Riigikogu returned to something like normality Wednesday

Riigikogu's main debating chamber.
Riigikogu's main debating chamber. Source: Priit Mürk/ERR

Wednesday's Riigikogu session went as would normally be the case, focusing on the coalition's planned tax hikes, while none of the filibustering which has dogged the past week-and-a-half of sessions was seen.

ETV news show "Aktuaalne kaamera" (AK) reported that the chamber was able to approve a statement of support for Ukraine's accession to NATO – a rare issue on which all six parties have by their statements been in agreement anyway – while, for the first time, the matter of planned tax hikes was on the table.

While the obstruction tactics employed by the three opposition parties, the Center Party, the Conservative People's Party of Estonia (EKRE) and Isamaa, fell mainly on a planned cut in family benefits, the opposition is divided on the tax hikes issue.

These would as stated entail a 2 percentage point rise in VAT and income tax, and, further down the road, put in place a car tax and also hike some excise duties, and will reform the land tax system.

EKRE will vote against all coalition tax amendments, the party's leader, Martin Helme, says.

"We do not support a single tax hike. We do not support those currently at the Riigikogu. We are definitely against what we have already been told here, that there will be land taxes, car taxes and garbage taxes," he said.

Additonally raising the tax on gambling and excise duties on alcohol and tobacco will lead to the Estonian state losing this source of revenue altogether, Helme – though despite this opposition, both of these draft bills passed their first reading (of three) on Wednesday.

As for the Center Party, MP and finance committee vice-chair Jaak Aab says that while the party is opposed to the VAT and income tax rises, it supports the bills to up excise duties and gambling tax.

Ultimately the VT and income tax rises will not bring money to where it is most needed, which Aab enumerated as local government, pensions and health care, but will instead "merely fulfill a Reform Party pledge to alter the income tax exemption system," referring to Reform's desire to eliminate bracket creep by installing an income tax-free minimum threshold.

Given the tumult on Toompea in recent days, the Riigikogu was ready to hold a length session through till Thursday morning where needed, but opposition MPs' stamina seems to have been exceeded by regular parliamentary business for the time being, and amendments were proposed to all the taxation legislation noted above, in the normal way.

Reform MP Andres Sutt said that the tax changes together cover the cost of the €700 income tax free threshold imposition, with a little left over to reduce the state budget deficit slightly.

Sutt said: "If we get these tax changes in place, the budgetary deficit has to stay within 3 percent, and that is already a major, major step forward."

Veteran Reform MP and former finance minister Jürgen Ligi said that at the same time, it would not be sufficient to undo what he called several years of inaction on that front.

"The sorry tale is that, yes, these tax increases do not in fact cover the deficit that has amassed over the years to any significant extent, so in this sense, the austerity measures which are inevitable in the coming years will be much more stringent," Ligi, who sits on the parliamentary finance committee, said.

Jaak Aab said that right now, effectively cutting taxes for the more well off by eliminating bracket creep is not the best move and so Reform should postpone doing so.

Reform had pledged to put the policy in place expressly in their pre-election manifesto, while the same could not be said of the VAT and income tax hikes.

Ligi said that this was being overly dramatic, adding that the VAT hike will up real prices to consumers by 1.66 percentage points – in fact it does not go far enough.

"The state finances are still in deep deficit and this will not go away all on its own," Ligi said.

The Center Party had in fact been in office when the excise duties (hard liquor excluded) were initially cut, in 2019. Arguments against raising this duty usually revolve around the lost trade south of the border, to Latvia, along with reduced "alcohol tourism" from Finland too, that the policy supposedly leads to.


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Editor: Andrew Whyte

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