OECD advises Estonia to review public expenditure, increase tax revenues
The Organization for Economic Cooperation and Development (OECD) proposes that Estonia assess its future public spending and tax revenue choices. The OECD is also concerned about Estonian enterprises' low productivity and hefty co-payments for health care.
In its report on Estonia, the OECD sees our economy in somewhat worse shape than the Ministry of Finance's spring economic prediction. The OECD anticipates Estonia's GDP to increase by -0.4 percent this year and 2.6 percent the next year. The ministry anticipates growth of zero and 3.3 percent, respectively.
The budget deficit situation is seen positively, but the OECD expects Estonia to implement tax and austerity measures next year.
"We have a few messages, one of which is on public finances, which is particularly relevant for Estonia, which has one of the lowest debt levels in the OECD. However, in the long run, you must begin to restore stability in public finances, as the population ages, putting public finances under strain. Defense spending is rising due to the geopolitical circumstances in Europe, in which we must live. It is also critical to explain in the short term whether fiscal policy will assist this recovery," Luiz de Mello, director of the OECD's country studies unit, said.
In addition to a car tax, the OECD believes that a real estate tax would be an effective source of revenue.
"These messages are very much in line with what we ourselves know, that the fiscal situation is difficult. We need to continue with the austerity measures as well as the tax reforms that we have already undertaken to reduce the budget deficit, and that is what the government has done," Finance Minister Mart Võrklaev (Reform) said.
The OECD analysis focused on the state of health care in Estonia. Access to health care should be improved, the report concludes.
"We are at the bad end of the stick, and the international recommendation is to extend health insurance coverage to all and to reduce people's out-of-pocket payments. Co-payments are so high that they impoverish and limit access to services. The current 23 percent that people pay out of pocket is far too high. The OECD's assessment of the proposed dessert tax was very positive. An evidence-based way to deal with the fact that people are consuming too much sugar, leading to high levels of obesity," Minister of Health Riina Sikkut, said.
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Editor: Kristina Kersa
