The opposition Reform Party's proposal to implement a universal minimum personal income tax exemption of €500 in lieu of the current income tax system is worth discussing, coalition Isamaa chairman Helir-Valdor Seeder said on Thursday.
"This is a proposal that is certainly worth discussing," Seeder told ERR. "The current income tax system will need to be changed, amended or modernized one way or another at one point anyway due to inflation and increasing wages, but the €500 income tax exemption [which currently applies to low wage-earners] is a fixed amount and in time will lose impact and meaning."
The junior coalition party chairman believes that Estonia's Income Tax Act will have to be amended in four or five years anyway. "So looking toward the future, we will have to address the Income Tax Act anyway, and various proposals are certainly worth discussing," he added.
"This isn't just a question of changing the Income Tax Act, of discussing which target groups will be affected and how and who will like it, but rather a much broader issue — what are the sources of funding, and what other tax changes will come with it," he continued, bringing up the more than €100 million dent Reform's proposed change would put in the state budget. "Because to save that degree of money just on expenditures is a very popular thing to say, but this definitely is not possible to do — to simply save hundreds of millions on current expenditures every year. This calls for broader taxation and renegotiation. So this is a point for more extended discussion."
Reform's proposal will definitely not be quick to receive approval, but Seeder said he was glad that some kind of specific bill has been introduced upon which the discussion could be based and regarding which parties could state their positions.
He added that tax changes are a longer process, of which Reform is surely aware and does not expect anything to change within a matter of months.
"The current coalition has agreed that we will not implement any new taxes and will not increase the tax burden," Seeder recalled. "Which does not mean that everything is rigidly fixed if there are good ideas. And if there are any well-grounded proposals, then we are open to discussions. The coalition agreement isn't Scripture which can't be changed."
He found that these discussions are meant moreso for parties to be able to have argued positions and their own proposals ready ahead of the next Riigikogu elections, adding that initiating these discussions early can only benefit the issue.
"So yes, I believe that this bill in its current form will definitely not be passed in the coming months," he said. "Its worth is as an actual proposal. And now it will be interesting to hear what various parties' positions or alternative proposals will be."
The Isamaa chairman admitted that he has only briefly had a chance to review Reform's proposals, which is why he doesn't want to provide any substantive comments regarding them.
"Perhaps it can't be assessed in such a black-and-white manner," Seeder said. "All different kinds of tax systems have both up- and downsides. They must be analyzed according to the aspects of which target groups [a system] affects and how, how it meshes with Estonia's own goals when it comes to the development of the labor market, research-based, innovative work, how and whom we will tax, and what the tax burden will shape up to be. Right now I am not prepared to assess this, but I'd like to acknowledge the Reform Party for introducing an initiative, for proposing changes and new solutions, and surely it will become clear in the process whether these solutions and proposals are reasonable, are good, are doable, whether they will ultimately receive the approval of the majority in the Session Hall of the Riigikogu or not, or whether better alternatives altogether will turn up in the process."
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.
Editor: Aili Vahtla