Opposition MPs criticize governmental inaction over economic downturn

Panelists on Tuesday's 'Esimene stuudio'.
Panelists on Tuesday's 'Esimene stuudio'. Source: ERR

Coalition and opposition leading politicians disagree about the wisdom of hiking taxes at a time when the Riigikogu, which just returned for the fall session, will soon be debating just that.

In addition the annual state budget process properly gets underway this month, making for a busy thirteen or so (leaving out the Christmas and New Year break) weeks remaining in 2023.

Appearing on Tuesday's "Esimene stuudio" political head-to-head debate were (in alphabetical order): Rain Epler (EKRE), Tanel Kiik (Center), Aivar Kokk (Isamaa), Jevgeni Ossinovski (SDE), Minister of IT and Minister of IT and Economic Affairs Tiit Riisalo (Eesti 200) and Finance Minister Mart Võrkalev (Reform).

The panel discussed the economy, with opposition party representatives (from EKRE, Center and Isamaa) criticizing the government's tax hikes and planned tax hikes, and inactivity amid the overall recession.

Coalition representatives for their part said the best guarantee of stability for business comes via state-regulated finance and the creation of renewable energy capacities.

Aivar Kokk said that Estonian entrepreneurs are not awaiting financial support, but they are awaiting economic stability. "The tax hikes were not negotiated with business stakeholders. /.../ The state must send the message that taxes will not simply be raised when times are tough," Kokk said.

Minister Riisalo said that, however, the coalition investing €343 million funneled via the EU's Just Transition Fund in the coming years, at least in Ida-Viru County. 

The first step here came with the investment into the Silmet magnet factory. "€150 million of this [€343 million total] will go towards investments in the smart economy. €50 million to encourage development activities based on oil shale technologies; €25 million on adequate education programs," Riisalo enumerated.

Jevgeni Ossinovski said that while the economy has been in decline for several quarters in-a-row, that decline is not across the board, and there are some sectors which are performing well, and growing. 

As for the decisions on tax increases, Ossinovski said that during a crisis, examining which types of tax increase are the least likely to inhibit economic growth is required; these are, above all else, consumption and property taxes, he said.

Ossinovski said: "The challenge here is massive and a lot of work needs to be done in this context, and there is no peace of mind over tax hikes not recurring."

In 2027, 1 percent of GDP, or €480 million, will be going to banks in the form of interest, he said.

"If we want better public services, we have to look at the tax policy," he added.

Ultimately since the state budget is far from being in order, the prospect of no further tax rises is a pipe dream, in effect.

Finance Minister Võrklaev said that a positive aspect is that the labor market remains strong, with no mass unemployment has feared in other economic crises.

Additionally, encouraging growth by subsidizing firms for their losses will not work out, he said.

Rain Epler disagreed. "The entrepreneurs I have spoken to, many of them have had to close down their businesses. A number of them have decided that no investments will be made in the current environment. /.../ In the energy sector, they are dealing with a kind of utopia and are not moving towards real solutions," he said, noting that the coalition's tax increases in the coming years will hit people with lower incomes and those living outside of the larger settlements the hardest.

Tiit Riisalo said the current government has found the optimal balance between tax hikes and borrowing; Mart Võrklaev said that although the summer Ministry of Finance summer forecast had been more optimistic than the spring forecast, nothing can be said to have substantively improved over that time.

While savings up to €900 million have been found within the state budget and its expenses, in the longer term, the state budget is still problematic. Võrklaev said.

Tanel Kiik said that the tax debate is certainly needed, but those who can pay more, i.e. the wealthiest, should nonetheless be taxed more.

The state must make more investments at a time like this, even at the cost of a budget deficit, he went on. This means even the planned cuts by the coalition should not actually take place.


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Editor: Andrew Whyte, Marko Tooming

Source: 'Esimene stuudio,' presenters Liisu Lass, Andres Kuusk.

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