Coalition talks: Reform's 'tax hump' abolition may take time to materialize

Kristina Kallas and Kaja Kallas.
Kristina Kallas and Kaja Kallas. Source: Ken Mürk/ERR

The clock is ticking relentlessly on coalition negotiations between the Reform Party, Eesti 200 and the Social Democrats (SDE), ETV news show "Aktuaalne kaamera" (AK) reported Thursday, as the deadline the coalition-in-waiting set itself for inking a deal – April 10 – is fast approaching.

The first half of this week, the fourth since the March 5 election, was spent on fiscal negotiations, and other money matters.

A "money tree" has been mapped out in the sense of both each of the three participants' policy desires and the actual financial situation.

Prime Minister and Reform Party leader Kaja Kallas told AK that the differences between the parties are "quite large."

This may men that one of Reform's most-trumpeted pre-election pledges, to eliminate the "tax hump" – bracket creep as wage inflation pushes more and more earners beyond the income tax-free threshold and into the next tax bracket (which also has far-reaching administrative aspects) may only become a reality after some time, AK reported.

Reform would impose a €700-per-month income tax-free threshold.

Kallas told AK that: "This is a matter of consensus; we're looking at options on whether it's possible to [abolish bracket creep] gradually, or whether it's possible to do it in a couple of years, when the financial situation will be better. We have to look at the whole picture."

Eesti 200: 'Tax hump' removal is on the table

Eesti 200's stand on taxation has evolved over time into something more similar to than different from Reform's.

The party's vice-chair, Kristina Kallas (no relation to the prime minister) told AK that: "The question is rather: How big the first bracket, i.e. the tax-free section, will be, since the impact on the state budget also depends on that."

"We are currently also waiting for clear calculations from the Ministry of Finance, in order to discuss the matter once and for all," she added.

SDE, which espouses a progressive taxation system, has not backed down from what AK reported as "retaliatory measures" if the "tax hump" gets eradicated.

SDE argues that the €700-a-month tax-free threshold proposed by Reform equates effectively to a tax cut, and mentioned a hike in the minimum wage as a quid pro quo if Reform want to get the tax hump policy put in place.

SDE leader Lauri Läänemets remained realistic about the prospects of progressive taxation becoming an actuality in this alignment.

"We're not dreaming about it too much," he said.

"For both the Eesti 200 and the Reform Party, a progressive income tax in the context of this type of [economically] right-wing worldview is probably probably not what they want to be talking about," he went on.

Thursday's negotiations agenda also included a discussion on state reform, and a reorganization of ministry portfolios to include a minister for climate/green issues (as distinct from the existing Minister of the Environment post, which, while it covers such matters, mostly concerns the doling out of contracts and support relating to forestry and other environment-based businesses-ed.).

Läänemets also called for the upgrading of the Minister for Public Administration post, a bit of a portfolio-for-all-seasons but which most closely pertains to a minister for the regions, to a full regional portfolio.

"All regional development and the reduction of regional disparities are [important] for us [in SDE], and I don't think it's viable to do that using today's position of minister of public administration; a much more robust ministerial portfolio is required here," the SDE leader added.

Some differences on marriage equality, consensus on Russian citizens' right to vote

Also, marriage equality, while on the surface not a divisive one for the all-liberal incoming coalition, sees some differences of opinion, this time between Eesti 200 and Reform.

While Reform feels that the long-awaited implementing acts which would make the Registered Partnership Act fully on the statute books are sufficient to deal with the matter and equate to the same outcome as marriage equality for those affected by it, Eesti 200 wants to go one step further.

Kristina Kallas said: "Within the cohabitation act (as the Registered Partnership Act is often colloquially referred to-ed.), not all rights are the same as those of married people. In fact, there is no equivalence. Marriage equality would perfect this much better."

The act grants the same recognition of the legal status of cohabiting couples, of any gender, as those afforded to married couples, but stops short of actually permitting same-sex marriage (same-sex marriages have in the past been conducted on the territory of some foreign missions in Estonia-ed.).

One issue on which there seems to be the greatest consensus is the right of Russian citizens resdeident in Estonia to vote in local elections – which is de facto consensus on, and only the legal aspect left to be dealt with.

This would mean Russian and Belarusian citizens who are registered permanently resident in Estonia would not be permitted to vote in local elections. In general, foreing nationals resident in Estonia can vote in local elections, while EU citizens can vote in the European elections in Estonia also.

Kaja Kallas said: "What I like about this is that the discussion has been very substantive. For instance, on the same subject of voting rights: What are the risks, what is achievable, and what is not. We want to make decisions prudently."

There are four more working days until April 10, taking in mind the Easter break.


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Editor: Andrew Whyte, Barbara Oja

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