Minister proposes new tax to fund health care

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Minister for Health and Labor Tanel Kiik. Source: Ken Mürk/ERR

Minister of Health and Labor Tanel Kiik (Center) proposed an additional targeted tax during Thursday's cabinet meeting which would be used to finance the budget of the Estonian Health Insurance Fund.

Kiik said that mainly financing health care from the social taxes of working people is unsustainable as the number of people who work flexibly is growing. The new tax would take into account rental income, dividends, interest and license fees. 

Kiik said this would see an additional 45,000 people pay the new tax and it is estimated that Health Insurance Fund would receive more than €160 million.

"Estonia has an efficient health care system, where good treatment results are achieved at low costs, but long queues for treatment and a large proportion of uninsured people are a concern," the minister said. "Residents' expectations for health care are growing, while the share of people who contribute is decreasing."

He added: "If the current situation continues, people will have to pay more and more out of their own pockets, which is why health care financing needs a systemic change."

Estonia allocates 6.7 percent of GDP to the health care sector which is smaller than the European average of 9.6 percent.

Kiik said a number of important decisions have been taken by governments in recent years to allocate additional funding to health care but this does not completely solve the problem.

"It is known that with the current model we will not be able to secure enough income for health insurance in the long run. This is particularly well illustrated by the fall in employment associated with the COVID-19 crisis and the consequent fall in tax revenues," he said.

"The decline in tax also immediately reduces health insurance revenues. As it is not conceivable to reduce the volume of medical services, it is necessary to increase the funding for health care."

Justice minister: Tax system will not change in coming years

The tax system will not change in the coming years and a wider debate is needed which includes the public, Minister of Justice Maris Lauri (Reform) said on Friday.

Lauri said there is a shortage of money in the health care system, but the same problem exists in other countries with a higher standard of living.

"Tax increases are definitely not planned for the coming years. But maybe in the future changes will have to be made in the tax system as the number of people of working age is decreasing," said Lauri.

She said the current government will not make a decision because this kind of change takes a long time to agree. Lauri also said she did not like the idea of a tax based on dividends.

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Editor: Helen Wright

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