Estonia could look at cutting certain assistance and support programs to reduce the all-time high budget deficit, said prime minister Kaja Kallas' economic adviser and former Bank of Estonia governor Ardo Hansson. He also pointed out a possible extension to property taxation.
"One thing to consider is [to stop] any kind of temporary planned programs in relation to the pandemic - reasonable programs in most cases - but they must have end dates. And if they were to end and expire, it would be a solid step toward balance," Hansson said on Vikerraadio's morning show "Vikerhommik" on Thursday.
He added that temporary programs established during the coronavirus pandemic should remain temporary. "We must see that these would not remain as permanent programs. If they are temporary, let them be temporary," the prime minister's economic adviser said.
Hansson pointed out that the largest factor to budgetary expenses came from supporting the economy. "Different business support programs, state capitalism actually grew," the former central bank governor said, adding that support measures were reasonable during the coronavirus crisis, as they were ways to temporarily support entrepreneurship, but they cannot be permanent solutions.
Responding to a question on possible tax raises, the four-time ministerial economic adviser noted that the current government has promised a tax peace, but he would not rule out increases in taxes for governments to come. "If in the future there is another government, who looks at the situation and says they will need to cut expenses a lot, then it will be very painful and would need increases in some taxes to compensate for. I would keep it on the table when it comes to a future perspective. Would not rule it out completely," Hansson said.
"Tax peace" refers to stability in the sphere which, in the case of the Reform/Center government's compromise, 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.
Hansson said property taxes are one to look at as a possible increase. "When we look at what Estonia has taxed at a relatively low level when compared to other countries - I would not say whether it is a good or bad thing - but all property taxes - natural resources, real estate, land - are taxed at a relatively low level. So if we look at where we have underused options in comparison to other countries, those are a few," he explained.
The economic adviser said he is optimistic for Estonia. "The situation is bright in the sense that we can handle this pandemic and can see the end already. And if we can handle it, we can start to restore normalcy. And I think we live in a much better political situation than a few months ago," Hansson said.
The Chicago-born Hansson holds a doctorate from Harvard University and worked for the World Bank before taking up a post as the governor of the Bank of Estonia in 2012. He held the position until 2019, after which he was named to the council of Coop Pank, but he has since taken up a position as the economic adviser for Prime Minister Kaja Kallas.
Editor: Kristjan Kallaste