The Estonian Ministry of Climate has drafted an amendment to the Mining Act, connecting fees for mining fees on state land more closely to the regular land valuation. The draft amendment also includes proposed ways to mitigate the steep price increases.

The most recent regular land valuation in Estonia was carried out by the Estonian Land Board last year and, as it had been more than 20 years since the previous one, land prices rose sharply. Throughout Estonia as a whole, land prices increased around eight times from their previously assessed value. There were however, significant regional variations.

Under the draft proposal, extraction fees for the peat, and therefore the mining industry would increase several times over. In other areas, extraction will become much cheaper.

In peat producing areas, fees will double on average, with some facing the prospect of a twelve-fold increase. While according to the 2001 land valuation the average fee was €13 per hectare, last year's valuation will show this was up to an average of €23. Two thirds of cadastral parcels will be subject to increased extraction fees.

In most cases, the annual increase will be somewhere between €100 and €5,000, with higher increases in a dozen cadastral parcels. The biggest increase will be in two cadastral parcels in Rae municipality, Harju County, where the fee will rise by around €50,000.

58 cadastral parcels will see reductions in their peat extraction fees of between €100 and €1,000.

However, the biggest increases will affect land used for mining, with new fees eight times higher on average than before.

While in 2001, the average fee was €53 per hectare, it will be €197 per hectare in 2024.

The explanatory memorandum to the draft also lists the areas, which will face the biggest price increases, as follows:

A cadastral parcel in the village of Tammiste, Tori Municipality, Pärnu County will see a 71-fold increase from €12 to €870.

A cadastral parcel in the village of Männiku, Saku Municipality, Harju County is set for a 62-fold rise.

A cadastral parcel in Kabina, Luunja Municipality, Tartu County will be in for a 53-fold rise.

Meanwhile, for the cadastral parcel in the village of Männiku, the increase will mean €300,000 in additional fees.

Only six cadastral parcels will see fee reductions.

Measures to mitigate sharp increases

To prevent the steep rise in land prices from forcing landowners to pay several times more in fees all at the same time, the state has set a limit to the increase in land tax.

Land tax can only increase by a maximum of 10 percent per year, and instead of the current maximum tax rate of 2.5 percent, next year it will be capped at 1 percent.

Annual fee rates for mining will also be changed. Instead of the current five percent, the annual fee rate will be three percent of the taxable value of the land or of the value determined in an extraordinary assessment. This change has already been written into the increase in land tax rates and will simply be incorporated into the new law.

In addition, a temporary measure will be introduced to mitigate the impact of the price increase. A transitional period of eight years will be set and the annual increase allowed in fees will be 50 percent of the previous year's.

"This measure will give tenants the opportunity to adapt to the changed situation. Eight years is a sufficient adjustment period to allow businesses to make the necessary changes to their economic activities," the explanatory memorandum to the draft bill states.

The permitted interval after which the fee can be changed will also be changed from three years to four years, the length of time before which the next regular land valuation will take place (in 2026). Up to now, land evaluation has been chaotic to say the least, with extraordinary evaluations conduced to revalue land.

Under the draft bill, the amendment would enter into force on, January 1 2024,  the same time as last year's land valuation results.

According to the state property register, at the end of last year, 630 cadastral parcels, which were registered as state property, had been allocated for the purpose of extracting mineral resources.

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