Airbnb to cooperate with tax authority

Online accommodation and hospitality marketplace Airbnb is to share user data with the Estonian Tax and Customs Board (MTA), according to the Baltic News Service (BNS).

An MTA spokesperson confirmed to the BNS that the cooperation is underway and that further details will be made public on Wednesday, at a press conference to be attended by MTA deputy director Rvio Reitmann and Airbnb head of public policy, Patrick Robinson.

The Estonian Association of Hotels and Restaurants (EHRL) had previously stated that Airbnb represents unfair competition and encourages a hidden economy in the sector. It demands that Airbnb income be taxed as is the case in neighbouring Finland.

The EHRL has also blasted plans for a one-euro-per-person-per-day tourist tax applicable in Tallinn only, as proposed by Tallinn city council chief Mihhail Kõlvart (Centre).

Since 2016, an individual submitting a tax return has been required to confirm receipt/non-receipt of rental income. Such income is subject to tax on a gross basis.

At press time, a quick search on the Airbnb site for accommodation for one adult in central Tallinn on the weekend of 7-9 December yielded over 200 results, ranging in price from €9 to over €100 per night. Searches in Tartu and Pärnu resulted in about 50 and 200 options respectively, in a similar price range.

Source: ERR News

Enterprise Estonia to open office on US east coast in 2019

Enterprise Estonia is to open an office on the east coast of the United States in 2019, offering cooperation between US partners in industry and technological development and businesses participating in its business and product development programs.

The exact location of the office has not yet been announced, though cooperation with partners in the state of South Carolina seems to have been the genesis of the move.

“If an Estonian enterprise finds a partner from South Carolina within the framework of this agreement, it will have the option of receiving support from the development program or product development aid to finance the project,” Tanel Rebane, director of the Trade Development Agency at Enterprise Estonia, said.

Read more from ERR News

Dubai company putting €100 million into Tallinn-Helsinki tunnel

Dubai engineering solutions giant ARJ Holding Ltd is investing €100 million in the Tallinn-Helsinki tunnel project, tunnel designer Peter Vesterbacka announced at a press conference on Monday.

Mr Vesterbacka, chief of FinEst Bay Area, the group behind the tunnel project, pointed out the total cost of the tunnel stands at €15 billion, with an investment period of 30 years; the tunnel itself has a projected life span of 120 years, he said.

Finest Bay Area Leader Vesterbacka said the total cost of the project is estimated at €15 billion. The investment period is 30 years and the tunnel should last 120 years.

Read more from ERR News

The value of car leases taken is up one fifth on a year ago

Demand remains strong for loans. One fifth more car loans were taken out in August than a year earlier. The same number of new housing loans was taken as a year ago, though a little fewer than in the preceding months. The average interest rate on housing loans continued to rise in August. Companies have taken 16% more in new loans and leases this year than a year previously. The activity in borrowing has been accompanied by rapid growth in deposits too.

The demand from households for loans is supported by the rapid rise in incomes. New loans of 107 million euros in value were taken out, which was about the same amount as in August last year, but less than in May, June and July. The stock of housing loans has grown by 6.8% over the year. The value of new car lease contracts signed was more than one fifth higher than last year and the growth in the total volume of car leases over the year has been about the same. The portfolio of other loans increased by 4.5%.

The value of new corporate loans and leases issued this year is up 16% on a year earlier, with long-term loans up 20%. New loans were issued to almost all sectors. Some of the new loans taken have been used to refinance old loans, and so the yearly growth in the stock of corporate loans and leases picked up a little to nearly 7% in August, if a one-off sharp reduction in the loan stock in autumn 2017 is disregarded [1].

A lively real estate market with strong demand for loans has seen the average interest rate on new housing loans rise in 2018, and the growth rate reached 2.6% in August. Interest rates for corporate loans have not changed though. The average interest rate on new long-term corporate loans was 2.7% in August, as it was in July.

Growth in corporate and household deposits remained fast. The total volume of corporate deposits in banks operating in Estonia increased by 12% over the year. Household deposits were up 10% on the year, meaning they have grown at about the same rate throughout 2018. Non-resident deposits fell by 25% over the year however, and at the end of August they were equal to 7.5% of the stock of corporate and household deposits.

Source: Bank of Estonia

See graph here

Author: Mari Tamm, Economist at Eesti Pank

Life expectancy is increasing in Estonia

According to Statistics Estonia, in 2017, life expectancy at birth was 73.7 years for males and 82.3 years for females. In the last ten years, male life expectancy has risen by 6 and female life expectancy by 3.5 years. As a result, the difference in male and female life expectancy has decreased.

The lowest life expectancy since Estonia regained its independence was at the beginning of the 1990s: in 1994, male life expectancy was 60.2 and female life expectancy was 72.8 years. Since then, people’s health has improved, youth mortality related to accidents has decreased and life expectancy has increased.

The difference between male and female life expectancy is decreasing: in 1994, the difference was 12 years, ten years ago, it was over 10 years, and by 2017, it was 8.6 years.

Compared to the average life expectancy in the European Union, people in Estonia live on average 3 years less, but this difference has diminished over the years. Compared to the European Union average, the female life expectancy in Estonia is 1.4 years shorter and the male life expectancy is 5 years shorter. According to 2016 data, in the European Union, the longest life expectancy for males was in Italy (81.0 years) and for females in Spain (86.3 years). Estonia ranks 23rd in the European Union in terms of male life expectancy; it is shorter in Lithuania and Latvia. As for female life expectancy, Estonia has a higher 19th ranking, ahead of all the former Eastern Bloc countries. Bulgaria and Romania have the lowest female life expectancy indicators. On average, in the European Union, the difference between male and female life expectancy is 5.4 years. The difference is smallest in the Netherlands (3.2 years) and greatest in Lithuania (10.6), Latvia (9.8) and Estonia (8.6). In Europe, such greater differences can only be found in the other former Soviet Union countries.

Life expectancy depends on many factors, the most important of these being the environment, accessibility of healthcare services, living standard and health consciousness. The somewhat shorter male life expectancy is not surprising as men are more prone to risk-taking. The greater share of physically demanding jobs or those posing more risk to health is a likely factor. In Estonia, more people on average have blue-collar jobs and there are more blue-collar workers among men. This could be one explanation for the greater difference in male and female life expectancy.

Statistics Estonia calculates life expectancy separately for urban and rural population, population of counties, by nationality and, as of 2017, by education, as a new indicator. Life expectancy is greater in urban areas, among people of Estonian nationality and people with higher education. The difference between male and female life expectancy is also decreasing in these groups. Life expectancy of males and females with higher education differs by 7.7 years, while in the case of basic education, the difference is 10.1 years. The difference in the life expectancy between females with higher education and males with basic education is 17 years.

Life expectancy at birth is the average number of years that a new-born is expected to live if mortality indicators specific to the time period do not change.

Source: Statistics Estonia

Households continued to borrow enthusiastically in July

  • Demand remained strong for both housing loans and consumption loans
  • Businesses increased their short-term borrowing in July
  • The average interest rate on new housing loans continued to rise and climbed a little above 2.5%

Households were again active in taking out new loans and leases in July. The 111 million euros of new housing loans was 7% more than was issued in the same month a year earlier. The yearly growth in the portfolio was around 7%, as in previous months. The volume of new car leases was 28% more than a year earlier and the portfolio as a whole increased by 21% over the year. Yearly growth in other loans to households remained fast at 8%.

Businesses increased their short-term borrowing above all in July. Around one third more was taken in short-term loans from domestic banks and lease companies than in the previous July, but long-term borrowing tailed off a little as the same amount was taken as a year earlier. The corporate loan and lease portfolio shrank a little during the month[1]. Borrowing by companies was restrained by their modest levels of investment and quite large reserves offunds.

The average interest rate on new housing loans rose a little in the first half of the year and in July too. With demand from households for loans strong, the average interest rate on housing loans rose to slightly above 2.5%. The average interest rate for long-term loans taken by companies reached 2.7%.

The rapid growth in the economy and in incomes saw strong growth in bank deposits. Corporate deposits decreased in June and July, but were still up 11% on a year earlier. Household deposits were up 9% over the year in July, meaning they grew at about the same rate as in the first half of the year.

Source: Bank of Estonia

Author: Mari Tamm, Economist at Eesti Pank

See graph here

Slower growth in wages may prove temporary

  • Wage growth was slowed by the effect of the tax reform, which changed how holiday pay is paid out and raised the average net wage
  • Upwards pressure on wages remains high
  • Wage inequality and poverty wages have declined in Estonia in recent years

Data from Statistics Estonia show that the average gross monthly wage was up 6.4% over the year in the second quarter of 2018, which is a slower rate of growth than the 7.7% in the previous quarter. The shortage of available labour kept upwards pressure on wages high, and the slower wage growth can be at least partly explained by the impact of the tax reform, which changed how holiday pay is paid out and so allowed employers to restrain the growth in gross wages a little as employees received more in their pay packets.

The new tax system made it less favourable for employees to receive holiday pay during the month in advance of their holiday, as the temporary rise in their pay would lower their tax-free allowance. The data indicate that employers agreed more frequently than last year to make all monthly payments the same size. This change had a particularly notable impact in the slower wage growth in education. Wage growth may be faster than expected in the next quarter though, as people receive more in wages during the holiday months than they did last year.

Wage inequality and in-work poverty have declined in Estonia in recent years. This has been helped by the rapid rise in the minimum wage over several years and by rises in family benefits. The risk of falling into poverty is substantially smaller for those in work than it is for the non-working. The risk of poverty is higher for single parents and those with low work intensity, and it declines with higher levels of education.

Source: Bank of Estonia

Author: Orsolya Soosaar, Economist at Eesti Pank


See graph here