Center wooing Reform on energy bill VAT slash

Center's Riigikogu whip Jaanus Karilaid (left) and Reform's whip, Mart Võrklaev.
Center's Riigikogu whip Jaanus Karilaid (left) and Reform's whip, Mart Võrklaev. Source: ERR

The Center Party says it wants to bring its coalition partner, Reform, over to the idea of reducing VAT on energy, even though a bill aiming to do that passed its initial Riigikogu reading without Reform's MPs voting in favor.

A bill which aims to do that was in fact tabled by the opposition Isamaa party; the bill passed its first Riigikogu reading (of three) on Tuesday.

Jaanus Karilaid, Center's Riigikogu whip, told ERR Tuesday that Center would support the bill provided Reform does, adding that the latter has yet to be convinced.

Karilaid said: "In today's anomalous crisis, tax should be reduced to ensure business competitiveness. We have a different understanding of crisis management [from Reform]. We also operate with a minimum program, within the bigger picture. This is indeed a problem."

Reform's whip, Mart Võrklaev, told ERR however that the party's MPs had wanted to bring the bill's first reading, including debates and discussions, to an end.

He said: "Rising energy prices are a real problem for both individuals and businesses, but we also need to monitor budgetary opportunities and the behavior of neighboring countries; so the group supports concluding the first reading."

"In an additional bill at first reading on Wednesday, the government has proposed a reduction in excise duty on fuels which carry special labels, in order to alleviate the situation facing farmers," he added.

Isamaa MP Aivar Kokk, who is deputy chair of the finance committee at the Riigikogu and whose party tabled the bill, told ERR compensatory measures must be in any case be taken quickly, to curb soaring inflation.

Kokk said: "One solution to mitigate the impact of increased energy costs would be to cu the VAT on natural gas, electricity and heating from 20 percent, to nine percent. High prices with energy carriers is hurting both businesses and consumers.

"Estonia has the highest inflation in the euro zone, and the country must take urgent steps to support its people and entrepreneurs," Kokk added, and said that it is unacceptable that, in a situation where public tax revenues are rising, no steps are being taken to alleviate price rises.

Isamaa's bill, if it passes, amends the VAT Act, cutting VAT on natural gas, electricity and district heating – a type of centrally controlled heat piped in as hot water to many apartment blocks – from 20 percent to 9 percent for the year May 1 2022 to May 1 2023.

Energy prices started creeping up last autumn, soon reaching all-time record levels, prompting the government to bring in in two main support measures aimed at cutting down bill costs to private individuals and to businesses. While the end of winter made the problem less immediately pressing, energy prices remain high, exacerbated by the war in Ukraine and the pressing need to decouple from Russian natural gas.

In March this year, electricity averaged €18.38 per Kwh inclusive of VAT (which totaled €3.06) – three times the price for April 2021, meaning that, even with the reduction in VAT to 9 percent, the state would still receive higher VAT revenues, according to Aivar Kokk, than it did last spring.

The finance committee opted on April 18 to wrap up the bill's first reading; only Reform's 34 MPs voted against the bill, at the 101-seat Riigikogu.

Reform's finance minister, Keit Pentus-Rosimannus, stated late on last year that cutting VAT on energy bills would achieve little in terms of its desired goals.

Reform also presented its supplementary budget, valued at over €802 million and issued in response to Russia's invasion of Ukraine, on Monday afternoon; opposition MPs including those from Isamaa have stated that the supplementary budget in its draft form needs to do more to combat inflation, suggesting that Reform changing its stance on Isamaa's VAT bill might work out as a quid pro quo for the latter's support for the supplementary budget - which must also pass three readings, as a matter of urgency.

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Editor: Andrew Whyte

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