Narva benefits most from new income tax redistribution policy
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