SDE leader: Key issues needing resolving before state budget can go ahead

SDE leader and Interior Minister Lauri Läänemets.
SDE leader and Interior Minister Lauri Läänemets. Source: Priit Mürk/ERR

The coalition Social Democratic Party (SDE) stands for the funding of education, party leader and Interior Minister Lauri Läänemets says, adding that until there is substantive agreement on a few final key areas between his party and its coalition partners, Reform and Eesti 200, it will be difficult to finalize the 2024 state budget.

Nonetheless, all three parties have made plenty of compromises and worked together through the course of the state budget discussion so far, Läänemets says.

A two-day out-of-town set of meetings held at the Vihula Manor Country Club and Spa last Thursday and Friday drew a blank on any compact on the 2024 state budget bill; the bill must be ready by the end of this month, in order for processing at the Riigikogu between now and mid-December, when the Riigikogu disperses for the Christmas and New Year break.

Monday's talks back in Tallinn also did not reach a final agreement, though participants said there was reason to be optimistic.

Lauri Läänemets told ETV news show "Aktuaalne kaamera" (AK) Monday that: "We have now reached the point where the axe of cuts will not fall anew on the Rescue Board and the Police and Border Guard Board."

"It is true that there are still some earlier cuts that had been entered in the state budget strategy, and we still have to negotiate on these issues. As for the Social Democrats, a key matter is what we will together come up with in respect of the car tax, and with mobility reform, i.e. more buses and more trains. In this regard, we have taken quite a few major steps forward," he went on.

Earlier on on Monday, Läänemets had told ERR's radio news that the state budget for next year was essentially in place, though referenced some holdout issues, including a tax on banks' profits, that time also.

AK reported that both Läänemets and Finance Minister Mart Võrklaev (Reform) have in essence said the budget is crystallizing, with agreement outstanding only on the last few items.

Läänemets said this had even been the case while at Vihula, though there were still "some very fundamental issues" requiring agreement, at that point in time, referencing cuts to research as well as the banking tax.

These key areas need resolving before the 2024 state budget can go ahead, Läänemets went on.

Minister Võrklaev reiterated his party's opposition to the banking tax and to corporate taxation also, citing the increased tax take the banks' bumper profits for this year will bring in (up to €70 million, Võrklaev said) and the need for businesses to be kept alive at a time of economic difficulty – a need which imposing a corporate tax would work against.

Eesti 200 chair Lauri Hussar meanwhile said his party will stay in the fight in respect of security and of education funding.

The state budget talks continue today, Tuesday – Prime Minister Kaja Kallas (Reform) is set to meet with senior banking executives to discuss the proposed bank profits tax with them further.

Minister Läänemets last week sent a letter to his coalition partners proposing a special tax on banks' profits which would, he wrote, take in €951 million over three years. Levying a "classical" corporate income tax has also been proposed.

At present, Estonia has a zero-rate corporate income tax on retained and reinvested profits. Distributed profits are taxed at 14-20 percent. This has been highlighted as one of several factors making Estonia an attractive for foreign investors and firms to do business, but is under pressure with the current need to plug holes in the state budget and the current economic situation as a whole.

The proposed car tax was introduced in the coalition agreement signed in April.


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Editor: Andrew Whyte, Marko Tooming.

Source: 'Aktuaalne kaamera,' reporter Liisbeth Rats.

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