Saue mayor: Personalized income tax could be levied at local level

Bridge over the River Vääna, at Padula, Saue Rural Municipality.
Bridge over the River Vääna, at Padula, Saue Rural Municipality. Source: Andro Mikkor

The new government's planned redistribution of revenues from richer to poorer municipalities is not the right way to go, Andres Laisk, Mayor of Saue Rural Municipality, says.

A switch to a personalized income tax which was levied on a local basis would be more effective, and would boost municipalities' autonomy over their own finances, he went on.

Speaking to Vikerraadio's morning show Friday, Laisk said: "I don't consider this redistribution, involving taking around €30 million from the wealthier municipalities and directing it to the less well of municipalities to be correct."

The text of the recently concluded national coalition agreement between the Reform Party, Eesti 200 and the Social Democrats (SDE), is very general with regard to municipalities, he added, with much of the information in the public sphere having percolated through from the media, and shrouded in ignorance.

Laisk's municipality, population a little over 22,000, is one of the wealthiest in Estonia, to the southwest of Tallinn and part of the "golden triangle" commuter belt which surrounds the capital on three sides.

"If you were already going the route of boosting the autonomy of local governments, you should have made the personal income tax a local one, followed the Scandinavian method. But this did not get done," he continued.

Laisk said the coalition agreement had stated that more flexibility in imposing in local taxes and balanced budgets, as well as the leveling of the playing field with regard to underdeveloped regions, plus the curbing of urban and suburban sprawl, were all needed.

Andres Laisk- Source: Veski Market

The method and timing of enlarging the scope of the land tax had also been questionable, he added, since it gave the impression that a "good state" had exempted the people from being taxed on their land, only for a "bad" local government to come along and do just that, or to levy taxes of some kind.

Even a maximal land tax would not, in any case, bring in much additional revenue to local municipalities, he said.

This would increase the proportion of tax revenue coming from land taxes to 6 percent of the total, from 2 percent, he went on.

"Even at the maximum rate, this would give Saue municipality two million [euros] more," he said, adding that the planned two-percentage-point VAT increase would anyway lead to Saue paying €200,000 of that back to the state.

Laisk did, however, concede that Estonian real estate taxes are among the lowest in Europe.

Overall, he said, the coalition agreement contains little on how to prompt economic growth in concrete terms. "Economic growth must not be put on the back burner next to a major [wealth] redistribution," he added.

He also referenced what he called the importance of, when taking out a loan, investing it strategically, in order to see a return, to society, within 10-15 years.

Andres Laisk ran for Parempoolsed at the recent March 5 Riigikogu elections, and for the "Koostöö - Meie vald" electoral alliance, at the October 2021 local elections.


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Editor: Andrew Whyte

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