The sharp rise in tax revenue was mainly due to the low starting level from the COVID-19 pandemic in the first half of last year, followed by the recovery in economic activity this year.
The rapid economic recovery continued in the spring of this year, while the company’s total sales grew 30 percent in May.
Economic growth in the first quarter of 2021 (Q1 2021) exceeded forecasts at 5.4 percent, while retail sales and goods exports recovered to the extent that they exceeded the pre-crisis level.
Estonia also benefits from the fact that its main trading partners are geographically close and have also performed better than many other EU countries.
The further development of the company’s turnover will depend in part on the continued vaccinations and also on the situation with restrictions, which have largely been lifted in Estonia.
VAT payments rose rapidly through May, partly due to the low base level set a year earlier when the coronavirus emergency existed.
In the first five months of 2021, 1.05 billion euros were paid out to the MTA, exceeding both the level of 2020 and the last pre-crisis year 2019 by 20.1 and 8.7 percent respectively.
Since January of this year, the monthly payments have been higher on an annual basis than in the previous year.
In May of this year, 47 million euros more was paid than in May 2020 and 39 million euros more than in May 2019.
Excise taxes are expected to rise in summer as tourism recovers and mobility increases.
Heavy alcohol and beer consumption taxes for May of this year were significantly higher than in the same period in previous years.
Compared to the previous year, the quantities of strong alcohol increased by 33.3 percent and of beer by 9.7 percent in May.
In five months, the volume of beer grew by 4.5 percent and 2.2 percent compared to the previous year, stronger than for strong alcohol, mainly due to the relaxation of restrictions.
The consumption tax payments for tobacco products rose by May by 4.6 percent compared to the previous year. Despite the increase in excise tax rates at the beginning of this year, the declaration of tobacco products has not decreased compared to the previous year.
Tobacco-free snuff is also reportedly growing in popularity, and in the past five months, explanations about it have increased 77 percent year over year.
The increase in fuel consumption tax in May, however, remained modest at 1.8 percent.
The effect of the loosening of the restrictions is also noticeable in the receipt of the fuel consumption tax, especially in the declaration of gasoline and in sales, the growth of which is accelerating from month to month.
Fast facts on tax revenue
- For the first five months of 2021, 41.6 percent of the budget was realized, 1.2 percentage points more than at the same time in 2020.
- The value added tax debt rose in one month by 9 million euros to 188 million euros, that is 4 percent less than in May 2020. The value added tax debt accounts for the largest part of the total tax debt at 54 percent.
- Mail and online retail sales rose the most at 36 percent, accounting for 5 percent of total retail sales in May. The increase in VAT payments on this was supported by unexpectedly high price growth of 3.6 percent in May.
- The total turnover of the companies also exceeded the level of 2019 by 3.8 percent at just under 222 million euros.
- The growth of the wage fund, which affects wage taxes, accelerated to 19.5 percent in May, or 9.1 percent taking account of the wage adjustment, mainly thanks to the acceleration in average wage growth to 16.7 percent, while the number of Jobs rose by 2.7 percent.
- Social tax revenue growth slowed to 8.8 percent year-on-year in May, partly due to higher unemployment insurance benefits in 2020.
- In May 2020, 28 million euros in social tax were paid on unemployment benefits, compared with 7 million euros in May of this year.
- The payments in the first five months were mainly supported by the better than expected development of the labor market in 2020, but also by bonuses and overtime pay.
- Income tax revenue increased by 14 percent in May 2021, while 5.1 million euros in income tax were reimbursed, plus 6 million euros from people of retirement age who leave the second pillar and can collect their money immediately.
- Excise tax payments rose 3.6 percent year over year in May 2021; The increase was driven by the consumption tax on alcohol, which is 7.4 percent higher than last year.
- Debts rose most in the arts and entertainment sector (by € 8 million) and declined most strongly in plant and animal husbandry (by € 2 million).
- The wholesale and sale of motor vehicles made a major contribution to the increase in sales tax payments in May, which rose by 26.1 and 77.7 percent respectively compared to the previous year.
- This surge in wholesale was the result of broad-based growth in the industry, including an increase in the wholesale trade of grain, building materials, and tools and equipment.
- The growth in vehicle sales in May was primarily due to the 86 percent growth in car sales. The total turnover in the industry even increased compared to the pre-crisis year 2019.
- In key sectors such as retail and real estate, VAT payments rose 9 percent and 55 percent, respectively, from January to May 2021, with the real estate market being particularly buoyant in 2021 so far.
The above data was reported by BNS based on the figures reported by the Treasury Department.
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