The current high rate of inflation is not as tough on society as had been the case in the 1990s as the economy and salaries this time around are rapidly growing, editor-in-chief of business daily Äripäev Igor Rõtov says. At the same time, the recent throwing-in of the towel on corporate tax reform reflects present-day realities.
Rõtov told Vikerraadio morning show Tuesday that: "The economy is currently growing 10 percent, and even though inflation takes six percent out of that, salaries are also increasing by seven percent. As a result, roughly, nothing is 'broken'. If we assess Estonia's economy, we are booming."
In his opinion, the situation is completely different from the economic crisis in 2008, which took 10 years for Estonia to recover from. "However, we have a difficult crisis at the moment and the situation is already the same as it was in 2019," Rõtov, who had been an avowedly public fan of the premiership of Andrus Ansip (Reform), continued.
"Predominantly, everything is okay. Take a look around in Tallinn - there are cranes everywhere, look at how roads are being built, how many investments are being made, look at how many young entrepreneurs are making an effort, and getting a result," Rõtov gave by way of example.
Rõtov added that even if there are also people who are struggling, the current economic state will bring in a lot of tax revenue to the state budget, which could be used to support those in need.
The Äripäev editor-in-chief added that, however, it is harder to forecast the future, since any unpredictable event could happen which would change everything drastically. "Future predictions are not useful, especially in today's changing environment. A 'black swan' could always come and transform the whole situation. But currently, the economy is strong."
Low corporate tax not appropriate any more
Rõtov said he didn't see a problem with the government letting go of their initial opposition and opting to subscribe to the global corporate tax reform initiative, as announced at the end of last week.
"Have you sensed any benefits from the fact that Estonian companies effectively don't pay an income tax?" he inquired of the show hosts. "When the principle was established in 2000, it was all very new and beneficial, and brought a lot of investments which went on house building, expensive equipment purchases. It worked at that time ," Rõtov said.
"When we look at the current economic structure, there are several companies which don't care about the income tax. For them, houses and equipment are not an investment, but rather human resources are. When they start a company, they hire 10, or 100 people, and pay social tax from the first day," Rõtov said. "But to take is as tragically as the government sometimes does in saying that foreign investments will not now come here; this is not the case, I think if we were to ask foreign investors how many of them are here in order to pay income tax after withdrawing dividends."
Rõtov also agreed with the claim that in reforming the current system, the problem of companies avoiding income tax by loaning money from their subsidiaries, and other such transactions, will be combatted.
Pandora's Papers' revelations have their impact
Commenting on the recently published so-called Pandora's Papers, which revealed the extent to which the rich were squirreling away assets in tax havens, Rõtov found that if this is done to optimize the fiscal situation, it is often not an infringement.
"The more serious problem is money laundering - when money is hidden when it is to be used in politics," he emphasized. Rõtov said out that there have been no major scandals in Estonia, and we are expected to see smaller sums involved.
Rõtov added that such revelations have a very strong deterrent effect, which prevents similar behavior from others. "It is social control which makes society stronger and more transparent, and it proves once again why we need a free press," he continued.
Editor: Roberta Vaino