The Tax and Customs Board (MTA) collected 1.05 billion euros in tax revenue in July, up 12.5% year-on-year.
“VAT revenue has been affected by strong economic activity and a new spike in price advances which has made consumers more cautious,” the finance ministry said. “On the one hand, inflation adds to VAT receipts, while it is also reflected in lower consumer confidence.”
The first seven months brought in 1.84 billion euros, which is 19% or 294 million euros more than in 2021.
Estonian corporate total revenue growth (18%) slowed to 9% from the monthly average for the first six months, thanks to a stronger baseline in the second half. But turnover by sector did not progress as vigorously as in previous months.
Retail and wholesale trade and energy affected VAT receipts the most in July, with receipts up 22% and 135% respectively.
The retail and wholesale of motor fuels was the largest contributor to the trade, with diesel and gasoline becoming more expensive by 60 and 39 percent respectively year-on-year. The 143% increase in the price of electricity affected the energy sector.
Excise duty revenue limited by continued decline in consumption
Excise tax receipts fell 1.6% in July year-on-year as automotive fuels limited growth.
Along with the monthly reduction, cumulative growth is now also in the red, with excise duty revenue for the first seven months of the year down 1.4% from the same period in 2021.
While the war in Ukraine and rising prices initially affected the habits of private consumers and gasoline consumption, the last few months have seen a drop in diesel purchases which reflects the evolution of business activity. While freight transport volumes continued to grow in the first quarter, a 12% reduction was recorded in the second quarter. International transport is experiencing a particularly deep decline, with volumes almost halving in the second quarter compared to six months ago.
Turnover continues to grow in warehousing and logistics but the pace is slowing.
The decline in fuel sales volumes is universal, with only Valga County diesel sales still up. Prices in the border town also compete with those in Valka, Latvia.
Fuel sales fell 7.8% in July year-on-year, with diesel sales contracting 7.7% and gasoline sales 8.2%.
Wage fund growth slowed in July but remains historically high
Wage fund growth slowed to 12.3% in July year-on-year. The growth in the average salary and the number of jobs slowed to 8.6 and 3.3% respectively.
The share of registered workers in the population is at an all time high at 62.7%. Wages have increased the most in accommodation and food services (33.4%), while the number of jobs in the sector continues to decline.
The administration recorded the most job creations in July (+4,400) in connection with rental employment, followed by accommodation and catering (+3,800).
Social tax revenue growth slowed to 9.8 percent from a year ago for the lowest monthly increase this year.
April saw the entry into force of an amendment to the Social Taxation Act which reduced the tax rate from 33% to 20% in some cases, costing Estonia 5 million euros social tax revenue.
Maintaining strong personal income tax revenues (state budget and local government shares combined) continues to rely on strong growth in the wage fund. Revenue rose 18.1% in July year-on-year, with local government’s share rising 13.2%.
Growth in distributed profits supporting corporate tax receipt
Corporate income tax rose to 30.3% in July year-on-year from 24% in the first half.
The lion’s share of growth came from distributed profits from private sector companies, with dividends from public companies also up slightly.
Tax revenues are affected by the volume of dividends and the lower tax rate of 14% for regularly distributed profits. At the end of the first seven months of 2022, reduced-rate tax revenue amounts to 118 million euros, up 18 million euros compared to last year.
The standard tax rate of 20% on distributed profits brought in 158 million euros, or 39 million euros more than a year ago.
The negative effect of the reduction in the tax rate is offset by the additional income tax of 7% for individual shareholders on dividends taxed at the rate of 14%. Over the first seven months, this brought in 25 million euros in personal income tax, or 5 million euros more than in the same period last year.
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