Ratas: Reform will have difficulty pushing through its tax hikes

Jüri Ratas
Jüri Ratas Source: Priit Mürk/ERR

While the coalition's "steamroller" is essentially functioning in the Riigikogu, pushing through proposed tax hikes will not prove easy, Center Party leader Jüri Ratas says.

Ratas, a former Riigikogu speaker, told ETV politics head to head "Esimene stuudio" that the coalition is currently doing things it had not pledged ahead of the elections, with the outcome being that the most needy groups in society are suffering the most.

He said: "A 10-percent rise in revenues and income tax will hit those social groups that would need help the most. Taxation needs to be both affordable and fair. The system that the Reform Party is creating is not affordable for those who actually need support, plus it is also unfair, as taxes should be paid by those who are able to do so, without their shopping basket diminishing as a consequence."

Ratas stressed that the opposition does not support the planned tax rise which, he said, helps to fulfill one election pledge the Reform Party did make before March 5, that is to abolish the so-called tax hump.

"This will cost about €500 million per annum, but only rise further in the years to come. Based on this, people will have to pay 10 percent more in VAT and 10 percent more in income tax … the income tax exemption will be taken away from the second child onward, and family allowances will be cut."

"I don't think this is in any way reasonable, so it will certainly not be easy for the coalition to push through the Reform Party's election pledges," he added.

"Naturally, the coalition's steamroller will ultimately work out, but the role of the opposition is to point out that this is not a road which the political parties pledged for ahead of the election," Ratas added.

Presenter Andres Kuusk noted that since the Reform Party won the elections with a substantial majority, it oughtn't to come as a surprise that it would try to implement its main election promise (ie. abolishing the "tax hump"). 

Ratas responded that it had been more of a shock than a surprise.

"The Reform Party never once said that if you elect it tomorrow, Estonia would be in safe hands, one where 10 percent of your VAT will increase, 10 percent of your income tax will increase, plus we will up the land tax, oh, and there will be a car tax too. This was not discussed. Additionally, thanks to the Reform Party, we will lose additional income tax exemptions for children. But they were talking about something else [ahead of the election]. This is also the reason why the Center Party is picketing in front of the Stenbock House," he went on.

Ratas, former health minister Tanel Kiik (Center) and supporters picketed the Stenbock House last month, daily Postimees reported at the time, and pledged to continue these protests – to culminate in a larger demonstration this month.

When Center was in office with the Conservative People's Party of Estonia (EKRE) and with Isamaa, 2019-2021, it, too, was regularly picketed, though not directly by Reform.

Ratas said that his party, on the other hand, had been talking about tax increases prior to the elections, but this would have meant higher earners contributing more, ie. a more progressive system, the implication being that this was not a popular move and cost Center votes. 

"It is in no way acceptable that a millionaire and a person on a low wage pay the same [level of] income tax," Ratas added.

At the same time, Ratas expressed hope that the Reform-led coalition will have to temper some of its tax desires in due course, for instance thanks to

Ratas said hopes that, as a result of lobbying from the tourism sector, the coalition will row back on its increase in VAT for accommodation.

Ratas added that his party is not opposed to a car tax per se, but rather he questioned its being based on CO2 emissions, which he said would disproportionately hit older people living in rural areas.

"Our vision is that taxes should be levied on pricier cars. This would not mean that the environmental component must be completely zero, just that the tax must not be primarily based on CO2," he said.

Tax hikes planned by the coalition will also deepen what Ratas called the economic and socio-economic crisis in Estonia, while at the same time, the XV Riigikogu faces tough time ahead.

"Two different sides are emerging, and I think that the opposition, such as the means given to us provide for, will push for these changes not coming in this form and with this degree of rapidity."

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Editor: Andrew Whyte, Merili Nael

Source: 'Esimene stuudio', interviewer Andres Kuusk.

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