New coalition likely to throw out social tax cut

Kadri Simson. (Siim Lõvi/ ERR)
11/10/2016 2:50 PM
Category: Business

Next year’s budget bill is already in the Riigikogu, but a new coalition of Center Party, Social Democrats, and IRL would likely want to take lowering social tax by 0.5% back out of it. Finance Committee chairman Remo Holsmer (Reform) announced he would have this step assessed for its legality.

Center Party MP Kadri Simson told ETV’s “Aktuaalne Kaamera” on Wednesday that changing the 2017 budget bill was difficult, as for every additional expenditure income sources needed to be presented.

“Next week the Riigikogu will discuss our proposal to leave social tax at 33% and to leave out a 0.5% cut for next year. This way the budget would save €40m,” Simson said. This money would then be allocated to financial support for farmers, giving local governments more means, and to raising teachers’ salaries.

The proposal apparently wasn’t met with a lot of resistance by Center’s potential future coalition partners. “The Social Democrats certainly think lowering social tax by half a percent would be unreasonable. We have said so before,” chairman of the Social Democrats, Jevgeni Ossinovski, confirmed.

Finance Minister Sven Sester (IRL) didn’t have objections either. “Lowering social tax wasn’t one of IRL’s election promises,” Sester said.

In the longer term, the Center Party wants to reform Estonia’s tax system completely, including among other things the introduction of a progressive income tax.

There were a lot of taxes as used across Europe that Estonia didn’t have, Simson said. Their reform would consider a corporate gains tax, changes to income tax, and a number of other models. From the point of view of a new coalition that included IRL, those things would be a lot harder to negotiate.

Sester commented that IRL had said before that they wouldn’t support a progressive income tax, and that the business environment needed to be such that it was attractive to companies to do business in Estonia.

Concerning the budget bill, Sester said he was confident that it would get confirmed by the Riigikogu before the end of the year.

Reform’s Holsmer wants Chancellor of Justice to assess legality of budget bill change

Reform Party MP and Finance Committee chairman Remo Holsmer announced on Thursday that he had sent Chancellor of Justice Ülle Madise a request to assess the legality of the Center Party’s announced step.

Holsmer said he had asked Madise to analyze if changing a bill less than six months before its entering into law was consistent with the Taxation Act and the principle of legitimate expectation.

He pointed out that tax changes needed to be settled six months before the according law entered into force, which at less than two months until the new year wasn’t given in this case.

Editor: Dario Cavegn

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