1. Estonian Taxes and Tax Structure Tax Policy Department Ministry of Finance Revised in 2011

2. General Data Population (01.01.20 11 ) 1,34 0 , 194 Total area 45,227 km 2 Average salary (20 10 ) 792 EUR Currency E UR GDP (20 10 ) 14,305 mill EUR Economic growth ( forecast for 2011) 7 . 5 % (forecast for 2012 ) 3.0 % GDP per capita (20 10 ) 10 , 674 EUR Inflation (forecast for 20 11 ) 4.9 %

5. Taxation Act

7. State taxes 1) excise duties; 2) income taxes; 3) gambling tax; 4) value added tax; 5) land tax; 6) social tax; 7) customs duty; 8) heavy goods vehicle tax

8. Local taxes 1) sales tax; 2) boat tax; 3) advertisement tax; 4) road and street closure tax; 5) motor vehicle tax; 6) animal tax; 7) entertainment tax; 8) parking charge.

14. Tax Structure

15. Structure of tax burden (% of GDP ) Source: Statistical Office of Estonia, Ministry of Finance

16. Structure of general government tax revenue Source: Statistical Office of Estonia, Ministry of Finance

17. Tax burden ( % of GDP) Source: Statistical Office of Estonia, Ministry of Finance

18. State Budget Tax Revenue 20 10 Total tax revenue 4 045,6 m illion EUR Total revenue 5 516,1 m illion EUR Source: Ministry of Finance

19. Tax Revenue 20 10, million € ( collected) * - The amount received by the state + local governments Source: Ministry of Finance

20. Direct taxes

22. Reasons for introdu c in g flat rate in Estonia

24. The outcome …

25. Personal income tax revenue 1994-201 5 million € Source: Statistical Office of Estonia, Ministry of Finance

26. Corporate income tax revenue * - includes revenue under the prior Income Tax Act (taxable period 1999) million €

28. Personal Income Tax

32. Income tax reduction

37. Corporate Income Tax

39. Corporate income tax Elimination of technical shortcomings Additional funds available for investment Stricter regulation of transfer pricing Acceleration of economic growth Introduction of the CFC rules Transparency and exchange of information

41. Time The taxation of profit until 1999 Tax rate 26 % (on gross profit) Corporate income tax Income tax 26 EEK Dividend payment 74 EEK Profit earned 100 EEK

42. Time The timing of tax payment under the new system (since 2000)* The tax rate ha s be en decreased since 2005; see next slide Corporate income tax Income tax 26 EEK Dividend payment 74 EEK Profit earned 100 EEK Tax rate 26/74 (on net amount, equals to 26% of gross profit) No tax

45. + qualified dividends received 100 EUR + foreign interest received 100 EUR (source state WHT 10) Donations 200 EUR Expenses unrelated to business 300 EUR Gifts 100 EUR 1400 E UR potentially taxable income Tax liability deferred Profit earned in 20 09 200 E UR + Profit earned on 20 10 1000 E UR Dividend / liquidation 640 E UR Exemption method Taxable amount 64 0 – 100 = 540 CIT (21/79) 27 CIT (21/79) 80 CIT (21/79) 53 CIT (21/79) 144 Credit method 144 – 10 = 134 Total CIT liability 294 Time Corporate income tax

48. Structure of declared corporate income tax 2003-201 5 million € Source: Statistical Office of Estonia, Ministry of Finance

49. Social Tax

54. Social tax revenue 1994-201 5 m illion € Source: Ministry of Finance

55. Structure of declared social tax 2003-201 5 million € Source: Statistical Office of Estonia, Ministry of Finance

56. Indirect taxes Ministry of Finance of Estonia

58. Value-added Tax (VAT)

63. VAT revenue 1994-201 5 million € Source: Statistical Office of Estonia, Ministry of Finance

64. Excise duties

66. Excise duty rates on alcohol 01.01.20 11

67. Excise duty rates on tobacco products 01.01.20 11

68. ENERGY PRODUCTS: n ational excise duty rates o n MOTOR FUELS and the EU minimum excise levels ENERG Y PRODUCT Excise rates in E stonia 01.0 1 .20 11 The EU minimum levels of taxation Unleaded petrol 422,77 EUR / 1000 l 359 EUR/ 1000 l Leaded petrol 422,77 EUR / 1000 l Gas oil 392,92 EUR / 1000 l 330 EUR 1000 l Gas oil for specific purposes 110,95 EUR / 1000 l 21 EUR / 1000 l LPG 125,26 EUR / 1000 kg 125 EUR / 1000 kg Petroleum 330,1 EUR / 1000 l 330 EUR 1000 l

69. National excise duty rates applicable to heating fuels and electricity and the EU minimum excise levels Energy product Excise rates in Estonia 01.0 1 .20 11 The EU minimum levels of taxation business non-business Light fuel oil 110,95 EUR/ 1000 l 21 EUR/ 1000 l 21 EUR/ 1000 l Heavy fuel oil 15,01 EUR/ 1000 kg 15 EUR/ 1000 kg 15 EUR/ 1000 kg Petro leum 330,1 EUR/ 1000 l - - Natural gas 23,45 EUR/ 1000 m 3 0,15 EUR/ GJ 0,3 EUR/ GJ Coal and coke 0,3 EUR/ GJ 0,15 EUR/ GJ 0,3 EUR/ GJ Ele ctricity 4,47 EUR/ MWh 0 , 5 EUR/ MWh 1 EUR/ MWh

70. Excise duty revenue 1994-201 5 m illion € Source: Statistical Office of Estonia, Ministry of Finance

71. Packaging excise duty

74. Gambling Tax

77. Plans for the future

79. The main goal for the future- shifting tax burden from income and employment to consumption and environmental taxes Plans for the future

80. Thank you!

81. Background information

82. Average Economic Growth in 1996 – 20 10

83. Estonian real convergence w ith the EU

84. Labour market goals in Lisbon Strategy

85. Growth expectations

86. General Government budgetary balance 200 4 -20 15 Source: Statistical Office of Estonia, Ministry of Finance

87. General Government tax burden 1995 -20 15 ( % of GDP)

88. General Government debt in 20 10 (% of GDP)

89. Tax rate on low wage earners: Tax wedge on labour cost