Toomas Sildam: Tax reform debate and local elections

Kaja Kallas and Jüri Ratas.
Kaja Kallas and Jüri Ratas. Source: Priit Mürk/ERR

It would be very interesting to see the Reform Party and Center Party working together, trying to answer the question of what kind of a tax reform Estonia needs, Toomas Sildam writes in his weekly comment.

Parties are lining up for local government council elections. The Social Democrats, Reform Party and EKRE have published their election platforms that include both nationwide messages and promises to improve life in cities and rural municipalities.

Parties are also looking in the direction of Riigikogu elections in March 2023 and talking about… a tax reform.

Only the Conservative People's Party (EKRE) promises not to lay down new taxes or hike existing ones, while it supports regional tax exceptions for local companies.

Reform Party leader, Prime Minister Kaja Kallas said in her general assembly speech that Estonia needs to go over both its expenses and income, that it is time to abandon dogmas and that Estonia needs a businesslike tax debate. She said that while the current government has agreed not to tamper with taxes, a tax reform debate could be just what the doctor ordered leading up to Riigikogu elections.

Social Democratic Party (SDE) leader Indrek Saar also talked about taxes in his general assembly speech, saying that Estonia will have to start looking for additional revenue to make sure the state does not wither. He gave the example of taxing luxury vehicles in a situation where the government is currently going after hobby education funding.

Isamaa chairman candidate Lavly Perling is also among those urging a tax debate. She says that difficult decisions need to be made to improve everyone's quality of life and serve Estonia's interests, including reforming the tax system, healthcare and education.

When the Center Party, SDE and Isamaa formed a coalition in 2016, talks also concentrated on possible income tax and VAT hikes. In the end, the sides agreed on a €500 basic exemption and a progressive so-called "tax ladder" that many people found complicated.

Center Party chairman, then Prime Minister Jüri Ratas tried to launch a tax debate in 2019, saying that Estonian society and politics have been looking at tax matters in a very one-sided and even dogmatic manner so far.

"Debate over the tax system!" Center slogans read, trying to amplify its chairman's initiative in social media.

But the other parties did not go along with Center back then.

To fantasize, it would be very interesting to see the Reform Party and Center Party working together, trying to answer the question of what kind of a tax reform Estonia needs, next to finding a common presidential candidate. For example, in terms of changing tax rates or boosting the importance of property taxes as per the OECD's recommendation.

And why not? It would be rather statesmanlike conduct. No irony.

But how does this tie into local elections? Directly, because any tax debate will eventually arrive at how to boost the revenue base of local governments.


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Editor: Marcus Turovski

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