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Kallas on tax hikes: I likely am committing political suicide

Prime Minister Kaja Kallas (Reform) in the Session Hall of the Riigikogu.
Prime Minister Kaja Kallas (Reform) in the Session Hall of the Riigikogu. Source: Priit Mürk/ERR

Commenting on the government's planned tax hikes on Wednesday, Prime Minister Kaja Kallas (Reform) said that these are unpopular but essential decisions for future generations. Nonetheless, the Reform Party chair doesn't consider Estonia's imminent VAT increase from 20 to 22 percent significant.

"I likely am actually committing political suicide here, because I'm doing what's right for the Estonian state and for future generations," Kallas said during Question Time in the Riigikogu on Wednesday, responding to MP Vadim Belobrovtsev (Center), who had asked whether Kallas and the Reform Party wouldn't perhaps like to hand over responsibility for governance to other political forces.

"Do you really believe that I really want to raise these taxes – that I'm some kind of flagellant?" she continued. "I'm just asking – what are the alternatives? In a situation where you're all saying that benefits must be raised, wages must be raised; everything must be raised. It's coming out of taxpayers' pockets. And we cannot take out additional loans because those can't be used to cover fixed costs. Money doesn't come out of [an ATM] somewhere; it doesn't come from some foreign uncles. It comes out of taxpayers' pockets. This formula just doesn't all add up."

Kallas said that the upcoming VAT increase in Estonia, which will go from 20 to 22 percent from the new year, is Estonians' contribution to increasing defense spending, adding that this increase isn't a significant one.

"I'm just back from Europe, where these debates are taking place," she said. "The security situation is exceptionally complicated; never before in our period of independence has it been this complicated. We must therefore make decisions that enhance our security. We have to make them looking forward. Yes, that isn't something currently tangible, but if we don't make these security expenditures, then believe me, we'll all end up finding out the hard way. So a 2 percent VAT increase isn't really significant."

The Reform chair said that it's a fine time to be a member of the opposition right now, as the government has to make unpopular decisions, which the opposition can simply criticize without offering any alternatives on where to save.

"If we take out loans, loan interest rates have gotten so high that in 2027 we'll be paying more in interest on our current loans alone than the entire Ministry of Culture budget is worth," she highlighted. "In other words, all of the money we're putting into theater, sports – that we put into culture – is less than the amount of money we're paying to banks in interest. I'm asking you – what is the alternative? And I'm really very willing to hear an alternative that would be less painful for me personally as well."

Kallas also touched on the support she earned in the Reform Party's latest elections, which were held last month.

"You say that support for me among members of my party is modest," she commented. "I'd say my support – 64 percent, I think – is higher than that of Isamaa's chair within his own party, if you put it that way. But that's not important, of course."

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Editor: Aili Vahtla

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