TALLINN - A number of Estonian entrepreneurs suspected of tax fraud have increased salaries and started to pay more income and social tax after the Estonian Tax and Customs Board sent warnings to 1,000 companies earlier this year.
Almost one-third of those companies contacted by the tax board, and half of the companies warned, changed the payroll numbers in their tax declarations.
This change should bring an additional 47 million kroons (3 million euros) to the state budget.
The main explanation given for the low wages was that employees work seasonally and many companies hire retired people who agree to work for low wages and salaries.
Not surprisingly, about 50 companies raised wages for a couple months and then brought them back to the previous level. But Egon Veermae, manager of the control department at Tax and Customs Board, said the board was inspecting taxpayers carefully and such tricks would not fly.
"Those companies that did not react and whose tax risk is still high are constantly under supervision and may expect an audit," said Veermae.
Income to the state budget has improved significantly due to economic expansion and better tax collection, especially after a crackdown on so-called "envelope salaries" in the construction, hotel and restaurant businesses. Many companies report minimal salaries to the tax authorities but pay their employees above that amount in unreported cash.
The tax board expects an additional 1 billion kroons to the state budget mainly from an increase of value-added tax and social tax.
The board did not publish names of companies that received the warnings, but it has declared that they were mainly in the construction and hospitality industries.
The board carried through a similar undertaking last year and sent out 600 messages, which brought an additional 8.3 million kroons in revenues.
In the third quarter of 2005, the average monthly gross salaries of full-time and part-time employees of enterprises, institutions and organizations were 7,786 kroons and the hourly gross wage was 45.8 kroons.
Compared to the same quarter of the previous year, the salaries increased by about 10 percent. The income increased most in fishing, by almost one third. The average wage for 2001, for example, was 5510 kroons.
The lowest average hourly gross wages are in fishing (28 kroons), the hotel and restaurant business (32 kroons), agriculture and hunting (33 kroons) and highest in financial intermediation (77 kroons) and real estate, renting and business activities (55 kroons).