Minister of Health Riina Sikkut (SDE) meanwhile put the figure of the "hole" in the state budget at around one billion euros.

"If we were to aim solely at a balanced budget, this budgetary 'hole' would be substantial indeed," Sikkut said.

"However, taking into consideration that budget criteria must be met, we also want to move towards balance," she went on, likely including EU budgetary requirements in that.

"The [finance ministry's] spring forecast will reveal the final figures, but I think we can safely talk in terms of a billion [euros] particularly if the tax take turns out to be worse [than hoped]," the minister continued.

"This scenario was already included in the state budget strategy," Sikkut went on, referring to the annual four-year plan, known in Estonian as the RES, drawn up in tandem with the actual state budget for the following year.

"Regardless of these decisions that still need to be made, whether they concern efficiency, revenue growth or any other changes, the volume we have to agree on by the fall will be about a billion. By then, what the forecast states will have affected what those numbers will ultimately turn out to be."

Last week, the coalition introduced three tax change proposal, namely a tax on sugary drinks, hiking the misdemeanor fines tariff, for instance with regard to road traffic offences, and that of state fees applicable for example when buying property, plus a freeze on the income tax exemption applying to pensions.

Sikkut said that since these three changes had already been included in the RES, there was nothing new about them.

The minister stressed also that the government's intent with these changes is not to plug the budgetary hole – which the consensus seems to be would require greater funds than would be raised by the three measures in any case.

Sikkut said: "They are in place either to meet health goals or, in the case of fines, taking into account that living standards have been rising for 15 years yet the fines have remained at the same level – ie. ultimately this modernization has to be undergone."

"Actually these changes are not in any way in the budget to bring a significant increase in fixed income, which would allow us to face the future more boldly. Rather, these are necessary policy changes in a sectoral sense, on which there was already an agreement in the fall, while now the drafts have been completed and sent for their coordination round, meaning the public discussion is also taking place now," she continued.

Jüri Ratas (Isamaa), also appearing on Tuesday's "Esimene stuudio," said the governing coalition shocks society with a new tax on practically a weekly basis and solely in the interests of fulfilling the Reform Party's tax pledges.

"There is actually only one reason it, namely that when a coalition tripartite coalition was formed in 2016, of the Social Democrats, Isamaa and the Center Party (which Ratas headed up as prime minister – ed.), our desire was to alter the income tax exemption, essentially meaning wealthier higher earners would not have received that income tax exemption. But today, given the current coalition, that system will be turned upside down, so the wealthier people will get an income tax exemption back," Ratas said.

"This tax system change – and the Reform Party gave it a name, the 'tax hump,' which actually does not exist – will take €494 million from the budget when it comes into effect in 2025," Ratas said.

Eliminating the "tax hump," a phenomenon also known as bracket creep, whereby rising wages push more and more people into the next tax bracket, was a Reform Party pre-electoral pledge.

"Now, this present to the wealthy is being patched up via a sugary drinks tax and a car tax," Ratas went on.

"This will of course hit people's livelihoods very hard and painfully, the livelihoods of rural people, particularly when it comes to the car tax. I think that this is actually the reason, and it must be stated specifically that we are actually fulfilling the election promise of the Reform Party. In my opinion, this tax change, this so-called elimination of the tax hump, is not really needed," Ratas continued.

According to Ratas, the biggest problem related to the two percentage-point VAT hike (to 22 percent) at the start of the year, as the competitiveness of the Estonian economy has fallen compared with that of Latvia and Lithuania as a result.

Riina Sikkut pointed out that during the Jüri Ratas first administration, 2016-2019, they had also wanted to introduce sugary drinks and car taxes, but at that time the state budget and overall economic situation was not as parlous as it is today. "The fact that we need to tax more, whether it be on actions which damage the health, or on property, is actually a common understanding between us. I don't object to the tax hike either, but it has nothing to do with the tax on sugary beverages," Sikkut said.

Sikkut said that the government does not make decisions on a fragmented basis, and has no desire to introduce a taxation cornucopia, but the current situation demands new tax revenue sources nonetheless. "The case for change is a strong one," she said.

Ratas concurred that a tax debate in and of itself is not a bad thing. At the same time, he added, in the current situation, with an economy which has been contracting for eight quarters consecutively, raising taxes is crazy talk.

The state budgetary situation will be ameliorated if the wealthier demographic loses its income tax exemption once again, he reiterated. "This is something they don't need right now, yet it takes a lot of money out of the budget," he went on.

While raising defense spending is the right thing to do, rather than introducing new taxes or hiking existing ones, this money ought to be obtained via loans – going back to a difference of opinion he had with the Reform Party when he was Center Party leader.

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