SDE plan to raise tax-free threshold to €800 would cost state €150 million
The Social Democrats (SDE) have the aim of making the minimum wage in Estonia tax-free, party deputy Riina Sikkut said, on day four of coalition negotiations between her party, Reform and Isamaa. This would cost about €150 million to the state, Sikkut says.
This would be achieved after raising the income tax-free threshold to €800 per month, from its current level of €500, a figure Sikkut announced earlier on Thursday.
She said: "€ 800 is the round figure we are talking about, so that next year's work will ensure that lower-paid workers win out and are better able to cope with their earned income, without having to apply for subsidies."
The move would cost around €150 million, she added.
"A fairer tax system was needed even before the current crisis. It makes sense to improve people's livelihoods now, while in the long run we can see that the tax burden on the wealthy should be higher than that imposed on the lower-paid," Sikkut, a former health minister, went on.
"This is also not a temporary measure which should be reversed later, either. It is a step in the right direction, and offers the necessary relief," Sikkut added.
Shifting the tax curve has also been on the table during the current coalition negotiations.
"If we can reach an agreement to raise both the income tax-free minimum and move the curve forward, the impact would be very significant. A teacher earning €1,600 would also receive €100 more per month," she went on.
"It depends on how our agreement goes. The same amount of people can come from there...Undoubtedly, considering how many people it affects, of course, this measure also has a budgetary impact. But we are talking about a change that would be needed to make the tax system fairer anyway," Sikkut said.
While there are no plans to abandon the current system, the existing tax system should serve people in the same way as in 2018 when it was introduced, she added.
The current minimum wage is €654, while the main trade union in Estonia recently called for its raising to €700 from the summer.
Sikkut said earlier that neither SDE nor Reform and Isamaa have any "red lines", on which they would not equivocate, in their requirements
Temporary, focused support should be offered, for instance in the case of fuel subsidies for those in out-of-the way places, Sikkut said earlier on Thursday, adding that blanket support smacked of short-termism and should instead make way for policies with a longer-term prospect, such as raising the tax free allowance.
The current tax-free allowance can be utilized in full by those earning up to €1,200 (gross) per month, while from €2,100 upwards, there is no allowance.
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Editor: Andrew Whyte