Helme: Planned tax changes will punish poorer population
Behind the state's financial situation are the political decisions of the past couple of years, says Conservative People's Party of Estonia (EKRE) chair Martin Helme, according to whom Estonia's poorest and rural residents will be hit hardest by the incoming Reform-Eesti 200-SDE coalition's planned tax hikes.
"I'd still like to emphasize above all that if we said that the Riigikogu lacked legitimacy due to e-elections being questionable, I'd now say the same about this government — that it's obviously lacking legitimacy," Helme told ERR on Sunday.
"Everything they have written into the coalition agreement has not received any sort of mandate from voters," he continued. "Regardless of whether we're talking here about the economy, regional policy or then values issues — homosexual marriages or euthanasia — none of it has received any sort of mandate from voters. These were not issues before the elections and no one asked voters for permission on this."
According to the EKRE chairman, it was known prior to the elections as well that these parties want to increase taxes, but they didn't talk about that. The tax increases written into the new coalition agreement are the worst case scenario, he noted.
"They actually very clearly have the Reform Party written all over them," he said. "They punish the poorer population and rural residents more. The increase in VAT is the most broad-based consumption tax, and consumption taxes always hit those people hardest who have smaller incomes."
Behind the need to raise taxes isn't poor fiscal discipline following the previous, 2019 elections, but rather the political decisions of the past couple of years, the opposition party chair continued.
"The first, most serious decision was to not react to rising energy prices," he said. "This pushed the Estonian economy into a downturn. When that downturn reached us last year, it became clear then that tax receipts wouldn't be coming in full anymore. And that expenditure side kept on in the same vein as we saw during the post-COVID economic recovery. Indeed, the economy recovered well, the economy grew well, tax receipts were very high, but the energy crisis, which falls firmly into the Kaja Kallas[-led government] period, ruined our economic growth, and therefore it won't be possible to continue with this increase on the expenditure side."
According to Helme, in order to bring the budget back into balance, the focus should be placed on creating an environment suitable for economic growth.
"Every percent of economic growth brings with it several hundreds of millions in tax revenue," he explained. "The current government, on the contrary, has decided to take steps that will lead our economy into an even deeper crisis in the coming years."
He believes the government should focus not on tax changes, but on energy policy reform.
"If this had been sorted out, and the price of electricity, natural gas and other fuel prices been brought down even now following the elections, that would have given the economy new growth momentum, and I think we'd be moving much faster toward budgetary balance in the three- to four-year perspective than we're currently moving," he said.
According to the EKRE chair, not a single tax needs to be raised in order to correct the budget deficit.
"Our party's position is no new taxes, no tax increases whatsoever," he said. "If anything, what should be discussed are tax cuts, and taxes inhibiting economic development should have been the first to be cut."
He believes that throughout the entire energy sector, for example, either excise duties should have been reduced or it should have been considered how to reduce energy prices via state-owned companies and thereafter pricing and profit policies.
"If you ask me which taxes should be raised in order to patch up the budget, my response actually in fact remains that in order to patch up the budget, taxes shouldn't be raised, but rather lowered," Helme said.
In order to increase revenues, the competitiveness of the Estonian economy needs to be promoted and exports increased, he continued.
"And well, of course, if considering at all what we should be taxing, then major international corporations should be taxed more, not small businesses within Estonia or domestic Estonian consumption," he added.
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Editor: Aili Vahtla