Raimond Kaljulaid: Estonia needs deliberate tax reforms

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Raimond Kaljulaid. Source: Siim Lõvi /ERR

We need a government that can really delve deep in the expenses and income sides of the state budget. Estonia needs thorough and deliberate tax reform instead of mechanical cuts, Raimond Kaljulaid writes.

"If we cannot find avenues for cost-cutting, taxes will need to be hiked," PM Kaja Kallas told ERR news. This kind of simplified demagogy is expected to make people believe that cutting local governments' hobby education funding is a good idea.

I'm convinced that Reform's prime minister and finance minister do not trust a single Social Democrat when it comes to the state budget.

After all, only people with a certain genetic predisposition are capable of professionally steering Estonia's fiscal policy and all of them belong to the Reform Party.

Therefore, allow me to quote long-time Reform chairman, former PM Andrus Ansip who told ERR in early May: "It is clear that reserves previously set aside need to be spent in a crisis, however, Jüri Ratas' government has squandered these reserves in this one. No effort was made to prepare for crises when the times were good. And because this has already happened, we now need to borrow to weather this crisis."

I'm not out to demonstrate that the state budget cannot be dialed back. Rather, the question is that of timing.

The state and local governments, just like the private sector, must weigh all their expenses and consider whether they are still necessary and sensible in the recent volume.

However, poor decisions made at the wrong time on Reform's watch have now landed us in a situation where three government ministers have been preoccupied with two bands this week.

When will we get a government that will address strategic problems?

Allow me to recall what the National Audit Office wrote in its report on the future of vital public services: we are looking at a situation where the quality and/or availability of vital services (education, healthcare, social protection, internal security) will worsen.

Solving major strategic problems Estonia is facing is not possible without a tax reform.

It is not a choice between cuts and tax hikes, as proposed by the PM. The choice we need to make is between reasoned and sensible tax reform and a considerable drop in quality of life for most people.

We need carefully thought-out tax reforms that first and foremost hike the tax burden of the wealthier part of society. This stands for progressive income tax but also specific schemes aimed at funding concrete services, such as care insurance.

At the same, I'm absolutely convinced that we must take a critical look at all state and local government spending. The previous government promised a zero-base budget (referring to it as a state budget revision) but failed to take a single step in that direction.

It is important on both the state and local level.

For example, I cannot fathom how we can calmly discuss cultural landmarks of national significance that cost dozens and hundreds of millions of euros during a time when our musicians and interpreters have been in a situation where they need to sell their instruments to pay their bills for over a year.

Or that we are still planning to construct a €100-million tunnel under the airport in a situation where we cannot even keep our sidewalks free of ice that causes hundreds of people to fall and break their bones every winter.

We need a government that can delve deep into the expenses and income side of the state budget and compile one based on the actual problems and challenges people face in a post-digital turn 21st century society.

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Editor: Marcus Turovski

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