2027 State Budget Is Ready: What EUR 21.3 Billion Means for You

What happened and when

According to ERR, the Estonian government approved the draft 2027 state budget and the state budget strategy for 2027-2030 on 28 September 2026. Prime Minister Kristen Michal will hand the draft over to the Riigikogu on Tuesday.

Under the draft, the total volume of the 2027 state budget is EUR 21.3 billion. Revenues amount to EUR 19.4 billion, expenditures to roughly EUR 20.2 billion, and investments to approximately EUR 1.2 billion. ERR's report does not specify which particular tax changes the budget includes, so this remains an open question at this stage, one that should become clearer as the Riigikogu debates the bill.

Why revenues and expenditures don't match

A simple calculation shows that expenditures (about EUR 20.2 billion) exceed revenues (EUR 19.4 billion) by roughly EUR 0.8 billion. This gap means the state plans to spend more in 2027 than it collects from taxes and other revenue sources combined, in other words, the budget is in deficit. ERR's report does not explain how this gap will be covered (for example, through borrowing), so further details should emerge once the Riigikogu debates the bill and reviews the explanatory memorandum.

For ordinary people, this gap matters because the balance between state spending and revenue affects, over the long run, what tax changes the government may consider in the coming years. If a budget runs a persistent deficit, it usually signals that revenues will eventually need to rise (for instance through tax rates) or spending will need to be cut.

What this means for your salary right now

ERR's report on the draft budget contains no information about new tax rates for 2027, so it cannot currently be said that payroll taxes will change. The rates currently in force are those of 2026: an income tax rate of 22%, a basic exemption of EUR 700 per month (EUR 8,400 per year) applied equally to everyone, and a social tax rate of 33%, which the employer pays on top of the gross salary.

Suppose your gross salary is EUR 2,000 per month. Following standard payroll calculator logic, you would first deduct unemployment insurance of EUR 32.00 (1.6%), mandatory funded pension contribution of EUR 40.00 (2%, the default rate), and income tax of EUR 270.16, calculated on taxable income of EUR 1,228.00 (gross minus unemployment insurance, pension contribution, and the EUR 700 basic exemption). Your net salary would then be EUR 1,657.84. For the employer, the total cost of this employee is EUR 2,676.00 per month, since social tax and the employer's share of unemployment insurance are added (gross multiplied by 1.338). These figures apply now, in 2026, and will remain valid until the Riigikogu changes tax rates as part of the 2027 budget.

What to watch during the Riigikogu debate

The bill reaching the Riigikogu does not mean the final budget is settled. Parliamentary debate may change details of the draft before it is passed into law. Since 2026 already has an income tax rate of 22% and a VAT rate of 24% (in earlier years these were lower, for example in 2023 income tax was 20% and VAT was 20%), it's worth watching whether the 2027 budget includes the following changes to tax rates or not.

• Whether the income tax rate (currently 22%) or the basic exemption (currently EUR 700 per month) changes in 2027
• Whether the VAT rate (currently 24%) stays the same
• Whether the minimum wage, which rose to EUR 946 per month on 1 April 2026, will see another increase
• How the gap between budget revenues and expenditures, roughly EUR 0.8 billion according to the draft figures, will be covered

Practical tip: calculate your own situation now

Since the specific tax changes for the 2027 budget are not yet clear from ERR's report, it makes sense to base your calculations on the currently valid 2026 rates and keep an eye on further news about the budget process. If you want to know exactly how much of your gross salary you actually take home, or how much your employer really pays to employ you, you can calculate it precisely with a payroll calculator that shows both net salary and total employer cost according to the 2026 rates.

It's also worth checking a tax-free income calculator, which shows how much of your income falls under the EUR 700 per month basic exemption threshold. Once specific tax changes for 2027 become clear during the Riigikogu debate, they will be made available through new articles and updated calculators.