

You Are Being Sold Far Below Your Value
Ready to face exactly how much money you’re giving away to the good people on Toompea every year? Get an idea right here
Numbers! They’re hard. And once the government and its bureaucracy get involved, things get ever so much more confusing.
Let’s start with some basics, shall we — what a gross and a net salary are.
Gross means before deductions, before tax. Net means what you’re left with after you’ve paid all you owe the government by law.
So in Estonia, your gross salary currently covers:
- What you get paid into your account (your net salary)
- Income tax at 20% of your gross salary, which your employer sends straight to the Finance Ministry
- 1.6% unemployment insurance contributions
So you pay the government just over 20% of what you earn, and get to keep just under 80%. Correct? Of course not.
On top of what they pay you, your employer also pays 0.8% unemployment insurance contributions and a whopping 33% social tax on every last cent of your gross salary.
As a resident of Estonia, you are aware of this, of course. And surely it’s all fine and dandy.
There’s just the small fact that all the work you do comes at a price for the employer. Logical too, sure. But consider this — if your employer is required to pay an additional 33% in social tax, this makes your work 33% more expensive.
In other words, if you want to know exactly what your work is worth to your employer, you have to include all the money the employer spends on you and because of you.
Here’s an example.
So the average Estonian tax payer made €11,758 gross last year. This figure includes income tax as well as unemployment insurance paid by the employee, by the worker.
To this, you can now add 0.8% for the unemployment insurance paid by the employer, the company — and the 33% social tax.
What you get are €15,732.20. That is what your employer spent on you. That’s the total value of your work.
Still operating with the reported average of €11,758 gross, this means that the state on average gets a total of €6047.77, or 38.4% of your employer’s expense on you. Another 1.87% of your employer’s expense is paid into an obligatory pension fund.
Once this is done, you’re left with 61.6% of the money your employer spends on your work. In this example that’s €9,684.42. (As an effect of the economic crisis, people had the chance to apply for higher pension fund payments for the years 2014–17. The amount given takes the average of the two possible pension fund contributions into account.)
But there’s more.
You need to spend money to live. And in most places you spend money, the state is already waiting — now claiming 20% value-added tax.
To this, depending on how much you drive, drink and smoke, you can also add excise duties on fuel, alcohol, and tobacco.
This is generalising now, of course. But if you’re where I am in life, namely you have a small family, rent or interest to pay, and perhaps a car — then you know damn well that you’ll end up spending the lion’s share of that money on everyday life.
And everyday life in Estonia comes at 20% VAT.
This, believe it or not, now pushes the total of what ends up in the hands of the state beyond the 50% marker.
That’s right. If you live and work in Estonia, the state gets more than half of the money you work for. Not companies. Not businesses. Not banks. The state. And that’s plainly how it is.
If you’re curious just how much you are signing over to the chaps on Toompea, have a look at this neat little tool here.
Puts the cost of political disinterest and lethargy in perspective, doesn’t it?
More than half of your money, half of what your daily work is worth, is used to pay for the lousy coverage of public service in this country, where you pay extra for anything a civil servant has to heave their flabby backside out of their chair for.
And, of course, for all the hot air and the hogwash you get to listen to whenever you get close to a properly employed politician or public official.
So next time you find yourself accidentally reading an interview with Valdo Randpere, for example, don’t fold up the paper just yet — after all, you’re paying good money for it.