Foreign trade minister opposes unemployment insurance contributions hike
IT and foreign trade minister Kristjan Järvan (Isamaa) opposes rise in unemployment insurance contributions proposed by health and labor minister Peep Peterson (SDE). The taxes raised would top up the unemployment insurance reserve, which was greatly depleted following the arrival of the coronavirus in early 2020.
Järvan, who oversaw the Isamaa-led liberalization of the Estonian pension system during the Center/EKRE/Isamaa coalition, said: "We in the government have agreed ... that this will not happen, while, of course, Isamaa's position is that we would rather reduce taxes."
Minister of Rural Affairs Urmas Kruuse (Reform), however, told ERR that they have not discussed the issue at coalition level and do not have a definite position. Reform's traditional line is also towards low taxation.
Järvan is backed by the chief of the main lobby group representing employers, however.
Arto Aas, chief of the Estonian Trade Union Confederation (EAKL), had said it was not reasonable to raise the tax rate in the current, inflationary economic situation, adding that where is still €500 million in reserve in the unemployment fund, while the fund's expenses could also be looked at.
While the rate of contribution has long been set at 1.6 percent of salary for employees and 0.6 percent for employers, the Peterson proposal would increase these figures to 1.8 percent and 0.9 percent respectively.
The Unemployment Insurance Fund (Töötukassa) declined to comment on the topic to ERR, saying they are awaiting the Ministry of Finance's next economic forecast, and will prepare their own calculations and forecasts by August 19.
Unemployment Insurance Fund's reserve was drained to the tune of €300 million, around a third of the total, through the latter part of the pandemic (from late 2020 to the present) and as noted now stands at around €500 million.
Wage support measures put in place earlier on in the pandemic had helped mitigate the worst-case scenario for the fund, Peterson went on, but added that: "The question today is whether such measures should be implemented once again."
Unemployment is also rising at the moment, with an additional 25,000 jobless expected to be added to the total registered, Peterson said.
The initial decision on how to proceed is due mid-month, when the Unemployment Insurance Fund has discussed the matter at board level.
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Editor: Andrew Whyte