Half additional money earned after tax changes will go on day-to-day expenses
Half the extra money people in Estonia will take home each month following recent tax changes is likely to be used to pay for everyday expenses.
From the start of this year, people in Estonia will have more money in their pockets each month due to the monthly tax-free income threshold rising by €700. A person earning an average salary of €2,100 a month will thus gain an additional €1,800 per year. That means a total of €680 million across the entire population.
"Everyone will benefit from this to some extent. Of course, the benefit will not be the same across the board. It is highest in percentage terms for those earning €2,100 – at €154 per month. From there on, the financial benefit continues to increase. And, in fact, there are significantly more people who are not receiving an additional €154 per month to their net salary than those who are," said Madis Aben, an analyst at the Ministry of Finance.
According to Aben, around half of that money will go towards additional consumption. However, analyst Triinu Tapver says the median salary, which, at €1,700 a month is significantly lower than the mean salary also needs to be considered here. Taking that figure into account, half of salary earners will receive between €10 and €90 extra per month.
"The average weekly food basket for a family of four costs €30. This amount, which is earned by those in the lowest salary brackets and for whom the food basket is extremely important, is not very large, as they earn an average of €40 (per month). Around 40 percent of Estonians earn significantly more than that, but these are specifically the high earners. And if we look at it by sector, for example, these tend to be IT sector employees, financial sector employees and energy sector employees," said Tapver.
A survey by SEB Bank also showed that people with an income of up to €1,250 per month can cover their daily expenses with the additional money.
"Thirty percent of respondents, primarily those with below-average incomes, said that this money is being spent on daily necessities. That includes food, utilities and various transportation costs. Nevertheless, some people have also pointed out that they are starting to save and invest," said Elisabet Visnapuu, head of savings and investments at SEB.
Those with a monthly income exceeding €2,250, roughly 22 percent of the population, do have savings and investment plans.
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Editor: Marko Tooming, Michael Cole
