Kaja Kallas: State budget is put together

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Kaja Kallas.
Kaja Kallas. Source: Priit Mürk/ERR

Prime Minister Kaja Kallas told reporters after 6 p.m. on Tuesday that the agreement on the state budget was in place. There will be no new taxes in 2024 in addition to those already introduced by the government, and the car tax will be delayed by a year, the head of government said. There will be no cuts in education.

Agreement was reached on both the state budget strategy and the state budget for 2024.

"We have reached an agreement on the big picture. The most important message is that in 2024 there will be no new taxes in addition to those we have already introduced. The car tax will be postponed to 2025. I had a meeting with the bank managers; there will be no bank tax and the banks are willing to contribute to society in solidarity. This will give the banks a tax peace for three years," Kallas said.

"We have found special, narrow savings, which is difficult; it means that we need to find new sources of revenue in 2025. The areas where the money is needed are security, education in Estonian, social protection and cybersecurity. So the idea is that the new source of revenue will have to be broad-based," the prime minister added.

"We take the time to discuss and agree on tax ideas. We have a zero budget for the next four years. We will start with the three ministries with large budgets and try to make subsidies needs-based only," Kallas said.

"The 2024 picture is pieced together. I don't want to give specific numbers because the Ministry of Finance is still calculating them, but we have managed to do a lot to reduce Estonia's tax burden and, with it, the interest payments," Kallas added.

€150 million is expected to be cut across three ministries. Kallas does not specify the biggest cuts. "Let's get this document in order and then we go public. The spreadsheet will be ready in the next few days," Kallas said.

Interior Minister Lauri Läänemets (SDE) said that banks will take steps within two years to contribute to the economy through the state budget. "The point of fairness has been met, even though the SDE had in mind much higher numbers, but the principle is nevertheless important," he said.

Kallas said that banks will pay more dividends in the coming years, on which they will pay income tax to the state budget. "Over two years, this contribution will amount to €120 million, in addition to what was planned," she said.

"Education is important to Eesti 200, and we are pleased to see that there will be no cuts in education. The best economic policy is education policy," Marek Reinaas (Eesti 200) said. He added that next year's budget has a total of €1.7 billion for investment, of which €1.2 billion will come from foreign funds and €500 million from the Estonian state budget.

The government left an empty budget line in the 2025 tax revenue without a specific tax category, with an expected amount of €400 million. "By July, we will have a solution [on how to fill this line]. We have half a year to discuss. This base should be as broad as possible, because when we talk about security, it concerns everyone," Kallas said.

Teachers' pay is the only one to rise

Läänemets said the public sector wage bill would not be frozen for four years. "We all understand that it will be very difficult to make these wage increases in the coming years, but we will make an effort to do so. If we didn't have the new taxes, if we didn't have the broad-based national defense tax, we wouldn't be able to have the wage increases that we have," Läänemets said.

"For next year, however, the public sector wage bill will be frozen, with the exception of teachers' salaries, which will rise," Läänemets added. "Unfortunately, there will be no pay rise for rescue workers and police officers next year. Fortunately, we have reached an agreement that there will be no layoffs of police officers. But one of the commands will have to be close down," the minister said.

On Tuesday night's program, Läänemets said that although there will be no pay rise for rescuers and police officers next year, their salaries will have to rise in 2025 at the expense of a new tax increase.

The income tax exemption for pensioners will rise to €776 next year; thereafter, this increase will be frozen.


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Editor: Mari Peegel, Kristina Kersa

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