The government has separated its tax changes bill into four parts dealing with different tax instruments. The approved bills will be sent to the parliament.
First, the government approved the bill to amend the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act and other associated acts.
The bill aims to hike the excise duty on alcohol, cigarettes and smoking tobacco by 5 percent for three consecutive years starting in 2024. The fiscally marked diesel excise duty hike will be canceled, meaning that Estonia will retain the EU minimum permitted rate of €21 per 1,000 liters.
The law will enter into force on January 1, 2024.
Secondly, the government approved a bill to amend the Gambling Act to hike the gambling table tax rate from €1,278.23 to €1,406.
Third, draft legislation to amend the VAT Act was approved that will see Estonia's VAT rate go from 20 percent to 22 percent from January 1, 2024. Accommodation providers will lose their special 9-percent VAT rate and accommodation services will be subject to the standard 22-percent rate from January 1, 2025.
Fourth, the government approved the Income Tax Act and the Defense Forces Service Act. Starting from 2024, the additional tax exemption for children and spouse will be abolished, and home loan interest payments can no longer be deducted from taxable income. 2025 will see the natural person and company income tax rate go from 20 percent to 22 percent. The 14-percent incentive rate for companies that regularly distribute profits will also be abolished, alongside the 7-percent rate for natural person dividends. The basic exemption will be €700 per month or €8,400 annually for everyone starting from 2025. The only remaining exception will be pensioners whose exemption equals the average old-age pension.
The opposition voiced fierce criticism for the government's initial attempt to introduce all of these and other changes in a single so-called cluster bill, which led to obstruction efforts that have kept the Riigikogu from approving this week's agenda. The parliament has been holding night sessions of procedural questions and other ways of stalling proceedings.
Editor: Marcus Turovski