The directive needed all member states to agree on the proposal, and Estonia was the only country that disagreed.

Minister of Finance Mart Võrklaev (Reform) said it would not be fair to people who want to earn a little extra money from their home by, for example, renting it out for a week on vacation via Airbnb.

Killu Maidla, CEO of the Estonian Hotel and Restaurant Association (EHRL), told ERR it considers the legislation to be a very reasonable solution.

"We can see that in this market Airbnb is not so much a sharing economy as an explicit business, as the statistics show," she said.

Maidla pointed out that 79 percent of those renting out accommodation through the platform in Estonia own two or more apartments.

"It's no longer the case that I go on holiday for a week and rent out an apartment. It's a business in its own right, and property developers will tell you that many [people] are investing to provide this service. On the hotel side, we feel that it takes away manpower because the apartments that are on the market have to be cleaned by somebody," she said.

One example, is that cleaners often want to work part-time in hotels to get health insurance, but when asked how they make a living, they say they clean apartments.

"We can see that this is a growing business that is completely unregulated in our market. A great many European cities have also regulated it," she said.

The EU recently adopted a regulation on the sharing and collection of data on short-term accommodation services. Under the rules, short-term rental platforms must share information about the accommodation advertised and who benefits.

The regulation is voluntary, and according to Maidla, Estonia is one of the few not planning to join.

"The rest of Europe, however, sees the need to regulate this, it is a big part of the black economy. Even the tax authorities cannot reach all landlords," said Maidla. "If there were VAT, it would level the playing field, but labor taxes are much more important. We are very disappointed that Estonia did not go along with this and hope that at least a compromise could be reached."

Maidla estimated that there are around 2,700-3,000 short-term rental spaces in Tallinn, but she has no idea how many rooms there are.

"A survey conducted by Colliers in Riga showed that the number of rooms in short-term rentals exceeds the number of hotel rooms by 20 percent. This is clearly not a sharing economy," she said. "Unfortunately, they are operating on unequal terms."

Maidla said politicians are well aware of the union's positions, but nothing has changed. If Estonia were to approve the VAT rules for platform services and join the regulation obliging apartment owners to add their premises to the database, it would have a significant impact, she believes.

"In fact, many companies that formally offer short-term rentals and pay decent taxes also say that this market needs regulation. It is in the interest of all those who operate honestly," said the head of the union.

Helen Pahapill, tax policy advisor at the Ministry of Finance, told ERR this week that Estonia cannot agree with the VAT legislation because it does not make the tax system fairer, but creates additional injustice.

From this year, the platforms undertake to submit information to the tax office, and the Ministry of Finance considers that there is no need to collect tax through the platform, because the tax office can already see whether someone is evading the VAT obligation based on the information they receive.

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