Report: Estonia has the lowest asset taxes in the EU

Estonia has the lowest asset taxes in the European Union, the brief report “Asset Taxes in Estonia and in European countries” by the Foresight Centre reveals. If asset taxes amounted to the average level of the European Union, over 500 million euro would be received additionally in the state budget.

“The Estonian tax system is based largely on labour and consumption taxes, while at the same time asset and property taxes have found little use in the funding of the costs of society,” expert of the Foresight Centre Magnus Piirits said. “Asset taxes account for around 5% of the tax revenue of European Union countries. If Estonia used asset taxes on the same level as is the average in the EU Member States, for example, more than 530 million euro would have been received additionally in the state budget in 2019.

Asset taxes include real estate taxes, taxes on net assets, taxes on estates and gifts, and taxes on financial and capital transactions (e.g. transactions with securities and holdings in companies). Piirits pointed out that real estate taxes accounted for the largest share of asset taxes in the majority of European Union countries (incl. Estonia).

In Estonia, the main type of asset tax is land tax, which is received by local governments.  For example, in 2019, the proportion of real estate taxes in tax revenue was 0.6% in Estonia and on the average 3% in European Union countries. From 2012, the land tax collected annually in Estonia has remained consistently at around 60 million euro,” Piirits noted.

Magnus Piirits thinks that the Estonian tax structure is bound to undergo changes in the future. “The decrease in the working-age population, the digital development and the change in the forms of work will reduce the capability of labour taxes in the funding of the costs of the state. If costs remain at the current level or increase, opportunities to cover them will inevitably have to be found,” he added.

Piirits said that, in terms of global tax trends, it must be taken into account that, in recent decades, asset inequality had significantly aggravated all over the world. “One per cent of the wealthiest own as much as 45% of all assets. The aggravation of inequality is fuelled by the money-printing by central banks because this raises asset prices,” Piirits said.

Likewise, with new IT-solutions and greater cooperation between counties, the fight against concealment of assets is intensifying in the world. “All this is creating a favourable ground for greater use of asset taxes. On the other hand, new asset classes are emerging, like crypto assets, which are very complicated to assess in terms of their value,” Piirits added. 

The brief report “Asset Taxes in Estonia and European Countries” can be downloaded HERE.  

Read the brief report for information on how estates are taxed in Finland and net assets are taxed in Switzerland, for example.

In 2021, the study projects of the Foresight Centre include “A future-proof tax structure”, which seeks solutions for covering the costs in an ageing society, and the opportunities to change the tax system over the next 15 years.

The Foresight Centre is an advisory board at the Chancellery of the Riigikogu that analyses long-term developments in society and economy. The Centre conducts research projects to analyse the long-term developments in the Estonian society, and to identify new trends and development directions.

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