Kaja Kallas: Taxes change, but values endure

Kaja Kallas at the Reform Party congress.
Kaja Kallas at the Reform Party congress. Source: Siim Lõvi/ERR

Various interest groups have fought, and continue to fight, a fierce battle to increase state budget allocations in their own interests, regardless of the overall needs of the country. We cannot give in to individual desires and the Reform Party has a responsibility to look at the bigger picture, Reform Party re-elected leader Kaja Kallas said during the party's general congress on Saturday.

I have led the Reform Party since spring 2018, so it has already been five and a half years. In that time, we have won four elections, including two national elections, and gained a record number of seats in parliament.

These have been turbulent years in the life of Estonia and the world, but the future shows no signs of calming down. The war in Ukraine does not seem to be over. This complicates the political and economic situation for all of Ukraine's allies, including us. We have a responsibility to govern, so there is nowhere to run from difficult and unpopular decisions.

There are no one-size-fits-all solutions in business and finance. But I am certain of some things. First, the government cannot spend more than it takes in over the long term, and public finances are the foundation of economic independence and security. Second, public subsidies must be targeted as much as possible at those who really need them and must not distort the free market economy. Third, a country like Estonia, neighboring an aggressive superpower, must have the capacity and will to contribute to its own defense spending.

We will not compromise on these points, and we are ready to discuss the methods of achieving them with both coalition partners and opposition politicians. I warned after the elections, and I must warn now, that many, if not all, of the decisions we need to take now and in the near future to improve public finances are already known to be deeply unpopular.

I feel even more than before that Estonia needs the Reform Party. Estonia needs a party that is ready to take the decisions that have been left undone for many years and to correct the mistakes that have been made in the past. It is not excluded that we will make mistakes as well. We have made mistakes in the past, and we could be making mistakes right now. This is especially true of economics: economics is not a precision science; it is often hindsight wisdom that reveals itself through the rear-view mirror.

Just as Winston Churchill once said to the British, "I have nothing to offer but blood, sweat and tears," I promise that you and me will have a lot of work to do, little money, and many sleepless nights during which we will be repeatedly asking ourselves, Why am I doing this?

Wouldn't it be easier to do what the opposition is proposing, and what seems to please both the press and a large proportion of Estonians – increase subsidies for everyone who can ask for them, cut taxes for everyone who likes lower taxes, and borrow money to fill budget gaps in the hope that it will never have to be paid back? Or if we have to, we won't be running the country anymore, and we'll be whining from behind somewhere about those who are trying to patch up the mess.

Does such an economic program sound appealing? It certainly does. If you don't think so, take a look at the opposition's support in public opinion polls. Would it be feasible? For a while, certainly. But it is not sustainable. For those who don't believe it, remember that Greece is as far behind us today with its policies as we were 15 years ago.

Estonia's issues started in 2016, when the first Jüri Ratas government accessed the public coffers and sent the Reform Party to the opposition benches to rest on its laurels. Reserves were quickly spent, and when they ran out, borrowing began, and the people were told the fairy tale of "non-repayable loans."

In 2019, a coalition of the Conservative People's Party of Estonia (EKRE), Isamaa, and the Center Party came to power, and the real "economy (bureau)crats" took the throne. Life was a flower, cakes were given out to everyone and "non-repayable loans" were taken out to cover running costs. On top of that, neighbors and allies were systematically bullied and then there was a celebration party again with more cakes, beating one's chest and drinks for the car. The party and revelry went on until Covid-19 arrived. Then came the war in Ukraine and the energy crisis. Crises that could not be foreseen but for which the reserves were intended.

There is an infallible rule in business and politics: the next crisis will come; the only question is when. No one knows the answer to that question, but preparing for a crisis must be an integral part of every politician's DNA.

I believe that if we can get public finances back on track now, both the Estonian economy and people's well-being will be back on track in a year or two. We have to believe in it ourselves. I do, and I am ready to go all the way.

At some point, we all have to ask ourselves: Do we bend down now and let the state walk on thin ice, or do we endure the present pain, and in the future we will be able to look back with pride: we did the right thing, and after us there was not a flood but a successful economy, a successful Estonia? And then we will be able to bequeath to our children, with a peaceful heart, a country on which they can build instead of cursing our failures.

We have been accused of not talking about tax increases before the election. It is true that we did not promise specific tax increases. We talked about balancing the budget, but nobody was really listening. This was at least partly due to the fact that EKRE, our main opponent in the elections, announced at the beginning of the campaign that taxes were not an issue. Hence the conclusion, and perhaps a lesson for the future: when the confrontation is based on values, nobody cares about numbers and percentages.

Is it bad? I'm not sure. I still believe that taxes go up and down, but values endure. If we can agree on common values as a society, we can find common ground on tax issues. The opposite is much more difficult, if not impossible.

Let me repeat once again, just in case, the core values for which the Reform Party stands. Estonia in our vision, in addition to the norms laid down in our Constitution:

  • Open-minded, friendly, pro-Western;
  • Valuing good alliances, never alone again;
  • Valuing a free market economy and little government intervention;
  • Respects public finances and balanced budgets;
  • Environmentally friendly and forward thinking;
  • Innovative and supportive of progress;
  • A country based on knowledge and eager to learn.

These values are self-evident to us, and these are the values that dominated the pre-election debates. These are the values that voters supported.

We began to take serious steps to put our public finances in order, with the aim of stopping the slide into insolvency. To do this, we raised taxes very moderately to spread the tax burden as evenly as possible. We have not been able to cut spending and save as much as we would have liked because we are not alone in government.

Various interest groups have fought, and continue to fight, a fierce battle to increase state budget allocations in their own interests, regardless of the overall needs of the country. We cannot give in to individual desires because the Reform Party has a responsibility to look at the bigger picture.

Fortunately, life is not all problems and worries. There are brighter moments; there are successes and decisions we can be proud of. The government we lead has a very ambitious coalition agreement, some important parts of which have already been or are being implemented.

The coalition agreement between the Reform Party, Eesti 200, and the Social Democrats is not the face of a single party. It is about compromise and finding common ground. The biggest common ground of our coalition is Estonia's independence, our sound public finances, our economic success, and our values. A country's fiscal strategy is a strategy for managing itself. It requires a flexible and sustainable public sector, overall savings, and hard work.

Our first and foremost goal is to significantly strengthen our self-defense. Without strengthening our defense, we cannot seriously talk about the future of our economy or the kind of Estonia we will leave to our children and grandchildren. The transition to education in the Estonian language is also part of our security. Security of energy supply, comprehensive protection of the population, economic competitiveness – all these areas are directly related to our security.

Recent times have not been easy for me personally or for the party. We have received a lot of criticism, especially for our fiscal initiatives. In short, nobody likes tax increases.

I don't like it myself. But to believe that we can provide the same services to our population with a tax burden of 33 percent as other Nordic countries do with a tax burden of 45–53 percent is to believe in Santa Claus. Just as there is no Santa Claus and no free sacks of goodies, there is no country that gets money from anywhere other than its taxpayers. It is our own taxpayers who have to pay for all the public services, subsidies, and salaries that the state then distributes through the budget.

Taxpayers have shown a very clear reluctance to support tax increases. Will the day come when we can talk people into tax increases? We have to believe in it, and, above all, we have to work, work, work in the name of this.

We were not elected to run a country to feel sorry for ourselves by looking at the ratings. We were elected to get Estonia back on track. And we will do it together with our coalition partners. It won't be easy, but we have no right to stop halfway.

There are many mothers and fathers usually on the winning side, while the loser is either the child of a single parent or an orphan. I know this firsthand, and I see it over and over again in my work. I believe that all of us have felt it in our lives and perhaps experienced it painfully.

But always, even in the most difficult moments, we have to remember that tomorrow is another day and the night is darkest just before dawn. We are doing the right thing; we are fighting for a better Estonia, and we must believe that one day, perhaps very soon, we will be able to point with pride at our current decisions and the results of our work.

I stand before you because I believe in Estonia, and I believe that Estonia needs the Reform Party. I stand before you because Estonia is so incredibly beautiful, successful, and developing so fast that I simply don't want to stand and watch this development from the sidelines.

I want to use all my skills to help make Estonia the best place to live, work, and raise children. I want to contribute in any way I can to making the image of Estonia irresistible to the world outside.


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Editor: Kaupo Meiel, Kristina Kersa

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