Finance Minister Turns Against Tide Pushing for Tax Free Minimum ({{commentsTotal}})

Source: Photo: Reuters/Scanpix

After general, nonpartisan support earlier this year for a proposal to increase the income tax free minimum, Finance Minister Jürgen Ligi has now expressed skepticism for such a reform, amid the recently launched 2014 budget talks.

The comments on Thursday by Ligi, who claims to have first brought up the idea himself, seems now to have put the ruling Reform Party at odds with signs emitted so far by its coalition partner IRL, reported ETV on Thursday.

Though next year's budget is expected to increase by 200-300 million euros, reaching an estimated 8 billion euros, Ligi said: "The reality is that in discussing expenses and revenues, none of the ministers has asked to reduce his or her budget. It [the tax free minimum] is a very expensive measure and there is a clear preference right now for raising pensions and salaries. And I have even started to think that in a situation where private sector salaries grow nearly 10 percent in a quarter, fueling this even more with taxes may not be good for the economy.“

Meanwhile, representatives of coalition partner IRL continued to argue that raising the tax free minimum is both necessary and possible.

"If possible, we should restore the situation of 2008, when the income tax free minimum was last raised to the rate it is currently at, 144 euros per month. And it should be restored so that it is pinned to the average salary; in other words today we should be talking about 165, even 180 euros," said Parliament's Finance Committee Chairman Sven Sester, an IRL member.

Earlier this year, both coalition partner IRL and the opposition proposed that the minimum be raised to 320 euros per month. More hardcore advocates called for 500 euros.

The possibility of raising the income tax free minimum, currently at 144 euros per month, and seen as a more helpful for the lower class than reducing the income tax, is expected to be one of the main areas of discussion at the budget talks.

The opposition Social Democrats have already submitted a bill to increase the tax free minimum. A member of the Finance Committee, Social Democrat Rannar Vassiljev, said: "The tax free minimum is unjustifiably low and it has not been raised for a long time. For that reason we have submitted a bill that would raise the rate by 16 euros each month for the next three years.“

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