Social Democrats' Local Government Spending Measure Fails to Pass
A proposal to restore the local government revenue base to pre-recession levels was voted down in Parliament after hours of debate .
In the November 8 vote, fifty MPs voted against the bill while 32 were in favor.
The Social Democratic Party had proposed that the local governments' share of income tax revenue rise to 11.67 percent in 2012 and to 11.93 percent in 2013. That would require an extra 15.4 million euros in the 2012 budget and 32.4 million euros from the 2013 budget.
One potential source of funding, the Social Democrats said, could be to cut the defense spending increase from the planned 22 percent to 8 percent, freeing up 40 million euros annually.
When the state's income tax revenue began shrinking, so did that of the local governments, but the state decided to shave off an additional 0.53 percentage point, lowering the municipalities' share to 11.4 percent.
"Does the government have the right to bite off another chunk in addition to already decreasing revenue?" asked Social Democrat Rannar Vassiljev on November 8 in Parliament.
Parliament's Finance Committee Chair Taavi Rõivas said the Social Democrats lacked an acceptable revenue source to bump up local budgets.
He also said reshuffling funds would still have an impact on the balanced budget. "The affect would only be zero if local governments do not actually use those funds [...] or if the government cuts costs to an equal extent," said Rõivas.
Moreover, Rõivas said, local government revenue from the income tax has risen by 70 percent since 2004. Since the consumer price index has increased by 40 percent, Rõivas said, the revenue increase has outpaced inflation.
Revenue from the income tax for municipal governments may still increase next year, but that is thanks to the 17 million euros worth of land tax exemptions, which the Cabinet has vowed to compensate.
The prime minister has previously criticized local governments, saying the 28 million euros that they did not receive when their share of the income tax was lower was a "drop in the bucket" compared to other receipts and expenditures, such as the proceeds from sale of emissions allowances - 123 million euros alone.
Ott Tammik