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Center Party chairman: Lowering VAT on energy still necessary

Heads of state reception at Kadriorg Art Museum in Tallinn.
Heads of state reception at Kadriorg Art Museum in Tallinn. Source: Ken Mürk/ERR

Jüri Ratas, speaker of the Estonian parliament and chairman of the ruling coalition member Center Party, sees a temporary cut in value-added tax on district heating, electricity and natural gas as a necessary third step to mitigate the impact of the increase in energy prices for consumers.

Last week, the government approved the principles of a measure developed in response to the rise in electricity prices, under which the state will compensate all consumers for 50 percent of the fee for network services, and decided to compensate 80 percent of the increase in the price of electricity, gas and district heating for less well-off households through municipalities. 

"As a third step, I continue to see a temporary reduction in VAT on district heating, electricity and gas," Ratas told BNS on Monday. "To do this, we first need to reach an agreement within the coalition," he added. 

Minister of Economic Affairs and Infrastructure Taavi Aas (Center) told public broadcaster ERR in mid-October that the government had discussed the proposal to reduce VAT, but although reducing VAT on energy would be easy from an administrative point of view, changing legislation would take more time. 

A little less than a week later, the party's representatives said that Center still wanted to proceed with the measure.

"Reducing network charges alone is not enough to make these winter bills less severe. The most effective measure, which could help both private consumers and businesses, would be to temporarily lower VAT on district heating bills as well as on electricity and gas," MP Erki Savisaar, a member of the Center Party's governing board, said.

He added that if so wished, the Riigikogu would be able to make the necessary legislative changes in a couple of weeks. European Union laws allow VAT to be reduced to 5 percent, meaning by as much as 15 percentage points in Estonia's case.

That is what Center has proposed to the Reform Party, its partner in the coalition.

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Editor: Helen Wright

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