Jüri Ratas: Tax hikes to undermine prosperity

Jüri Ratas.
Jüri Ratas. Source: Priit Mürk/ERR

The Reform Party government is not looking for solutions to problems but is rather adding to them through its tax reform set to cater to the wealthy. Tax hikes will impact people's living standard and deepen social inequality, Jüri Ratas writes.

The situation in Estonia is more than worrying. We have been wrestling with Europe's highest inflation and a broad-based economic crisis evidenced in the fact that Estonia was the only EU Member State to see its economy contract last year. This economic low tide will likely persist for this year as GDP was down 3.2 percent on year in Q1. The situation has clearly impacted our people's subsistence and prosperity.

A recent Bank of Estonia report reveals that while the assets of Estonian households have grown over the past decade, massive inequality remains a serious problem and is once again among the highest in the EU. The lion's share of net assets are owned by just a handful of wealthier households – Estonia's wealthiest 5 percent own almost half of all assets, while the poorer 50 percent own just 7.4 percent of assets.

Person making median salary just six cents in the black

The Reform Party government is not looking for solutions to problems but is rather adding to them through its tax reform set to cater to the wealthy. A person making median salary will gain just six cents from the Reform Party's almost half a billion euro campaign to abolish Estonia's gradual exemption reduction system or the so-called tax hump.

A laughable sum if we keep in mind that the government is planning to hike the VAT and income tax rates, introduce a car tax, raise the excise duty on fuel, abolish the tax exemption starting from the second child, slash the large family benefit, do away with free public transport and hike the VAT rate of accommodation providers. I would not be surprised to see further items added to this list.

It is a policy of deceit. It saddens me that the government is not willing to sit down to discuss the situation and fails to take it seriously. Not only are we lacking debate, the things that are being done are just the opposite of what was promised.

The way the coalition is pushing tax hikes through parliament is deceitful and wrong. These changes will only add to social inequality, weaken Estonia's economic footing and manufacture uncertainty. The results might be what we saw during the previous economic crisis, with people and companies possibly looking at very difficult times and slow recovery. We have no analyses or vision, only sums to be collected in the form of taxes.

But an empty sack does not hold form. One of our main goals should be an open discussion of how to restore growth. Only then can we have robust national security, better healthcare, broad-based regional policy, optimistic families and a tidy economy.

The debate needs to aim for reducing inequality, making the weakest link stronger. For making life sustainable in every corner of Estonia, ensuring a dignified existence for the weakest members of society, equal opportunities for business and job creation.

How to achieve all of that? We need to reflate the economy through counter-cyclical investments, instead of crossing out key investments much as Reform have done. We need to contribute to regional development. When Reform were ruling alone last summer, they sent the people of Hiiu and Lääne counties the message, "you number too few to matter in political terms," by sinking the Tallinn-Rohuküla railroad plan.

Natural resources need to be put to good use

We must base our natural resources use on the materials we have as well as how to add more value. We must make sure our ecological footprint is lessened and shake off the last 30 years' considerable dogmas.

A good example of making smart use of natural resources are smart biocoal pellets made in Põltsamaa. The high-in-carbon pellets made using green and renewable raw material can be used as an additive by European steelworks, helping to reduce the metal industry's emissions.

Burning oil shale for electricity will end in the next 12 years, while using the material to make new resources and store CO2 must be our challenge both scientifically and technologically, instead of ignorant and populist calls to end oil shale mining.

The 1987 Phosphorite War and its slogan "No to phosphorite" was noble in its goal but more so its political significance at the time. No phosphate rock mine was opened. Today, I believe that new technologies make it possible for us to discuss mining rare earth metals.

Materials needed for renewable energy solutions and growing demand for increasingly rare natural resources are a recurring green transition theme. We need to take advantage of that fact. I find the potential benefit of phosphorite to be in line with sustainable development goals.


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Editor: Marcus Turovski

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