Coalition not yet reached agreement on new VAT rates

State crest as a backdrop to a Stenbock House cabinet press conference.
State crest as a backdrop to a Stenbock House cabinet press conference. Source: Ken Mürk/ERR

The government has linked the adoption of its new tax legislation to a confidence vote, but the coalition parties have not yet agreed on VAT rates for tourist accommodation services, media publications, and bank dividends.

Reform, Eesti 200, and SDE plan to implement the new rules before July 1 and the work behind the bills has been carried out quickly, Thursday's "Aktuaalne kaamera" reported.

It is planned to submit the tax changes to the Riigikogu by Monday at the latest and put it on the agenda for the week starting June 14.

In order to pass the tax package, the coalition has decided the opposition's obstruction tactics cannot be allowed to continue and will link its adoption to a vote of no confidence in the Riigikogu.

"If it doesn't get support, the government will fall," said Prime Minister Kaja Kallas (Reform).

Opposition parties do not support the move.

Jaak Aab (Center), vice chairman of the Riigiikogu's Finance Committee, said experts have not had time to assess how the changes will affect the economy and the 12 amendments the party tabled will not be discussed.

"It is not good practice and procedure to adopt so many laws with confidence [votes]," he said.

At the moment, there is a 9 percent VAT rate for accommodation providers, while it is 5 percent for publications and 18 percent on dividends.

After the coalition took office in April, it was announced VAT on accommodation would rise to 22 percent, causing the industry to push back and successfully argue for a lower rate.

Now, the government plans to raise VAT on publications but it has not yet been agreed.

"A fairer way, in my view, is for everything to rise at the same rate. So maybe everyone could go up by 4 percent, which would be kind of even. That's what we're discussing to reach an agreement," said Kallas.

SDE's Jevgeni Ossinovski also suggested a more equal agreement could be found.

Kristina Kallas, deputy chairman of Eesti 200, said the government should find an alternative to rapidly raising the rate for accommodation.

"it is probably not wise to continue with such a quick increase at the moment," she said.


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Editor: Barbara Oja, Helen Wright

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