Estonian Minister of Regional and Rural Affairs Madis Kallas (SDE) said on ETV's political talk show "Esimene stuudio," that the increase in VAT is a major blow for rural areas. "All the appeals sent to my new e-mail are related to the VAT increase in the hotel sector," the minister said.
Madis Kallas began by discussing an issue related to his previous role as Estonian Minister of the Environment. Kallas said, that discussions on forest felling volumes were ongoing. However, he added, that there would be no changes to the felling volumes he had allocated (9,180 hectares instead of the current 10,490 - ed.) for state-owned forests.
"As far as the forestry development plan is concerned, it will go ahead. The current climate minister is already the sixth to be dealing with it. I would like to see the felling rate reduced further. However, I saw in the ministry how difficult it is to reach a compromise. At this point, this was the best possible compromise for the forest industry and environmentalists," Kallas said.
"There is no direct link between unemployment and lowering the volume of forest felling. This is clearly demonstrated by the fact that over the last 15 years, felling volumes in Estonia have risen by very large amounts, yet no additional jobs have been created. Many jobs in forestry have disappeared because of mechanization or valorization," he explained.
Kallas said that living in the countryside should not be a luxury that people have to pay more for. However, over the last 30 years, life has become concentrated in Harju County, due to jobs, housing, and business. "If we want to bring the situation back into balance, then we have to do something about it. The growth of Harju County could be shared across Estonia," Kallas said.
"If the money available to local governments (KOV) comes in according to (the amount of) personal income tax, then the income tax from pensions would go to the KOVs. This would make up for the inequality with Harju County, because the KOVs would receive more in tax revenues," Kallas said. "Younger people will live in Harju County, while older people will live elsewhere, in rural areas," Kallas added.
"We are still talking about growth, not the redistribution of poverty. The concentration in Harju County has not been caused by the mismanagement of local authorities. Our ideal situation would be like a July Estonia - everyone is where they want to be and everyone fits in," the minister said.
Kallas said however, that many local authorities will not take up the option of levying taxes themselves. "There are certainly municipalities that could have taxes in place and they wouldn't hinder the development of the regions. However, the state doesn't force them to do that, and it doesn't say that the state won't give you the money, so collect it yourself," Kallas said. Regions where land values and living standards are higher may consider introducing a land tax, Kallas said.
At the moment, it is extremely difficult to live in Estonia on a minimum wage of €725 a month, he said. "In light of this, the Social Democratic Party have always said, that if we want a society where everyone can live decently, we must move towards a minimum wage, which is 60 percent of the median wage. We see that the solution to this problem is raising the minimum wage," said Kallas.
"In my future ministry (Ministry of Regional and Rural Affairs – ed.), I have been communicating with the entire agricultural sector to discuss the challenges of raising the minimum wage. We are having discussions and identifying the potential issues, but our aim is still not to increase inequality," he added.
According to Kallas, the SDE will continue in the new government even if there is no increase in the minimum wage.
A rise in VAT is a heavy blow, Kallas said. "All the appeals sent to my new email are related to the VAT increase in the hotel sector. I will certainly take up this issue in government meetings. How to make it so that this blow, albeit only from 2025, is as soft as possible for rural areas," Kallas said.
Free public transport on rural routes was not abolished to save money, but so that public transport services could be improved, the minister said. "So that we can also get rural people away from using private cars and onto public transport," he said, adding that in many countries, public transport systems based on public demand are a success.
Kallas also said that the state needs to promote Ida-Viru County to companies as a place for investment so that the resources of the EU's Just Transition Fund, which amount to more than €0.5 billion, are put to good use.
Editor: Michael Cole