New coalition plans to compensate for lessening burden on lower incomes

Margus Tsahkna (IRL), Jüri Ratas (Center) and Jevgeni Ossinovski (SDE) introducing the tax and economic policies of the new government coalition in formation. Nov. 17, 2016. (Rene Suurkaev/ERR)
11/20/2016 9:35 AM
Source: BNS
Category: News

The new coalition’s plan to raise the income tax-exempt minimum to €500 from Jan. 1, 2018 would cost the state €139m in that first year, while in the following years the expense would decrease. To do this, their tax policy plan brings up new and increased sources of revenue.

In 2019 the reform would cost €121m, and in 2020 €132m, the coalition’s economic policy program states. The plan includes abolishing joint income tax declarations, although details have not been made public yet.

Chairman of the Center Party Jüri Ratas said on Thursday evening that raising the income tax-exempt minimum would mean that a person with an income of up to €1,200 a month would get €62 more. Persons who earn €1,758 a month would get the same net salary, while salaries starting from €2,100 would not be subject to tax exemption and decline by €38 a month.

Dropping social tax rate reduction to result in €41m additional revenue

According to the plans of the new coalition, next year will bring €41m in additonal tax revenue if the 0.5% social tax cut is taken out of the 2017 budget bill.

Keeping social tax at 33% is expected to bring in €41m next year, and increase from there to €86m in 2018, €91m in 2019, and €98m in 2020.

Over the coming years, the biggest source of income would be the 14% income tax rate on the dividends of so-called mature companies, which should bring in an additional €107m in 2018, the economic program of the new government coalition states.

Imposing a 14% income tax rate on companies that distribute profit regularly would result in tax revenue increasing by €76m in 2019, and by €46m in 2020.

In addition, raising the excise duties on beer, cider and wine would increase state budget revenue by €25m next year, €58m in 2018, €65m in 2019, and €71m in 2020.

Imposing a so-called soda tax on sweetened beverages will also contribute some €24m a year between 2018 and 2020, the coalition estimates.

Editor: Dario Cavegn

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