On December 9th Estonia counted another success in its continued efforts for economic integration with the Western world, after it was officially declared a full member of the Organization for Economic Cooperation and Development’s (OECD). The membership application process was completed when the Estonian Ambassador to France Sven Jürgenson presented a signed copy of the Accession Agreement to the French Foreign Ministry for permanent record. By signing and depositing the document, Estonia has pledged its full dedication to supporting and participating in the OECD’s fundamental aims and goals.

Estonia will now continue its efforts to further increase its international economic standing and cooperation by joining the euro area. Commenting on the OECD membership and the potential to join the euro area Prime Minister Andrus Ansip said, “…for a long time Estonia has had two important policy goals: joining the OECD and becoming part of the euro area. Today, we can say that the first goal has been achieved, and the second one is within our reach.”

Estonia initially began its campaign to join the OECD in 1996. On May 16th 2007 the OECD Council adopted a resolution to open accession discussions with Estonia. For the next two years 18 different OECD committees reviewed Estonia position economic policies and legislation, in order to assess their compatibility with the EOCD’s positions. An invitation for Estonia to join the OECD was issued on May 10th 2010. The Accession Agreement was signed by the Prime Minister of Estonia Andrus Ansip on June 3rd 2010.

Photo by Baltic Development Forum

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