Estonia's VAT rate climbing to 22 percent next year will net €220-230 million for the state budget, incoming finance minister Mart Võrklaev (Reform) said. Abolition of tax exemptions is set to yield another €40 million two years from now.
"We have a table reflecting the changes we can make, as well as expenses. Because the economic forecast puts the deficit at 4.1 percent, we set the goal of getting to 3 percent and keeping it there. We want to achieve that in 2024 –hence the tax changes and austerity. Switching to the zero budget in the future (going back to the drawing board in terms of how state budgets are put together – ed.), we'll need to find other ways of reducing the deficit," Mart Võrklaev, set to be finance minister in Reform's new government, said.
The VAT rate will be 22 percent instead of the recent 20 percent from 2024. "The effect of VAT will be €220-230 million. Tax exceptions will be abolished in 2025 to the tune of €40 million."
The incoming government decided against abolishing the VAT exceptions on periodicals, newspapers and medicines. "There have been concerns in the press of how to ensure high-quality news flow, while medicines are a necessity of life. Tax decisions follow national defense and green goals," Võrklaev said.
The future finance minister said that the planned car tax will bring €120 million. "We will need to have the car tax on the level of legislation by year's end. That is enough time, whereas we are proceeding based on green goals. We are planning a CO2 component where less pollutive cars will be subject to a lower rate. But we must also look at the element of luxury and tax bigger and more expensive vehicles more," Võrklaev said.
"The car tax formula needs more work. I cannot tell you the value for land tax on residential property off the top of my head, but the calculations are there."
Editor: Marcus Turovski