Reform MP: Proposal to lower VAT on energy is malicious

Jürgen Ligi.
Jürgen Ligi. Source: Priit Mürk/ERR

Veteran politician and Reform Party deputy chairman Jürgen Ligi does not support lowering VAT on energy and considers a proposal to do so malicious, as a reduction would be costly to the state budget, but would not have much impact and would help the rich instead of the poor.

Isamaa Party filed a bill on Tuesday to lower the VAT on electricity, gas and heat from 20 percent to 9 percent to alleviate soaring prices. Center Party chairman Jüri Ratas said on Monday that Estonia should already be preparing to cut VAT.

Jürgen Ligi told ERR that it would not be a reasonable measure. "It is malicious and something like bullying, we know the impracticality of the measure. It has little impact on prices, we are talking about tenths and it makes it more difficult to deal with the actual causes. It means investing in production, savings, transmission and so on," the Reform deputy chairman said.

In socio-political terms, lowering VAT would also be unreasonable, as it would falsely directed and extremely costly. "By a rough calculation, it is much more expensive than coronavirus treatments have been. It is not a funny number they talk about and it would not affect prices too much. By the way, major consumers would be the biggest winners."

"I'm sorry, I would like to call out names now, but someone like me and my colleagues, who have opened their mouths on this topic often, would win much more than the regular citizen. They just consume more. I am not jealous, but carrying water with such a sieve is just stupid. To grab money for yourselves out of the state coffers, leaving less there to help those who actually need help," the former minister said.

He added that lowering VAT would take millions out of the state's budget. "If we put actual money in, we must direct it somehow. Just fighting prices is extremely dumb. You must fight revenue in a market economy. Invest and then alleviate the problems of those that actually need it," Ligi said. "You must direct these measures."

He said there should be more production capacities in the spring as consumption decreases. "And with that, a permanent solution ends up being the ridiculous one. We want a green transition, an energy revolution, we want change and investments, new production capacities. But we are fighting for consumption to grow, that it would be more accessible and that the state would pay consumers," Ligi said.

"It is the incorrect measure, there is nothing to do. The issue itself exists. It is very scary. But we have not even defined it. We have not been provided any data on how many families, and what kind of families, actually have an electricity problem, that it actually hurts them. They have said 3 percent of private consumption was electricity and that it would not be the worst thing if it grew to 10 percent. That is not a big blow for the majority actually, the economy and revenues are growing too."

In addition, he said it is not correct to talk about a state budget surplus against the background of soaring prices, because there is still a budgetary deficit and expenses are growing.

"When they say we have any kind of surplus, it is incorrect. Our budget is in a huge deficit. It is not like we can just give up budgetary revenue and then start thinking about the actual people who need help," Ligi said.

He said the state should instead invest money into production. "By production, I mean small production, where the private sector would also receive state aid, this all requires money. In short, any removal of pricing components actually works against the energy transition and against social policy, no matter how tempting it may be."

"In the current winter conditions, we actually require more producers. Investments have not been made for a long time because prices were artificially low and older power plants were working at full steam. Now, when that has exhausted itself, there are fewer producers. Now, when Germany closes or is closing nuclear plants, which is not a reasonable step, we have production issues," Ligi said.

He said energy prices going up even more is a fact. "The huge need to invest across Europe due to cheap prices is now being felt. That is the issue and there have been some stupid decisions. I think Germany dropping nuclear energy is one of them. They should not have done so," Ligi said.


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Editor: Kristjan Kallaste

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