Analytics, Estonia, Financial Services, Industry, Markets and Companies, Taxation

According to the set objective, the impact assessment had to identify whether and if so by which national taxes and environmental and energy charges the Estonian industrial sector is in a significantly worse competitive situation compared to the reference countries, and to make policy recommendations to improve the situation, the Ministry of Finance said on Thursday.

The countries identified by the contracting authority as the reference countries in the impact assessment were Finland, Germany, Latvia, Lithuania, Poland and Sweden.

Of different taxes and fees, excise duties on fuel and gas, electricity excise duty, network charge and renewable energy charge, package excise duty and service fees of the recycling organizations, fees for the disposal of waste, mining rights fees, the fee for the special use of water, road user fee and heavy vehicle fee were compared. 

According to the Ministry of Finance, it came out that even though Estonia occupies very high places on international scoreboards measuring the competitiveness of the tax systems of different countries, primarily because direct taxes and the simplicity of tax administration are compared in such surveys, Estonia's competitive situation is average as regards the indirect taxes affecting the industrial sector more narrowly, such as electricity and fuel taxes and environmental charges.

In specific sectors, such as mining and the production of construction materials, the competitive  situation is poor due to high environmental charges. 

The policy recommendations contained in the study include lowering the requirements for businesses to qualify for the reduced electricity excise duty rate, or electricity-intensive rate, as the relevant EU directive would allow to do so. This would ensure a more moderately competitive environment for more Estonian production companies even after the current temporary reduced excise duty rate expires. Also, the study suggests differentiating the renewable energy charge and lowering the rates of mining fees and the fee for the special use of water. 

Finance Minister Martin Helme said in his comments published in a press release that the level of taxes paid by Estonian industrial companies could be lower and claims to the effect that the level of costs and taxes for businesses is very low here are not true. 

"We must act vigorously to raise the international competitiveness of our companies. I'm glad to note that we have taken the first steps already, but I'm definitely planning to present new proposals to the government already in the fall," Helme said. 

The survey commissioned by the Government Office was compiled in collaboration between the Ministry of Finance and the Ministry of Economic Affairs and Communications and its author is international auditing and tax consultancy firm Deloitte Advisory AS.