The introduction of a relatively low social tax ceiling would allow companies to save money and attract qualified professionals from abroad, a work group of the Estonian Employers’ Confederation finds.
Building materials manufacturer Krimelte’s CEO, Jaan Puusaag, heads the Estonian Employers’ Confederation’s work group on tax policy. Puusaag told business paper Äripäev that to attract qualified workers to Estonia, social tax should be lowered so that companies would save some 13% on the labor cost of highly paid employees.
The social tax ceiling should be set at about three times the average income, or about €3,500, Puusaag suggested. This would help several sectors to save millions of euros every year. The sector to profit the most would likely be the manufacturing industry.
There are 543 manufacturing companies in Estonia employing more than 1,600 people, on which they spend €4,900 a month on average. Reducing the social tax ceiling as per the suggestions of Puusaag’s work group would mean that these companies could save €10.8m a year.
There are 263 information technology and communications companies in Estonia that pay part of their employees more than three times the average salary per month. The financial gain for those sectors would be some €9.5m per year. The wholesale and retail as well as finance and insurance sectors are not far behind, with some €8m saved per year.
The introduction of such a lower social tax ceiling has been debated in the Riigikogu for years, but so far has been rejected as too expensive to the state. The currently negotiation Center Party, the Social Democrats, and IRL are planning to pick up the subject again.
Editor: Editor: Dario Cavegn