, 2012 Tax and Customs Board collected 4.7 billion Euros in tax revenue, i.e. 10% more than in 2011. The budget execution was 2.3 percentage points or 107 million Euros better than expected. Compared to the 2012 summer forecast of the Ministry of Finance, the over performance was 15 million Euros.

The impact of the excessive tax revenues to the general government budget balance is less than 0.1% of GDP compared to the 2012 summer forecast of the ministry. The final result may yet be affected by tax revenue in January, as the revenue of social tax, value added tax and excise duties collected in January 2013 will be added to the 2012 revenue according to the accrual principles.

Value added tax and corporate income tax exceeded the budgetary plans the most (58 million and 30 million euros respectively). Looking at the windfall revenue as a percentage of the total receipts of a respective tax, corporate income tax was followed by personal income tax, with the excess revenue comprising 4.8% of proceeds, i.e. 13 million euros. In addition to developments on the labour market, the revenues from personal income tax were also positively affected by lower income tax returns and additional payments. Returns on educational expenses and third pillar pension insurance payments were smaller in volume. However, the additional payments were larger than expected on financial profits, cutting rights of timber and real estate sales.

Only the revenue from excise duty on tobacco and electricity was lower than planned in the state budget (10.7 and 0.7 million euros respectively). However, the revenue of excise duty on tobacco was relatively good during 2012 and growth compared to the previous year was 9.5%. The main reason for the revenue shortfall was the lower than expected collection of excise duty on tobacco at the end of 2011, resulting in a lower initial level at the beginning of 2012 compared to the passed state budget.

During the year, the revenue of excise duty on packaging, corporate income tax and value added tax increased at the fastest rate. While growth in revenue from excise duty on packaging was a result of more effective supervision, the growth rate of almost 26% in corporate income tax revenue indicates substantial profits in 2011 and positive economic conditions in 2012. In 2011, the profits of companies increased by 1 billion euros, thereby allowing for significantly bigger dividend payments during the previous year. State owned companies also contributed positively, as income tax increased by 13 million euros compared to the year before.

The share of social tax in the total revenue was the largest in 2012 (40.5%) and almost a third (31.3%) of the revenue originated from value added tax. The contribution of excise duties was 16.3%, income tax formed 10.9% and other taxes 1.1% of the total revenue.

Additional information:

Rainer Laurits
Public Relations Department
Ministry of Finance of Estonia
Phone +372 611 3035
E-mail: Rainer dot Laurits at fin dot ee

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