Coalition wants to lower tax hike for banks

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Swedbank. Source: ERR

Postimees writes that the governing coalition may raise the income tax on banks by less, than agreed upon during coalition negotiations.

Annely Akkermann (Reform), chair of the Finance Committee of the Riigikogu, told the daily that a compromise is being sought regarding the increase in the income tax rate for banks. "Negotiations are ongoing," Akkermann said. "The compromise currently under discussion is whether the tax rate should be 22 percent or less."

Akkermann said the corporate income tax, which includes banks, will rise to 22 percent regardless, but the question is whether the advance tax for banks will be made lower.

Currently, the advance corporation tax (ACT) rate for banks is 14 percent.

Akkermann said that the Riigikogu Finance Committee wants to send the modifications to the draft tax laws to the legislature no later than the following Thursday. This means that there is only about a week left for discussions.

In addition, the government has retracted its initial proposal to increase the rate of value-added tax on tourist accommodations from nine to 22 percent. Also, the government intends to reduce the VAT tax on press publications.

Former banker Indrek Neivelt, commenting on the change of heart of government parties and the concession to banks, said that Estonian banks will earn between €500 and 700 million more than usual this year due to the rise in Euribor.

"And their ordinary profits were also substantially higher than the average for the euro zone. Essentially, their profits resemble a lottery win. By comparison: before the pandemic, hotels earned an annual profit of just under €40 million, whereas in the last three years they have suffered losses of €80 million and the state expects to collect less than €10 million annually in additional taxes," Neivelt said. "Taxes should always be collected where there is something to collect," he added.

He said that, for instance, LHV's return on equity for the first quarter of this year was 30,4 percent, which is 2.5 times higher than what would be considered reasonable in the euro zone.

"In previous years, the return on equity has already exceeded 20 percent. Such a return is fully sufficient to grow, as the bank manager says in the article, by an average of 10 percent per year. There would be funds remaining for expansion, taxes and dividends. Surely members of the LHV Bank's supervisory board and management board are aware of this. There is no sense in scaring politicians and the general public about the creditlessness of housing associations and businesses. Not for this reason," Neivelt said.

This article has been updated to include Indrek Neivelt's comments.


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Editor: Kristina Kersa

Source: Postimees

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