'Esimene stuudio': Coalition wants tax debate within society

Coalition panelists on Tuesday's
Coalition panelists on Tuesday's "Esimene stuudio". Source: ERR

The 2024 state budget, which the prime minister announced Tuesday afternoon is now ready for processing at the legislature, includes a broad-based national defense tax component, which will be covered in 2025 by the leftovers from the "empty" €400-million budget entry.

The government and the prime minister left this line blank and without a specific tax category, but with an expected value of €400 million, with a view to having its details hashed out by July next year.

"This base should be as broad as possible, because when we talk about security, it concerns everyone," the prime minister said Tuesday.

The coalition also wishes to use the next nine months or so to gestate these details, in a manner which will include societal debate.

This and other topics were on the table in Tuesday night's "Esimene stuudio" politics head-to-head show.

Participants from the three opposition parties were however of the opinion that other sources of revenue should be found than further tax takes.

Taking part in Tuesday's "Esimene stuudio" were, along with Finance Minister Võrklaev, Minister of Education Kristina Kallas (Eesti 200) and Interior Minister Lauri Läänemets (SDE) for the coalition, and EKRE leader and former finance minister Martin Helme, former public administration minister Jaak Aab (Center) and Isamaa leader and former foreign minister Urmas Reinsalu representing the opposition.

Võrklaev began by saying that the state budget priority for 2024 is security, both in a military sense and in a broader-based national sense

The second priority was economic growth via the green transition and an orderly state budget, the third, support for Ukraine.

"Yes, the government has said that a tax rise is needed towards broad-based security, but now we will take half-a-year to discuss which tax base to use for that," the minister said.

Lauri Läänemets said that the most important aspect for his party is impending cuts, particularly to the police and emergency services, where it is key that salaries do not remain frozen for the next four years.

Mart Võrklaev reiterated the broad-based national security tax should be in place by 2025, and should cover the €400 million budget hole currently lacking. LINK

Läänemets stressed the "broad" nature of the approach. "It is not the case that only individuals pay, but companies also have to contributed. How much a person has to pay will be revealed in the course of longer debates."

What form these debates might take was also hinted at by Läänemets, who added: "SDE's vision is very different from that of the Reform Party. We are saying that there should be a graduated income tax, but they want something else."

As for government borrowing, which though its pace of growth is planned to be curbed will still take place, Minister Võrklaev was unable to put an exact figure to it.

Kristina Kallas said the funds needed for the transition to Estonian-language onl education are there, adding the teachers' wage fund will increase also, though she was unable to cite figures.

Jaak Aab said that while taxation is a necessary evil there were better ways of doing it, including losing tax exemptions pertaining to the better off.

Mart Helme said that the Reform Party has been in power for three years and has promised to fix the country's economy, but instead has loosened up the state budget rules even more, adding that a rise in expenditure of between nine and 12 percent on Kallas' watch was unprecedented.

Võrklaev's response was that relaxing the regulations was necessary due to the difficult situation with the economy at present.

"Getting the economy going is important; €1.7 billion in this state budget for next year will go on investments: €300 million on the construction and renovation of buildings, €400 million on roads and railways, 3 percent of GDP will go on defense, then we will start dealing with the large-scale national defense," the minister said.

Helme said that investments should not be inundated in the green transition, and added that the current government had paid support measures incessantly while cutting investments into four-lane highways.

Urmas Rainsalu said that the tax rises adopted in spring when the coalition entered office required critical review.

"Taxes must not be hiked during an economic downturn; this is economic demolition," he said.

Läänemets said that while his party's planned tax on banks' profits will not come to fruition, around €120 million will nonetheless find its way to the state budget from that source, which he put down to his own party's work.

Võrklaev said that the car tax is coming following a substantive debate through summer, adding that the bill is ready and was initially due for its coordination round this week, but that this has been put back for coordination with society itself.

The bill will reach the Riigikogu in November, with a view to becoming law at the start of 2025, he added.

Krisinta Kallas meanwhile said that while government sector expenditure has risen since 2017, revenues have fallen, which would, she said, lead to a situation by 2027 where government sector revenue made up 37 percent of GDP, compared with expenses, which would by then equate to 42 percent of GDP.

This gap needs closing, which means, for instance, that teachers' wages cannot be boosted via loans as such.

"In terms of permanent revenues, we need a societal discussion, then we can start with it," the minister said.

A fall in state revenues is not related to the way that the tax system works in Estonia so much as that external revenues are not coming in.

Kallas listed the cut in fuel excise duties as an additional loss of revenue.

"Looking at the nine-year perspective, we do not have the revenue and expenses in the state budget, so it is necessary to start dealing with that. If we want to climb out of this hole via economic growth, in the coming years the economic growth of Estonia would need to be so fast that we would reach the welfare level of the U.K., within four years. This is not realistic," she added.

Läänemets said that his party "had no fetish for raising taxes," placing the blame at the deficit "the right wing parties have created," likely primarily referring to the Center-EKRE-Isamaa coalition in office 2019-2021.

Mart Võrklaev pointed to an improvement in how taxes are collected as required, such as making e-invoices mandatory from 2025, which he said would cut down on fraud.

Another of the many uses which the supposed messiah of Artificial Intelligence (AI) could be put towards would be in this area also.

The rest of the episode dealt with pensions and minimum wages, public transport and rural life, all of which Lauri Läänemets claimed would improve under the newly unveiled state budget, adding that the oil shale sector, which has been seeing somewhat of a renaissance of late, is a good source for potential state revenues.


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Editor: Andrew Whyte, Mari Peegel

Source: 'Esimene stuudio,' presenters Liisu Lass and Andres Kuusk.

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