Swedes pull €550m from Estonian Swedbank

Photo: SCANPIX

Yesterday, Swedbank announced it would withdraw €400m as extraordinary dividends from profits accumulated in its Estonian subsidiary, on top of planned dividends of €150m.

Thereby, a whopping €130m of corporate income tax will be added to this year’s Estonian state budget by Swedbank.

«In Estonia, Swedbank is super strongly capitalised as proven by last year’s ECB stress tests,» said Swedbank CEO Robert Kitt. «Thus, a part of the profits accumulated over the years was decided to be paid out to shareholders. The goal is to optimise the capital structure from the perspective of the entire group, while we are carefully watching to comply with Estonian requirements of capital adequacy,» he said.

Since 2014, Swedbank Group pursues dividends policy prescribing the yearly dividends payment of 60 percent of profits made in Baltic subsidiaries. Last year, Swedbank AS made €188m of profits, as at end of last year retained profits were €1.9bn.  

Finance minister Sven Sester welcomed the decision by Swedbank while promising the state will not respond by a supplementary budget. «For the state, this is a one-off income,» said Mr Sester.

As the money was unexpected i.e. unplanned in the budget, and other tax revenues are larger than hoped for, the budget will probably show a surplus this year. «As extra revenue happens, we will not jump to pass supplementary budgets, rather channelling this into reserves. As shown in times of crisis, reserves are worth gold,» promised Mr Sester.

Though the extraordinary €100m could, for instance, cover the child benefit rise to €60 the coming four years, Mr Sester said a one-off income could never be used to cover things like that. «Benefits, pensions, wages – these are not obligations assumed by the state for a month, two months or a year, but for years as base costs. To cover these from one-off income would be short-sighted indeed,» he said.

Therefore, excise rise cannot be cancelled also, as no-one could guarantee one-off revenues for the years that follow.

Mr Sester said this six month’s legal persons’ income tax is up 7.4 percent year-on-year at €185m.

«This serves to show that there is an increasing number of mature companies able to share their profits with owners and the society, paying dividends and from that the income tax to the state. And the revenues have rather come from private capital companies, not the public ones,» he explained.

Right after announcement by Swedbank a jubilant Prime Minister Taavi Rõivas came over social media: «An excellent example of how favourable tax environment helps accumulate profit, and a company’s success equals win for society.»

For the first time, SEB Estonia also paid ten million euros of dividends to parent company in first quarter this year, the state thus harvesting €2.18m of corporate income tax. In the first quarter, SEB made €20.2m of profit in Estonia.