Aivar Sõerd, who led the Tax and Customs Board for four years until he was sacked in 2003, said that banks in Estonia do not pay income tax on earnings as the rates may be too high.
Speaking to Postimees on Sunday, Sõerd, currently a Reform Party MP, said that officials and banks should sit down and talk about the fact that banks channel earnings outside of Estonia, via loans to parent companies, avoiding paying out dividends and Estonian income tax.
Tax officials said that none of the four biggest banks of Swedbank, SEB, Danske Bank and Nordea have paid any tax on income in the last five years, despite earning over a billion euros between them during the period.
Sõerd said that the point of the tax is for the state to take a share when money is taken out of businesses. Estonia has no corporate income tax on retained earnings. and Sõerd added that he has not seen banks earning a substantial part of those earnings lately.
Former Hansapank CEO Indrek Neivelt told ERR radio today that the problem is nothing new, but added the fact that the Reform Party is talking about it is positive.
He said that a rethink of income tax on businesses is in order, and that it should be lowered to 15 percent.
Tax breaks on investments have little impact in drawing business to Estonia, he said, adding that the scheme helped Estonian businessmen 10 to 15 years ago.