President: Why not lower social tax for IT companies, implement car tax ({{contentCtrl.commentsTotal}})

President Kersti Kaljulaid.
President Kersti Kaljulaid. Source: Siim Lõvi/ERR

Speaking on business daily Äripäev's morning radio program on Friday, President Kersti Kaljulaid suggested implementing a car tax as well as permitting IT companies to pay less in social tax.

Speaking on the radio program, Kaljulaid said that it is unpleasant but economically entirely understandable that many companies not as deeply impacted by the current crisis can utilize support measures to the same extent as those who are in greater need of them.

"If you give people the opportunity to take sick leave starting the first day they are sick and open their sick leave certificate themselves, not everyone who does so will be sick," she said. "If you promise that you will support all companies regardless of sector or region, then as many as possible will try to use this measure. Including those who anticipate that they will encounter difficulties in a few months."

The president stressed that the state's behavior in a crisis is tied in large part to the government's political ideology, and noted that when it comes to elections, people shouldn't focus on political parties' campaign promises, but rather their ideologies.

She considers the IT sector "Estonia's Nokia," as she believes the sector has the strong potential for growth.

"When you offer an e-service in another country today and mention that you are from Estonia, then that is equivalent to offering interior design services coming from Denmark or cheese coming from Italy," Kaljulaid said, referring to the IT sector as an Estonian hallmark.

Lower social tax for IT companies

The president said that Estonia's tax system is currently inclined toward capital investments, and in concept, this could change.

"Income tax exemptions on reinvested capital means that it is very advantageous for businesses to establish new production lines, thus increasing their productivity," she said. "And that has been a good measure for us." She added that considering the development of the service economy, a new regime could potentially be introduced via which IT companies would be required to pay less in social tax.

"A business-owner's wage costs account for 60-80 percent of their company," Kaljulaid explained. "In the IT sector in particular, a company's employee is its main asset, and is also its main cost. In that case, there should be a method by which, based on how high your wage costs are in proportion to your cost base, they could be permitted to pay less in social tax."

She nonetheless called into question social tax exemptions as a crisis measure, noting that it is important to consider whether and what the average person would have to gain from this.

The president also proposed the possibility of implementing a car tax in Estonia. While reducing fuel excises helps Estonian businesses remain competitive with Latvia and Lithuania, it is business, not the wealthiest consumers, that should be benefiting from this.

Kaljulaid believes that production should be shifted abroad and not kept in Estonia if there is insufficient labor. "If we keep the outgoing labor market open and close the incoming, then I believe that is just a matter of addition and subtraction; one doesn't even have to multiply," she said. "You understand that the volume of your own economy will shrink as a result."

She cited how an unexpected half of economic growth last year was attributable to foreign labor, up from one third the year before.

Regionalization in lieu of globalization

At the same time, the president believes that globalization in food production, for example, is on the decline and regionalization is on the rise. One idea she brought up was small farms and producers delivering their goods to local stores, where people are interested in buying them as well.

"As Europeans, it has actually been stunning for us to see how significant the differences are across various social groups in catching [coronavirus disease] and dying of it in the United States in particular," Kaljulaid said about the U.S. healthcare situation. "The European model, where healthcare access is much broader — we pay for it, and it is expensive. But it has provided us with the security that we won't see such local catastrophes in one or another ethnic group or state."

She also said that she believes that state officials' wages will not escape being cut.

Kaljulaid initially dodged a question by host Igor Rõtov regarding what she plans on doing following the end of her term of office as president, instead talking about secure data-mining and the need for artificial intelligence. She did finally say, however, that she would continue working until her final day in office, and doesn't intend to start planning the rest o her career at the moment.

She added that she believes that the role of president is necessary to defend the Constitution by rejecting bills and reminding officials of their rights and obligations. But one must choose carefully when to intervene, she added.

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Editor: Aili Vahtla

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