Reform proposing €500 minimum income tax exemption for all

Kaja Kallas and Aivar Sõerd (Reform) at a press conference.
Kaja Kallas and Aivar Sõerd (Reform) at a press conference. Source: ERR

The opposition Reform Party is submitting a bill on Wednesday according to which everyone, regardless of the size of their annual income, would be granted an income tax exemption of €500 per month (€6,000 annually), beyond which income would be subject to a flat rate of 20 percent.

Reform Party board member and MP Hanno Pevkur said on ERR's online broadcast "Otse Uudistemajast" on Wednesday that the party's proposed tax change would benefit everyone with a monthly income of over €1,200.

"These are teachers, doctors, rescuers, police officers and many other middle class people whose incomes have grown above €1,200," Pevkur said. "The tax reform of Ratas' government has hit these people the hardest."

Speaking at a press conference later, Reform Party chairwoman Kaja Kallas said that the wages of people in Estonia are growing, and more and more people are being affected by the current tax scheme. Kallas added that this issue doesn't only affect working people, but also pensioners as well.

"Our pensioners are becoming victims of Ratas' income tax system," Kallas said. "Beginning in April, 184,000 pensioners will have to start paying income taxes, as their pensions exceed the exemption. In other words, there are increasing numbers of people who cannot utilize it."

Regarding the cost and sources of funding for Reform's bill, Pevkur said that generally speaking, this change would cost €250 million, and the reform would be implemented within two years.

"We propose doing this within two years, at a cost of €125 million and €125 million," he explained. "If state budget revenues are increasing nearly €700 million per year, then €125 million isn't a very big concern. We also recommended €40 million in cuts to this year's budget. In other words, if the political will exists, then finding €125 million in a state budget that has grown to nearly €12 billion should't be a big issue."

According to Reform's calculations, under the party's proposed changes, someone earning a monthly income of €1,300 would win back €11 per month, with those earning €1,500 seeing an extra €33, €1,800 an extra €67, €2,000 an extra €89 and €2,100 an extra €100 per month.

Pevkur explained that Reform has proposed these tax changes just now as there are 68,500 people in Estonia who will be notified this month alongside their tax return that they owe the state money, as they have worked more than they predicted at the beginning of last year that they would.


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Editor: Aili Vahtla

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