The use of tax planning schemes based on the differential taxation of labor income and capital income. Tööjõu ja kapitali maksustamise erinevustel põhinevate maksude planeerimise skeemide kasutamine Eestis

  • Priit Sander University of Tartu
  • Mark Kantšukov University of Tartu
  • Velda Buldas Estonian Tax and Customs Board
Keywords: tax planning, income taxation, personal finance

Abstract

The current paper covers one of the tax optimization schemes popular in Estonia – full or partial replacement of labor income with dividends. Such scheme is used by some owner-managers as the regulation concerning emoluments of members of management body is very flexible. The main incentive to use the scheme is to reduce tax burden as dividends are only subject to income tax but emoluments to the members of management body are also taxed with the social tax. Basic results show that considered schemes are widespread. We estimate that due to replacement of salaries and wages with dividends there was a significant loss in social tax revenues in Estonia during 2005-2008. In majority of the sectors average dividends of ownermanagers in 2008 were higher than their average salaries. Also, the average amount of owner-managers’ emoluments in majority of the sectors was below the national monthly average salary, in some cases it was even below subsistence level
How to Cite
Sander, P., Kantšukov, M., & Buldas, V. (1). The use of tax planning schemes based on the differential taxation of labor income and capital income. Tööjõu ja kapitali maksustamise erinevustel põhinevate maksude planeerimise skeemide kasutamine Eestis. Estonian Discussions on Economic Policy, 18. https://doi.org/10.15157/tpep.v18i0.892
Section
Articles. Artikeln. Artiklid