The study analyses the distribution of tax burden between households – 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 2008-2015 is analysed and, using the Euromod microsimulation model, different hypotetical scenarious are also analysed. Similar study was conucted in 2008 for the period 2000-20007, thus the results of these two studies are compared as well. The analysis concentrates on the following taxes:
- social tax
- natural person income tax
- value-added tax
- excise duties.
Overall the analysis shows that there have not been any major changes in the size or distribution of tax burden in 2010 and 2016. The simulations show that on average the tax burden has slightly decreased due to a small decrease in social security contributions and income tax.
Recently, the income tax rate decreased by 1 percent point and the basic exemption level increased by €10 per month. These changes have had only a minor impact on the inequality of the net income according to the study.
In case of social tax, hypothetical scenarious were analysed: decreasing the tax rate by 1 pecentage point or establishing social tax ceiling for wages above €2,000 or above €3,000. The first scenario showed that households with higher income would benefit the most, while the state’s social tax revenue would decrease by €80 million. The second scenario would decrease the tax revenue by €64-181 million.
Value-added tax does not have much impact on tax burden, because there are not many tax exceptions in Estonia.
By nature, excise duties on tobacco products and alcohol beverages are regressive – those in lower income groups pay relatively more than those in higher income groups. However, the study showed that compared to the previous period (2000-2007) the excise duties have become less regressive. Regarding the the fuel excise duty, the previous analyse showed that it was progressive, but in the current study it is not so clear anymore.