Analytics, Estonia, EU – Baltic States, Financial Services, Taxation

The share of direct taxes in GDP increased by 0.2%, mostly due to the growing share of the individuals’ income tax. According to the Ministry of Finance, the share of enterprises’ income tax in GDP did not change. The share of social insurance taxes in GDP grew by 1% – mostly due to an increase in the social tax revenue in 2008.

The decline in the VAT revenue caused the share of indirect taxes to fall by a total of 1.4% of GDP.

Due to a number of ad hoc measures (e.g. suspension of payments into second pillar pension funds, stockpiling of goods subject to excise taxes) the tax burden in Estonia rose to 36.4% of GDP in 2009.

The Ministry of Finance projected that the tax burden in Estonia will start falling again this year as well as during following years.

While in 2008, indirect taxes and social insurance taxes in Estonia are close to the EU average, the share of direct taxes in GDP is much lower than the EU average level. This is mostly due to the particularities in the system of income tax on enterprises in comparison to other Member States.

The weighed average tax burden of EU Member States in 2008 was 39.3% of GDP. In comparison to the year 2007, the average tax burden had fallen by 0.4 percentage points.