Reform, Center leadership: We've buried taxation hatchet in coalition talks

Kaja Kallas (Reform) and Mailis Reps (Center) talking to AK Friday night.
Kaja Kallas (Reform) and Mailis Reps (Center) talking to AK Friday night. Source: ERR

Reform Party leader Kaja Kallas said Friday evening that her party and the Center Party have met in the middle on taxation, following the second day of coalition negotiations between the two parties.

Kallas said: "We are moving towards a balanced budget. We have clear differences of opinion when it comes to taxes, but since these are the crisis years, we have met each other in the middle and promise a tax peace."

"Tax peace" (Maksurahu in Estonian) may sound odd in English but refers to stability in the sphere which, in the case of the Reform/Center compromise under discussion at the moment, would entail Reform putting its desire to change the income tax-exemption system on the back burner, while Center in return shelves its main stances on a progressive income tax system.

Reform the classically liberal party

Estonia had long been noted for its income tax flat-rate, dating back to the premiership of Mart Laar (1999-2002) and also a Reform Party shibboleth (Laar was not a Reform Party member, but rather from what is now Isamaa – ed.) which had come under increasing pressure from the last financial crisis starting in 2007.

Former education minister Mailis Reps, representing the Center Party in the negotiations, told ETV news show "Aktuaalne kaamera" (AK) Friday night that: "In terms of taxation, whereas the Reform Party has a more uniform initial tax rate while we took the line of a more graduated (i.e. progressive – ed.) income tax system, along with other nuances, we ultimately found that we can sum things up in such a way that it is not viable to change things from either end."

In a related arena, Reform had long championed balancing budgets and was internationally noted for its austerity approach during the last economic crisis under Andrus Ansip's premiership, in comparison with the outgoing Center/EKRE/Isamaa's tackling of the current, coronavirus-prompted crisis by leaning on borrowing.

Leaders: Pandemic makes finding common ground all the more pressing issue

Either way, Reps noted, now was not the time to be focusing on division.

"There is a common understanding of revitalizing the economy in the crisis situation and moving towards a digital and green society," Reps said.

The talks were prompted by the sudden resignation of Jüri Ratas (Center) as prime minister early on Wednesday, as yet another scandal surrounding corruption allegations engulfed his party, this time centered on a real estate development in Tallinn and a €39-million state loan granted by state credit agency KredEx.

However, Center looks set to remain in office, at the expense of Ratas as prime minister and the Conservative People's Party of Estonia (EKRE) and Isamaa as coalition members.

The only other party with Riigikogu seats, the Social Democratic Party (SDE), did not have a sufficient number of mandates – at 10 – to form a majority with Reform at the 101-seat Riigikogu. SDE will remain in opposition if the talks progress and yield a new bi-partite coalition.

While the idea of a Reform-Center "super-coalition" was touted at the time, it was largely thought to not be viable, in part due to personality issues regarding both parties' leaderships. Kallas and Reps seem to be finding common ground, however.

At Friday's press conference, Kallas brushed aside a frequently asked question when coalition talks are underway, namely how will the 14 ministerial seats (excluding the prime ministership) be allotted between the two parties. Kallas said this will wait till the last day of talks.

Focus on key infrastructure projects including Helsinki-Tallinn tunnel

Infrastructure - including two major projects, the high-speed Rail Baltica project, and the proposed Tallinn-Helsinki tunnel – and research and innovation, the latter something Reps has knowledge in due to her earlier long-term ministerial role, were also on the table Friday, the two women said.

Reps said: "As for infrastructure, people cannot work remotely if there is no internet. It is therefore important to build up fast internet. We will accelerate the Rail Baltica process, and move forward with the Tallinn-Helsinki tunnel," she said.

Construction work has started on Rail Baltica, due to start operations in 2026, while the tunnel is still at planning stage.

Another ongoing project Reps named as priority for any potential Reform-Center coalition is the "2+2" (i.e. two-lanes, both directions – ed.) highway network, which would link Tallinn with Tartu, Pärnu and Narva, should it ever be completed. Again, some work has been completed or is ongoing on the Tallinn-Tartu highway.

New locomotive procurements for existing railroads were also a topic raise.

Kaja Kallas named climate change and the digital revolution as major issues on the horizon.


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Editor: Andrew Whyte

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