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Estonian tax system Erki Uustalu Adviser to the Ministry

Estonian tax system Erki Uustalu Adviser to the Ministry. 28.02.2007. “Look at the Swedish tax system and when you return home, do the exact opposite.” (Carl Bildt to Mart Laar). Current plans for Estonian t ax p olicy.

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Estonian tax system Erki Uustalu Adviser to the Ministry

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  1. Estonian tax systemErki UustaluAdviser to the Ministry 28.02.2007

  2. “Look at the Swedish tax system and when you return home, do the exact opposite.” (Carl Bildt to Mart Laar)

  3. Current plans for Estoniantax policy • General tax burden kept at 33% of the GDP • Lower labor-related taxes and increase consumption-related and other indirect taxes • increase of excise duties • increase of environmental taxes • decrease of income tax, exempt certain capital gains • Maintain the simple and transparent tax system with broad tax base with low administrative cost to the taxpayers and tax administrators. • Improve tax administration

  4. Flat tax rate • Uniform flat tax rate for individuals and legal persons (22%) irrespective of the type of income they earned. • Tax rate is lowered 1 percentage point per year until it reaches 20% by 2009 • Personal allowance EUR 1534 per year. • Limited amount of exceptions: broad tax base, low rate • keeping the number of exceptions as limited as possible makes the tax system fairer and less vulnerable to possible manipulations by taxpayers. • Every additional exception always distorts the system, creates additional cost for administration and may also cause inequality by being applied incorrectly. • Result: Simple, transparent and easily administrated system.

  5. Personal income tax revenue 1994-2010 million EEK

  6. Corporate tax law • The moment of taxation of corporate profits is postponed until the distribution of the profits; • NB! Tax has not been abolished: CIT is 5,4% of total tax revenues and 1,5% of GDP • Actual and hidden profit distributions are subject to corporate tax at 22% (Tax rate is lowered 1 percentage point per year until it reaches 20% by 2009); • The ultimate goal of the reform was promotion of business and acceleration of economic growth by making additional funds available for investment • No need to hide profits: Total profits of companies according to the Statistical Office(billion EEK)

  7. Corporate income tax revenue 1994-2009 Corporate income tax reform

  8. Social Tax • Tax rate is 33 %on the wages and other similar remunerations (incl. fringe benefits). • Employer-level tax • Earmarked for the social security budget • Social tax payable is personificated and in making pension payments will be taken into account. Tax allocation, if the person has NOT joined the II pension pillar: • 13% State health insurance system • 20% State pension insurance system (I pillar) • Unemployment insurance payment- 0,6 % payable by employee and 0,3% payable by employer

  9. Social Tax Revenue

  10. Tax burden (% of GDP)

  11. “A positive attitude may not solve all your problems, but it will annoy enough people to make it worth the effort” (Charlie Daniels)

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