SDE wants to collect nearly €1 billion from banks with special tax

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Central Tallinn skyscrapers, including the headquarters of several banks in Estonia.
Central Tallinn skyscrapers, including the headquarters of several banks in Estonia. Source: Siim Lõvi/ERR

Social Democratic Party (SDE) chair Lauri Läänemets sent a letter to his coalition partners in which he proposed collecting a combined €951 million over three years from banks by imposing a special tax.

"We've had two problems coincide," Läänemets said in his letter to the Reform Party and Eesti 200. "On the one hand, the rise in the Euribor has led to an unprecedented increase in banks' interest incomes, reducing people's purchasing power and businesses' capacity to invest and expand, holding back economic growth in general."

On the other, he continued, they've reached a point in drawing up the state budget where it's difficult to meet budgetary criteria, because it isn't possible to make cuts, and revenue sources don't provide sufficient solutions.

"In view of a fairer economic environment and the difficult budgetary situation, we, the Social Democrats, propose imposing a solidarity tax on banks' high interest incomes in Estonia," Läänemets wrote.

"Our proposal is based on the scheme being implemented in Lithuania, where the average interest income of the previous four years is subtracted from the current [income], and half of the resulting amount is taxed 60 percent," he explained.

Läänemets plans to use this special tax to add €384 million to this year's budget, €470 million to next year's budget and €97 million to the 2025 budget.

While he didn't cite this year's breakdown, according to the SDE leader, Swedbank would have to pay €216.4 million, SEB €113 million, LHV €56.5 million, Coop €18.8 million and other financial institutions a combined €65.9 million in these taxes next year.

In 2025, Swedbank would be slated to pay €44.4 million, SEB €23.2 million, LHV €11.6 million, Coop €3.8 million and other financial institutions €13.5 million in taxes.

Läänemets also noted that he believes Estonia could employ another model in lieu of the Lithuanian model, but that Lithuania's seems to him to be responsibly established in terms of all parties involved, and therefore a good one.

This May, Lithuania introduced a tax on banks according to which they are taxed 60 percent of a bank's net interest income exceeding a four-year average by more than half. Latvia has likewise mulled introducing an additional tax on banking profits.

Kallas, Hussar against bank tax

Prime Minister and Reform chair Kaja Kallas has previously described the taxing of commercial banks as populist.

"I think that's populism," Kallas said. "This has much broader implications that the government absolutely must consider. Because banks also keep the circulation of the economy going."

She added that the additional taxation of banks may also make home loans and other loans more expensive.

Eesti 200 chair Lauri Hussar has expressed similar views, likewise warning that further taxing banks may make loaning money more expensive and thus ultimately be bad for the economy.

"Banks' advance income tax has already been raised from 14 percent to 18 percent, meaning that banks will be taxed more going forward," Hussar said in an online Postimees broadcast less than a month ago. "I'm not so sure that the idea of taxing banks is a magic charm that would help raise a lot more money or solve our major problems."

Each such tax also bumps up the cost of banking services, he pointed out, "And that also increases the price of a loan, and that has a direct impact on the economy as well."

EKRE, Center in favor

Of Estonia's opposition parties, both the Center Party and the Conservative People's Party of Estonia (EKRE) have been in favor of taxing banks.

EKRE chair Martin Helme has previously said that it has in no way been proven that taxing bank profits would impact people's mortgage payments, as those have increased several times already anyway.

"I don't see how this would make lending more difficult or loans more expensive," Helme said. "That's nonsense."

Center Party whip Tanel Kiik, meanwhile, has said that the additional taxation of banks isn't a punishment for anyone, but rather the building of a fairer and more solidary society.

"For example, 30 percent of the major banks' record profits would be enough so that we could cancel the VAT hike as well as the planned car tax," Kiik highlighted.

"Given the already rapid rise in prices and the economic downturn that has lasted for a year and a half already, this would be much fairer and more responsible than the increased taxation of working folks," he added.


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Editor: Aili Vahtla

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