Estonia's government coalition to take relaxing budget rules route

Prime Minister Kaja Kallas (Reform) speaking to ERR journalist Madis Hindre on Monday.  September 18, 2023.
Prime Minister Kaja Kallas (Reform) speaking to ERR journalist Madis Hindre on Monday. September 18, 2023. Source: Priit Mürk/ERR

As the basic State Budget Act sets stricter budget rules than EU requirements, Estonia's government coalition will be taking the route of relaxing the basic budget law, Prime Minister Kaja Kallas (Reform) confirmed Monday. Kallas is set to meet with representatives of banks Tuesday to discuss the idea of a possible banking tax.

"The idea with the [state budget] basic law is to tie it to European criteria," Kallas said Monday. "We've actually set ourselves tougher restrictions than European restrictions. And we simply cannot fulfill them. So we would do like Europe's and we won't outrun that."

The prime minister did not wish to specify in what sums exactly this fundamental change would contribute to the drawing up of next year's state budget.

"We've made a lot of progress, and I'm not going to state the amounts yet just in case, because we were arguing over these numbers just a moment ago," she acknowledged.

The coalition council convened at 1 p.m. on Monday to discuss next year's state budget. Although hopes of getting the state budget squared away over a two-day field trip to Vihula Manor last week didn't end up materializing, around noon Monday, Kallas was optimistic that an agreement will be reached soon.

"The expectation was that we'd reach a deal at the end of last week, but we'll try today, then," the Reform Party chair said. "Then again, nothing is agreed until everything is agreed. Let's see what's new from this weekend."

Both Kallas and Minister of Finance Mart Võrklaev (Reform) have said that in terms of the budget, one major source of revenue has been under discussion — an additional tax, in fact, according to Võrklaev.

On Monday, the prime minister said that nothing specific has been arranged.

"The idea is that if we need to find sources of revenue, then let's take that time and discuss it with everyone in society," she said. "So that everyone is on board."

ERR asked Kallas whether only an increase in the tax burden would be written into the state budget strategy, which would then be calculated precisely over the next year.

"Yes," she replied, "So that everyone would have enough time, and so that there would be rounds of approval, discussions — all of that."

She added that the government has previously been criticized for coalition partners agreeing on tax increases and the government coming up with a specific plan, and so they want to hold a social debate over the potential additional tax.

"We're trying to take everything into account," Kallas said. "To do it in such a way that we have time to discuss and agree on what the basis should be upon which we calculate this. How and whom it will affect more, whom it will affect less. So that we'd have time to draw up legislative intent; so that we'd have time to discuss and coordinate this with everyone. So that when it goes into effect, then it's been done in good, inclusive form, so to speak."

Commenting on the topic of cutting additional higher education funding, a controversy-sparking issue that Minister of Education and Research Kristina Kallas (Eesti 200) claims was specifically a Reform Party proposal, the prime minister said that she supports the approach that all sectors have to make an effort.

"This is where if we distribute this pain more evenly, so to speak, across all sectors, then it won't hurt anyone too much; rather, it will hurt a little bit for everyone — to put it this way," Kallas said.

Regarding a special tax on banks, the Reform chair acknowledged that that has been the wish of both of her party's government partners, i.e. the Social Democratic Party (SDE) as well as Eesti 200.

"I've invited representatives of all the banks to meet with me tomorrow to find a solution," Kallas said. "On how to get the revenue we need in the budget."


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Editor: Aili Vahtla

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