Estonia’s Tax Ration Increases

April 9, 2010 Taxation in Estonia

Foreboding Estonian ParliamentIn 2009 Estonia’s overall tax ratio was 36 percent of Gross Domestic Product (GDP), rising by 4 percent compared to the previous year.

According to recent research released by Statistics Estonia (SE), due primarily to a significant increase in indirect tax collection in 2009, the overall national tax ratio increased by 4 percent of GDP. Overall, collection of direct taxes fell by 3 percent compared to 2008. Collection of indirect taxes increased by 2-3 percent compare to the indicators of last decade. Indirect Taxes collection, comprised of Value Added Tax (VAT) and Excise Duty, accounted for EEK 32 billion of the national collection total, while direct taxes, taxes of wealth and income, contributed EEK 16 billion.

According to the EU statistics office Eurostat, in the fourth quarter of 2009, Estonia recorded the highest European GDP growth rate of 2.5 percent, compared with the previous quarter. At the same time, Estonian inflation jumped unexpectedly by 1.7 percent in March. Throughout the last decade Estonia has held an average Tax Ratio of 31 percent of GDP. The SE report attributed the overall tax ratio increase to the significant rise in indirect tax collection coupled with a 14.8 percent drop in national GDP.

Photo by Huzhead