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Swedbank's huge profit raises issue of banks' contributions to national budget

Swedbank.
Swedbank. Source: Siim Lõvi /ERR

Swedbank, Estonia's largest bank, earned €385 million last year. Results doubled over last year. Huge profits have resurrected the issue of how much banks should contribute to the national budget.

During the summer budget debates, the Social Democrats proposed a temporary bank tax on banks' excess profits along the lines of the Lithuanian measure, but it failed to gain support. Now the leader of the Social Democratic Party, Interior Minister Lauri Läänemets, has proposed that the banks help finance the teachers' pay rise.

"We first proposed temporary bank levy last summer when we were preparing the national budget, but the government could not agree on this. But since the prime minister says that €10 million can't be found, I think we don't even need a bank levy. The prime minister could meet with the bank heads and say that this would be a solidarity action, giving Estonian banks a free choice to solve this problem," Läänemets said.

Finance Minister Mart Võrklaev (Reform) rejected the idea, saying that the banks already contribute a lot to the state budget. "I understand that Lauri Läänemets likes to engage in a lot of populism, but the banks have already contributed €80 million this year through an increased dividend payout, with another €6 million coming in from last year, for a total of €84 million plus €90 million per month. Another €40 million is expected next year. From 2025, this advance tax on banks will increase from 14 percent to 18 percent – one of the tax changes in the package that will go to our defense spending," Võrklaev said.

Olavi Lepp, the head of Swedbank, agrees.

"Swedbank has pledged €10 million to the education fund, which will be launched soon. We will definitely invest in education. On the question of contribution, let me remind you that the entire national budget is funded by business, and in four years, the revenue side of the budget has gone from €10.7 billion to €16.7 billion, a €6 billion increase. I believe that the money is in the budget, and it is simply a matter of politicians making sensible decisions," Lepp said.

On Wednesday, the Center Party parliamentary group in the Riigikogu presented a draft resolution imposing a temporary solidarity tax on Estonia's banking sector from 2024 to 2027.

Lepp, however, doubts the long-term duration  of the banks' enormous profits. "Definitely not. Like all banks. Interest rates are approaching their peak. Rather, we are now paying much more for deposits, and this was a one-time profit peak that we will certainly not experience again," he said.

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Editor: Merili Nael, Kristina Kersa

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