According to Statistics Estonia, tax benefits turned the year 2008 an unprecedented profitable tax year for the residents of Estonia, enabling substantially to reduce the tax burden of the employed persons.
During the last five years several tax changes profitable for private persons have taken place. The income tax rate was lowered from 26% to 21% and the tax-free part of the gross income rose from 16,800 kroons to 27,000 kroons per year. Income tax benefits of private persons promote mostly children, own home foundation, pension collection and further education. Using all tax benefits of natural persons provided in the Income Tax Act, a wage earner’s real tax rate after tax return could become much lower of the valid rate — 21%.
For example an employed married couple with two children, who earned gross wages and salaries in total 20,000 kroons per month (240,000 kroons per year), whose income was reduced by unemployment insurance by 1,440 kroons, who had 1 million mortgage loan for 15 years and who paid 52,000 kroons loan interests, who had 1,600 kroons education expenditure and who took into account the tax-free part of their two children (54,000 kroons as total), got from the state approximately 22,600 kroons of income tax returns. Hereby the tax rate for this family was only 7% instead of 21%, which is three times less than they paid to the state from their income per annum.
In 2008, the revenues from the taxes and social security contributions increased by 2.6%, the state’s income being 80 billion kroons. The growth rate of income slowed down, as a year earlier the growth was 23%. In 2008, an equal share of the government sector revenue came from taxes on production and imports (37.9%) and social security contributions (37.2%). The income tax revenue accounted for a quarter of the total income.
Personal income tax by recipient, 2004–2008
For further information:
National, Financial and Environmental Accounts Department
Tel +372 625 8414
More detailed data have been published in the Statistical Database.