Tax ratio increased due to indirect taxes

According to Statistics Estonia, in 2009 the Estonian overall tax ratio was 36% of the Gross Domestic Product (GDP). Compared to 2008, the ratio of taxes rose by 4 percentage points, mostly due to the increase of excise duties.

In 2009, the revenues from the taxes and social security contributions decreased by 3 billion kroons compared to the previous year, bringing in to the state 77.4 billion kroons. If since 2000 the overall tax ratio remained at the level of 30–32%, then in 2009 it increased to 36%. The average ratio of the European Union has stood at around 40–41% since the beginning of nineties.

The share of indirect taxes received by general government rose to 42%, bringing in to the state 32 billion kroons. The majority of indirect taxes are value added tax and excise duties. The percentage of indirect taxes of the GDP has remained within the limits of 12–13% during the last ten years, but in 2009 the indicator increased to 15%. An important role plays the fact, that the long-term growth trend of the GDP at current prices has turned into fall last year, decreasing by 14.6 % compared to 2008.

The revenues from direct taxes (current taxes on income and wealth) amounted to 16 billion kroons. The share of direct taxes in tax revenue was 22%, it decreased by 3 percentage points compared to 2008. Since 2000 the share of direct taxes in the GDP has remained within 7–8%, which is approximately twice lower than the European Union average ratio.

In 2009 the revenue from the compulsory social security contributions was 29 billion kroons in total. Compared to the previous year the social security contributions ratio of the GDP increased by one percentage point and was 13% in 2009.

Recession of tax revenue is characteristic of the year 2009. For instance the inflows from gambling tax have decreased by 43%. Compared to the previous year the increase has been in revenues of excise duties and unemployment insurance payments.

Tax ratio*, 2000–2009 (ratio of GDP, percentage)
  2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Estonia 31 30 31 31 30 30 31 32 32 36
European Union (EU 27) 41 41 40 40 40 40 41 41 40 ..
Eurozone (EU 16) 42 41 41 41 40 41 41 41 41 ..

*     Taxes received by general government and social taxes (excl. the share of taxes transferred to the European Union).

..    Data have not been published.

Source: Statistics Estonia

Stable decrease in retail sales

According to Statistics Estonia, the retail sales of goods of retail trade enterprises decreased in February 2010 compared to January this year as well as compared to February of the previous year.

The slowdown of the decrease in retail sales, which had begun at the end of the previous year continued also in January this year, when the retail sales decreased 11% compared to the corresponding month of the previous year. In February the stable decline in retail sales remained, decreasing by a tenth. Last year the decrease in retail sales was the biggest in February — 19%.

In February, the retail sales of goods of retail trade enterprises were 3.8 billion kroons. The decrease in retail sales of goods was most influenced by the stores selling manufactured goods, where the retail sales decreased by 14% compared to February 2009. The retail sales of stores selling household goods and appliances, hardware and building materials decreased the most or 27%. The decrease in non-specialized stores with industrial goods predominating and retail sales of other specialized stores slowed down compared to the previous months, the retail sales in these stores decreased 12% during the year. The low reference base in 2009 contributed to the slowdown in the decrease of the retail sales in these stores.

The retail sales in grocery stores have been rather stable during the recent months. In these stores, the retail sales decreased 6% compared to February of the previous year.

Compared to the previous month, the retail sales in retail trade enterprises decreased by 5% in constant prices. According to the seasonally and working-day adjusted data the retail sales decreased by 1%.

In February the revenues from sales of retail trade enterprises were 4.6 billion kroons, out of which the retail sales of goods accounted for about 85%. The revenues from sales decreased in current prices compared to January this year as well as compared to February of the previous year by 5%.

Retail sales volume index of retail trade enterprises and its trend, January 2002 – February 2010 (2005 =100)

Diagram: Retail sales volume index of retail trade enterprises and its trend, January 2002 – February 2010 (2005 =100)

Source: Statistics Estonia

Tallinn new sales tax unclear

Retailers say it is an outrage that Tallinn city authorities are still unable to say clearly exactly who and what will be subject to the sales tax that the City of Tallinn plans to introduce in the middle of the year. They also say that the collection of the tax will be very expensive in comparison with revenues, writes Äripäev.

It is estimated that cost of adapting accounting, cashier and sales systems could be as high as 25 million kroons  for retailers alone while total related costs of businesses could reaech 65 million kroons.

Andres Heinver, CEO of grocery chain Selver, says that making changes in information systems could cost millions and require additional workforce. “The fear is that we will not be ready by time,” said Heinver, explaining that it is still unclear which products the sales tax will cover. “There are more questions than answers and the city does not have them. The worst is that they are trying to do it in the euro year.”

Read more from BBN

Estonia would like to have euro in 9 months

Estonian Prime Minister Andrus Ansip said at a European Union summit news conference in Brussels last week that Estonia would like to join the euro area from Jan. 1, 2011.

“We fulfilled all the Maastricht criteria already in a sustainable way,” he told reporters.

The Estonian government’s budget deficit estimate for last year was confirmed by the statistics office last week, showing the country met terms for euro entry in January 2011. The general government deficit, including local governments and social insurance funds, was 3.7 billion kroons, or 1.7 percent of gross domestic product, in line with the Finance Ministry’s estimate this month and below the 3 percent limit for euro adoption.

Read more from BBN

Industrial production increased

According to Statistics Estonia, in February 2010 the production of industrial enterprises rose 5% compared to February of the previous year.

In February 2010 the production in manufacturing increased 4% compared to February of the previous year. When in total of 2009 compared to the previous year, the production decreased in all branches of manufacturing, then in January some branches showed recovery marks. In February a considerable growth could be observed in more than half of branches. When the export sales in manufacturing increased 12%, than the domestic sales fell 9% compared to February of the previous year. The rapid increase in production was partly affected by comparing to lower comparison base, where the production in February 2009 was one of the lowest during the previous year. The branches holding a big share, as manufacturing of electronic products, rose 65%, the manufacturing of wood — 18%, mainly due to the increase of exports. The production increased also in the manufacturing of metals, motor vehicles, refined petroleum, plastic products, building materials and furniture. The production of wearing apparel, leather, chemical and metal products, machinery and equipment decreased more than a fifth. The main reason causing the decline was a continually insufficient demand.

In February 2010 compared to January, the seasonally adjusted industrial production decreased 1%, the production of manufacturing remained on the level of the previous month.

In February 2010 compared to February 2009, the production of electricity increased 19%, the production of heat — 7%. The increase in energy production was caused mostly by a lower outdoor temperature and a rising demand of energy induced from it. The exports of electricity rose slightly too.

The volume index and trend of production in manufacturing, January 2000 – February 2010
(2005 = 100)

Diagram: The volume index and trend of production in manufacturing, January 2000 – February 2010 (2005 = 100)

Read more from Statistics Estonia

Price of government owned manor house falls over 20 times

State Real Estate Company is holding yet another auction for finding a buyer for Keila-Joa manor house, one of Estonia’s most fascinating manor architecture specimen. The state has repeatedly attempted to sell the manor complex that is located about 40 km from Tallinn. The new starting price for the complex is 2 million kroons, reports ERR.

The state has been attempting to sell the complex since 2006. The first auction was organised in October 2006 with a starting price of 10.5 million kroons. The highest bid of 45.1 mln kroons was made by Gunnar Kool’s EU VIP but he refused later to sign the purchase contract.

The second auction was made in February 2007 with a price of 25 million kroons, but it attracted no bids. Third bid in April 2007 was made with a starting price of 20 million. It fails and the state started to consider whether to turn it into presidential residence.

Fourth bid was made in August 2008 with a starting price of 20 million kroons that was later lowered to 10 million. It fails. In May SREC announced a new auction and lowered the price to 5 million kroons.

The complex includes a manor house building next to the river and waterfall and 5 hectares of land with auxiliary buildings

The buyer would be obliged to preserve the heritage and restore it in original volume. No additional building is permitted. Another requirement is that the complex must remain open to the public to a certain extent.

The building that was once owned by the Volkonski family was formerly used by the Soviet army which operated a cinema, library and a club in the building.

Read more from BBN

Ekspress writes

Read from Wikipedia about Keila Joa manor house

Exports grew on account of mineral products

According to Statistics Estonia, in January 2010 exports of goods grew by 11% and imports declined by 3% compared to the same month of 2009. The increase in exports was mainly influenced by the steep growth in the dispatches of oil products and fuel oils.

In January 2010, exports of goods from Estonia amounted to 8.1 billion kroons and imports to Estonia 8.6 billion kroons. Trade deficit accounted for 0.5 billion kroons in January, which was threefold less than in January of the previous year (1.6 billion kroons).

In exports among commodity sections the biggest share was held by mineral products (25% of Estonia’s total exports), followed by machinery and equipment (17%). Compared to January of the previous year exports of mineral products grew 2.5 times (by 1.2 billion kroons). Exports of wood and products thereof grew by 25%.

In imports among commodity sections the biggest share was also held by mineral products (26% of Estonia’s total imports), followed by machinery and equipment (19%). Compared to January of the previous year imports of machinery and equipment fell by 21% (or 0.4 billion kroons) and imports of transport equipment by 41% (or 0.3 billion kroons).

In Estonia’s exports the main countries of destination were Finland (18% of Estonia’s total exports), Sweden (14%) and Latvia (8%). The increase of exports to France, Nigeria and Costa Rica was mainly caused by the increase of dispatches of mineral products (motor spirits and fuel oils).

The main countries from where goods were imported to Estonia were Finland (16% of Estonia’s total imports), Russia (12%) and Latvia (11%). Compared to January of the previous year imports declined to some extent from Germany and Netherlands, but from the most of the main partner countries imports to Estonia increased.

Compared to December 2009, exports of goods declined by 6% and imports by 16%. In January compared to December, the decrease in foreign trade was caused mainly by the seasonality and is characteristic of the previous years as well.

According to Eurostat, in January 2010 the average increase of exports of the EU countries grew by 3% compared to January 2009.

Estonia’s foreign trade, 2009–2010 (million kroons)
  Month Exports Imports Balance
  January 7 266 8 821 -1 555
  February 7 817 8 747 -930
  March 8 346 9 770 -1 424
  April 7 736 9 324 -1 588
  May 8 161 8 505 -344
  June 9 548 9 934 -386
  July 8 246 9 414 -1 168
  August 8 114 9 286 -1 172
  September 9 434 10 172 -738
  October 8 968 9 726 -758
  November 9 109 10 385 -1 276
  December 8 599 10 258 -1 659
  January 8 062 8 582 -520

 Read more Statistics Estonia

Government deficit decreased

According to preliminary data of Statistics Estonia, in 2009 the Estonian general government sector deficit was 1.7% and gross debt level was 7.2% of Gross Domestic Product (GDP). In the 4th quarter the Estonian general government sector surplus was 4.3 billion kroons.

In 2009, the general government budget’s deficit remained within the limits set out in the Maastricht Treaty. At the end of the year the total expenditures of the general government sector budget exceeded the revenues by 3.7 billion kroons. For the first time the unemployment and health insurance funds ended in deficit: social security funds’ shortage of 1.5 billion kroons made up even 40% of the general government total deficit. Both, the central government’s and the local governments’ sector deficit decreased compared to 2008. In 2009, the central government deficit was 0.6% and the local governments’ sector deficit 0.5% of GDP.

The general government gross debt level still increased in 2009. By the end of the year the debt amounted to 15.5 billion kroons, growing by a third compared to the previous year. The central government’s debt level increased last year nearly twice compared to 2008, amounting up to 44% of the general government sector’s total debt. The total borrowing of the local governments sector increased only by 0.6 billion kroons in 2009, amounting to 8.7 billion kroons.

The 4th quarter 2009 compared to the 4th quarter 2008

In the 4th quarter of 2009, the general government’s total expenditures decreased by 17.5%. Expenditures decreased in all cost categories, only the expenses for social benefits increased by 0.5 billion kroons (6.2%). The general government’s wage costs were 1.2 billion kroons smaller.

The total income increased by 4.2 billion kroons (16.9%). The taxes on products and property income raised the total income — the receipts from the excises were high before the rise on the tax rate and the income from the dividends was received in the 4th quarter instead the usual 2nd quarter.

In the 4th quarter the increase of the general government gross debt level continued. While the domestic debt decreased by 0.7 billion kroons, the level of the general government’s foreign debt grew by 2.5 billion kroons in the last quarter. The growth of the foreign debt was mostly influenced by the outpayment of the large loan agreement taken for the co-financing the foreign aid programmes. Domestic debt decreased due to the return of the loans to the domestic banks. Both, the decrease of the domestic debt and the increase of the foreign debt, were mainly the result of the activities of the central government, the debt level of the local governments remained almost unchanged in the 4th quarter.

Eurostat publishes the debt and deficit levels of the Member States on 22 April.

Source: Statistics Estonia

Port of Tallinn expects 275 cruise ships this year

Estonia’s Port of Tallinn expects a total of 275 cruise ships with about 400 600 passengers to visit the port this year. Port of Tallinn public relations officer Sven Ratassep told BNS that 273 cruise ships with 400 000 passengers were expected to call at Tallinn City Harbor and two cruise ships with 600 passengers at Saaremaa Harbor.
Ratassepp said that the exact number of visitors could be quoted only at the end of the season, as a few more ships could come or fail to arrive during the season.
The first cruise ship will visit Tallinn on 24 April and the last on 20 September, Ratassepp said. He said that 254 cruise ship visits had been planned to City Harbour and eight visits to Saaremaa Harbour.
Last year a total of 307 cruise ships with 415 000 passengers called at Tallinn, 10% more than in the season of 2008. 302 cruise ships called at City Harbour and five cruise ships at Saaremaa Harbour. The longest ship that visited Tallinn last year was the Norwegian Jewel, of 294.13 meters, while the Emerald Princess brought 3 298 passengers to Tallinn on 17 July.

Source: Estonian Review

Danish furniture maker Flexa to relocate factory to Estonia

The Danish manufacturer of children’s furniture Flexa intends to shift production to Estonia and in connection with this, Flexa Eesti plans to increase its staff to up to 240 people.
In the course of the restructuring of the Flexa group, a plant will be relocated from Denmark to Estonia, board member of the Estonian operation Marianna Paas told BNS on Friday. “Furniture for children will be produced as before, it’s just that the part which used to be produced in Denmark will henceforth be produced in Estonia.”
Plans are for the Danish factory to continue working till the beginning of July and for the Estonian unit to fully take over its tasks in late summer. Flexa Eesti, which currently employs 210 people, plans to hire up to 30 new workers.
Paas said the last two years have been very difficult for the Estonian unit. “We have become considerably more cost-effective, but what we need to achieve in order to continue properly working is turnover,” she said.
Flexa Eesti made a loss of 89.3 million kroons (EUR 5.7 mln) in the business year ending in October 2008 after posting a profit of 23.8 million kroons the year before. Flexa Eesti AS is part of the Danish group Flexa Holding A/S.

Source: Estonian Review