Ratas: Estonia's tax system needs to be modernized

Jüri Ratas
Jüri Ratas Source: Center Party.

Estonia's tax system needs to be modernized, Jüri Ratas, chairman of the Center Party and speaker of the parliament, said in his opening remarks at a conference on the Estonian economy in Tallinn on Tuesday.

"The tax system is an instrument with which we can reduce inequality and poverty and raise the standard of living of all people and the competitiveness of businesses. The overall tax burden determines the volume of public goods," Ratas said, opening the conference titled "Our choice - what kind of Estonia do we want?"

Ratas added that the structure of taxes, meaning how much of the tax revenue is collected through taxation of production, income, consumption and property, also has a strong impact.

"We remember well how many were doubtful about the reform raising the amount exempt from income tax. In hindsight, however, it is clear that people with lower than average wages had  more money left in their hands indeed and, according to the OECD, inequality in Estonia decreased," the chairman of the junior partner in the two-party governing coalition said according to a press release. 

"An equally good example is excise duties, the timely reduction of the rates of which significantly increased our common income," he added.

Over the last decade, the way people do business, work and consume has changed a lot, Ratas said, adding that the sharing economy, e-services, cross-border trade, forms of teleworking, and volunteering have emerged as new forms.

"If we look at these changes from a taxation perspective, there are even more questions than answers -- who and how should we tax and who consumes these services?" Ratas said.

"At the same time, it is clear that Estonia must remain competitive in the world, and do it in the wind of dizzying global changes of course. I mean the direction towards environmental sustainability, innovation and digitalization that we have taken in the European Union," the former prime minister said.

Ratas added that by this he also means the proposed introduction of a minimum corporate tax rate, which was only recently requested by the G7 states.

"In my opinion, it is wise for Estonia not to resist change or to go along last, but to adapt among the first and help others to implement change. It's possible to earn through this as well," Ratas added.

Businessman: Estonia should start levying social tax on passive income

Social tax should be paid in Estonia also on dividends and rental income, businessman Indrek Neivelt said at an economic conference of the Center Party on Tuesday.

"A person pays on income, but basically nothing is paid on dividends and rental income, that's not fair. We tax work but we do not tax passive income," Neivelt said. "A normal society would do the opposite, would motivate people to work, not just sit back and do nothing." 

Neivelt said all income should be subject to the same social tax. However, the tax could be capped at a certain level, such as the president's salary.

"All people pay social tax on all their income. It does not discriminate against those who receive high wages," he added.

Neivelt also said that taxes should be used to motivate people to live healthier lives. A large proportion of health care expenditure currently goes on treating lifestyle diseases, he said. Therefore, individualized social taxes could be introduced, with people with lifestyle diseases paying a higher social tax. 


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Editor: Helen Wright

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