Estonian government writing empty €400m revenue line into 2025 state budget

Euro coins.
Euro coins. Source: Siim Lõvi/ERR

The Estonian government intends to include an empty budget line in its 2025 state revenues with no specific tax type indicated but a projected amount of €400 million, or approximately 1 percent of the expected GDP.

Both Prime Minister Kaja Kallas (Reform) and Minister of Finance Mart Võrklaev (Reform) have said regarding the budget that a major new 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."

The prime minister 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.

"Now we're trying to respond to this criticism by taking time and broadly discussing what these could be, where we could find these additional sources of revenue," she said, adding that "the entire opposition, the press and everyone" can get involved and provide their input.

"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."

ERR reporter Madis Hindre asked Kallas whether new revenue sources won't be listed by area, but rather only with projected revenue indicated.

"Yes, that was the Finance Ministry officials' suggestion — to not beat yourselves up so much over definitely having to have the answers to all the questions right this moment," she replied. "And given the criticism that we haven't sufficiently involved or listened enough, then we're going to do this more broadly before we come up with a specific source of revenue."

On Tuesday, however, the Ministry of Finance submitted for a round of approval a bill of amendments to the basic State Budget Act with which the government intends to significantly relax state budget rules — and with just a two-day deadline given for feedback.

New taxes, discussions at Vihula Manor

To date, the government has only discussed the car tax as an example of an established new tax.

Kallas is slated to meet with representatives of the country's major banks to discuss the prospective banking tax.

Minister of the Interior and Social Democratic Party (SDE) chair Lauri Läänemets said Monday that next year's budget has more or less been figured out, but added that yet to be decided are the possible introduction of the banking tax as well as major changes to the state budget strategy for the coming years.

According to Läänemets, a tax on sweetened beverages could net the government more than €10 million.

Eesti 200 MP Marek Reinaas, who participated in the state budget talks at Vihula Manor last Thursday and Friday, says that Estonia won't be seeing a banking tax, however the current budget solution does foresee some sort of tax hike in the long run. What exactly that may be, however, still needs further discussion together.

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.

Minister of Education and Research Kristina Kallas (Eesti 200) said she is optimistic that the budget will settled on Tuesday.


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Editor: Aili Vahtla

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