The study analyses the distribution of tax burden between households, asking which income groups have gained or lost due to changes in tax rates and whether tax changes increase or decrease the progressivity of Estonian tax system. The actual tax burden in 2000-2007 is analysed and also for 2008-2012 the income distribution under various policy change scenarios is forecasted, concentrating on the following taxes:

  • social tax
  • natural person income tax
  • value-added tax
  • excise duties
  • and land tax

According to the analysis, lowering the income tax rate and increasing the basic exemption level have resulted in increased inequality in net income between households. Value-added tax does not have much impact on tax burden, because there are not many tax exceptions in Estonia. Excise duties on tobacco products, alcohol beverages and electricity are regressive – those in lower income groups pay relatively more than those in higher income groups. The situation is opposite in case of increase of fuel excise duty – it regressive, meaning that relative tax burden increases more for those in lower income groups.