One tenth of Estonian businesses pay 90 percent of state budget's VAT receipts

Photo: Arvet Mägi/Virumaa Teataja

Data of the Tax and Customs Board show that a large part of Estonian businesses evades paying value added tax and basically billions of euros of VAT is paid into the state budget by just one tenth of companies, the business daily Äripäev reports.

There are in Estonia around 72,000 businesses liable to VAT. Fresh statistics of the tax authority showed that last year just 5,690 of them paid VAT in the amount of 2.08 billion euros, which made up 90 percent of total VAT receipts. The rest pay only a minimum amount of VAT and one third of the businesses receive more money in tax refunds than they pay in taxes, Äripäev says.

Basically this means that 5,690 entrepreneurs are paying for the upkeep of the rest, deputy head of the Tax and Customs Board Egon Veermae said. In his words, we find ourselves in a situation where a handful of enterprises is creating value added and one third of businesses are essentially receiving state subsidies in the form of tax rebates.

Head of the board Marek Helm told the paper that entrepreneurs use various schemes to evade taxes such as shell companies, cash payments to conceal turnover or writing off expenses not related to business activity.

Finance Minister Jürgen Ligi said the tax authority's statistics did not come as a surprise. "The statistics confirm that the situation is very serious, that because of fraud fair competition suffers and it is not possible to reduce the tax burden of taxpayers who duly pay taxes," he told the paper. According to the finance minister, the government is working on several proposals including radical ones, among them more efficient surveillance, personal liability and business bans for systematic evaders. Under consideration are also general electronic registration of transactions and the requirement to register new staff on the first day of work.