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SDE proposes new 5-year national defense tax to cover budget gap

Minister of the Interior Lauri Läänemets (SDE).
Minister of the Interior Lauri Läänemets (SDE). Source: Siim Lõvi/ERR

A new tax to fund national defense and a loan could help the government cover a hole in next year's state budget, junior coalition party the Social Democratic Party (SDE) proposed.

Party chairman and Minister of Interior Lauri Läänemets wrote to Reform and Isamaa: "Our biggest challenge today lies in the fact that there are not enough funds for critical needs such as salary increases, increased costs and national defense investments for the needs of the crisis."

The government will meet on Thursday and Friday to discuss the 2023 budget.

Läänemets said emergency situations require a bigger contribution and the war has raised Estonia's defense spending by almost €1 billion. This means it is harder to spend money in other important areas, such as raising salaries.

SDE is proposing a 1 percent tax on private individuals for the next five years and a 2 percent tax on company profits.

Läänemets said this would generate an additional €200 million per year, and €1 billion over the next five years, which could be be spent on national defense.

Another proposal by the party suggests the government take out a €1 billion loan to cover defense costs.

Läänemets said it would be reasonable to combine both suggestions.

"It is neither fair nor sustainable in the long run if Estonia's security during Putin's war is paid for by lost salary raises for our teachers, rescuers, healthcare and cultural workers. We cannot allow a situation to arise where Estonian national defense and the livelihoods of important public service providers are in conflict."

Both education and emergency workers have held protests over low wages this week outside parliament.

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Editor: Helen Wright

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