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Former finance minister: Unspecified tax rises should not be in the budget

"Pay." Source: Siim Lõvi /ERR

Aivar Sõerd (Reform), a former minister of finance and member of the Riigikogu, said that the budget strategy for 2025 should not include €400 million in undefined tax increases and €150 million in undefined cutbacks as revenue sources.

Sõerd said that it makes no sense for the Estonian government to develop a budget strategy if the revenue sources are unknown. "Of course, there should be no such thing," Sõerd said.

"The expenditures for 2025 are known. The costs that must be incurred are known and based on the most recent and most comprehensive knowledge or the current state of affairs. However, the sources or means by which these costs will be covered are only partially known. And the state has regular revenues, which are tax revenues and non-tax revenues and other sources of revenues. And the borrowed money," Sõerd said.

"But then there is this blank line that is going to be filled by some kind of new tax, and on top of that there is this so-called activity-based budgeting nonsense of zero budgeting," Sõerd added.

When asked if such a move does not appear to be just deferring decisions to the future, as the government is unable to agree at this time, while it will not be any simpler in the future, Sõerd responded that he could not add anything to what was expressed in the question.

Sõerd was also critical of the activity-based budgeting (ABB). According to him, it is evident from the cut proposals that no one in the ministries employs activity-based budgets, but rather actual budgets with business activities and numbers.

"Please, we have had an Activity-Based Budget for three years, but the budget cuts, which is what the budget review is all about, are still done on the old form of the Expenditure and Resource-Based Budget," Sõerd said.

Aivar Sõerd. Source: Ken Mürk/ERR

In his social media post, Sõerd gave an example of how the Ministry of Education is cutting €4.5 million from funds for the renovation of state schools.

"There is no expenditure section for the cost of renovating public schools in an activity-based budget. Under the ABB result area 'Intelligent and active people' are the programs such as 'Reorganization and development of the educational network' and 'Ensuring access to general and higher education'.

"The purpose of allocating the money placed into the cost pool is to ensure access to quality education, etc., and the programs are presented as a single cost pool. Indicators of performance, such as the percentage of pupils with low educational attainment who are not enrolled, are used to evaluate the expenditure of funds," Sõerd said.

"So, the cost of repairing public schools is not an activity-based category of the state budget, but rather a resource- and expenditure-based category. The same logic pervades the other ministries' expenditure categories," he said.

"The actual administration of public finances, the search for cost reductions, and the monitoring of budget execution are not based on an activity-based budget, but rather on a regular expenditure- and resource-based budget. The activity-based budget has no users in the Riigikogu or in government ministries or agencies," Sõerd said.

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Editor: Huko Aaspõllu, Kristina Kersa

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