Minister of Finance Mart Võrklaev's plan of dropping €400 million worth of new tax hikes and borrow the money instead is a political statement rather than a plan at this stage, coalition Eesti 200 leader Margus Tsahkna told ERR.
Finance Minister Mart Võrklaev (Reform) told ERR Tuesday that the continued recession means that Estonia should cancel €400 million worth of unspecified tax hikes in 2025 and borrow to cover the shortfall.
Tsahkna repeated his earlier point that the fiscal deficit is closer to a billion euros but welcomed the opportunity to start discussing the state budget strategy (RES) and taxes in the coalition.
The Eesti 200 chairman said that his party has long since wanted to see a plan from the Ministry of Finance for how the RES could help kickstart the economy. "And we have seen no such plan. /.../ But now the finance minister has said that the RES is not complete, suggested the debate is open again. I want an open debate in terms of tax and economic policy and investments," Tsahkna said.
He joined Social Democratic Party (SDE) leader Lauri Läänemets in claiming that everything is back in play now.
"It's all back on the table. The matter of abolishing the tax hump (Estonia's gradual basic exemption reduction scheme – ed.), whereas the government has no agreement for car tax either. I believe the finance minister needs to realize what he has opened up," Tsahkna said. "He opened the whole thing, the whole RES debate, including income, expenses and measures. And I'm very much looking forward to the debate."
Tsahkna said that Eesti 200 aims to make concrete proposals regarding strategic investments in energy and green reform in industry, but added that Estonia cannot improve its economic situation simply by borrowing more.
"Those are major investments for which we need to borrow, not for what I believe the finance minister suggested, which was simply getting through the year somehow," he remarked.
The Eesti 200 head suggested that the government could convene to discuss changes to the state budget strategy early next year.
"I want to hear about this plan. I want to see the calculations. Tax hikes are not smart decisions in the current economic situation if they are ill-considered. But I also gather from his [Võrklaev's] statements that he has other plans. Excellent, let us discuss them," Tsahkna said.
The Bank of Estonia on Tuesday published its recent economic forecast according to which the Estonian economy will continue shrinking and unemployment will climb to 9 percent. The Bank of Estonia forecast growth for 2024 as recently as this fall.
Editor: Marko Tooming, Marcus Turovski