On Sunday, the weekly new show "Aktuaalne kaamera. Nädal" (AK.N) spoke with both sides to understand the reaction to the law, nicknamed the "Robin Hood" tax.

Under Estonia's current system, money is allocated based on where people are registered as living.

One example is Värska in Setomaa, south Estonia. When working-age people leave to study or develop their careers elsewhere in the country, their tax money goes with them.

This has created an unequal situation where the aging population has remained in the countryside and it is increasingly difficult for municipalities to provide services, AK.N reported.

Raul Kudre, mayor of Setomaa, compared the development gap to Estonia's rail network.

"One is as slow as our railways – one allows 100 kilometres an hour, the other 160. Cities such as Tallinn and the Tartu region and surrounding municipalities are speeding upwards like a high-speed train, while the rest of Estonia is growing at a much slower pace," he described.

Municipalities receive almost 12 percent of personal income tax and 2.5 percent of income tax paid from pensions. This means, in areas where the number of elderly people increases, there will be less and less tax money allocated.

Former Minister of Regional Affairs Madis Kallas (SDE), who resigned last week, put forward the redistribution plan to try and slow down the unequal pace of development. Over the next five years, it aims to raise the income tax paid to municipalities by working-age people and pensioners to 10.23 percent.

For Põlva County, this would give the municipality an extra €184,000 and Setomaa municipality €49,000 every year.

"For us, every €100,000 is very significant, in terms of local roads or services of some kind. Because, unfortunately, the fact is that this demographic decline and ageing means that every year means there is less money," said Martti Rõigas, mayor of Põlva.

Kudre, mayor of Setomaa, said: "Let's just say that, of course, it helps us. It slows down the management of income-expenditure and operating revenue, it clearly helps with the difference, but it does not solve all situations."

The plan has been nicknamed the "Robin Hood tax" because, figuratively speaking, the future revenues of rich municipalities are redistributed. But who is defined as rich and who is poor?

Kallas explained: "All the municipalities that border Tallinn and Tallinn itself, and essentially all the municipalities that border Tartu and Tartu itself, fall into this category of growth regions. And, unfortunately, essentially all the rest are those that are shrinking regions. In the last 20 years, it is estimated that something like 150,000 people have moved from the rest of Estonia to these two areas."

Wealthier municipalities do not support the plan. After all, the rich didn't like Robin Hood and it's no different now, AK.N said.

"The fact that the City of Tartu is going to receive less revenue with this reform is undoubtedly unpleasant for us," said Mayor of Tartu Urmas Klaas.

Tartu is expected to see an income reduction of almost €800,000 next year due to the plan, and even more in the future.

"We need to review the contracts we have for the various works the city has done. We may no longer be able to issue some grants. We certainly cannot develop public transport now because it is very expensive and there is simply no money for it," Klaas explained.

The mayor of Tartu does not think the plan will change Estonia's demographic situation and other solutions should be considered.

"For example, serious thought should be given to the factors that would help to develop the economy there, to the conditions that would invite companies to create jobs there," he said.

Martti Rõigas, mayor of Põlva, said there is no other plan on the table: "Arguments are coming from outside that this is still not right, that it has to be solved in some other way, but we have been talking about this in some other way for decades. And there is no other concrete better plan."

Klaas also pointed out the timing as interest rates are still high and the care reform has created additional expenditures for local councils – Tartu is now paying an extra €1.8 million.

But poorer municipalities are also experiencing the same problems.

"We have heard that we are no longer able to invest from our own revenues, so to speak. But here we have not been able to invest from our own revenues for a long time, we have all our investments either in loans or grants. It is not the case here that we have surplus funds for investment. And in the same way, our children want new school buildings, new kindergartens. We cannot say come to the countryside, but we have everything here in such a state of disrepair and decay," said Rõigas.

What effect is the Robin Hood tax supposed to have on the municipalities that are now getting bigger?

"This could restore some faith. It seems to me that many areas of Estonia have essentially given up, that young people are moving out more and more, that the elderly will hopefully cover the population in another twenty years, but this kind of question of faith, whether we will see life everywhere in Estonia," said Kallas.

The government has already agreed on the income redistribution law. But at the same time, local governments will be able to create new local taxes

"The problem is that, while originally it was said that these reforms would have to go hand in hand, that if we were to be deprived of less revenue, on the other hand, these opportunities to earn back the revenue that we would not get are planned for a few years later – in 2026, 2027," said Klaas.

Who wins and who loses?

There are 79 municipalities in Estonia, and 17 of them have a higher proportion of working-age population and higher wage levels. These areas will see their revenues decrease under the new system.

The Ministry of Regional Affairs and Agriculture said those expected to lose out are the so-called "golden circle municipalities" close to Tallinn in Harju County and in and around Tartu.

Tallinn's current income would decrease by €8.46 million, Tartu by €794,000, Rae municipality would lose €727,000 and Viimsi €694,000.

All other local governments can be counted among the winners.

The biggest winners will be the cities of Narva, Pärnu and Kohtla-Järve. But Maardu, located next to Tallinn, will also be in the top 10, which would receive an additional €234,000.

However, as a point of curiosity, Ruhnu, an island municipality, will neither gain nor lose anything in the first years.

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