Narva benefits most from new income tax redistribution policy

Narva. Source: Narva linn

Estonia's eastern border city of Narva will benefit most from the government's plans to change the income tax allocation to local governments and will gain an extra €1.5 million, analysis shows.

From 2024, municipalities will receive additional funding due to changes in tax and state pension distribution.

Regions with a higher number of elderly people will be better off while those with more working-age people will see a reduction in their funding, analysis from the Ministry of Finance shows.

Pension funding will rise from 1.88 percent to 3 percent but the share of income tax will fall from 11.96 percent to 11.76 percent.

Narva, with a population of under 60,000, will receive an additional €1.56 million per year, approximately 2.5 percent of its current budget.

Kohtla-Järve, also in Ida-Viru County, will get almost €1 million, Pärnu €622,000, and approximately €300,000 will be given to Saaremaa and Valga municipalities and the cities of Sillamäe and Viljandi.

However, the city of Tallinn, the city of Tartu, and the so-called "golden circle" municipalities — Rae, Viimsi, Saue, Harku and Saku — in Harju County will see a reduction in their funding. Tallinn will lose almost €7 million.

Hiiumaa, Muhu, Vormsi and Ruhnu islands will also be worse off.

Rae municipality stands to lose the most — 1.8 percent of its revenues.

Kiili, Harju, Viimsi, Saku, Saue and Jõelähtme municipalities and Keila and Tallinn cities will also see decreases of more than 1 percent.

The small island of Ruhnu, off the coast of Pärnu, will lose €3,000 but this amounts to a 1.2 percent loss.

Sillamäe and Kohtla-Järve will see a rise of 2.6 percent, followed by Narva with 2.5 percent and Loksa by 2.3 percent. Lüganus, Rõuge and Toila follow with a hike of 2 percent.

The coalition plans to make amendments to the Income Tax Act that will raise the finances of poorer municipalities, but this will come at the expense of wealthier areas.


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Editor: Karin Koppel, Jaan-Juhan Oidermaa, Helen Wright

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