Estonian Minister of Finance Mart Võrklaev (Reform) is hoping the government will manage to make cuts of as much as €175 million before Christmas. According to Martin Villig, if the country is in a position where cuts are needed, they will have to be made, However, other measures will also help the economy.

"In fact, I see that tax increases have to be made when the economy is growing. And if the economy is going down, then the state could actually invest more to help the economy. As far as I've seen from the latest news, in Lithuania for example, the economy is growing and one of the arguments there was that the state itself is also contributing more. So that could be an option," Villig said.

"But surely, even in these more difficult times, what we can do is still make wise choices and invest - in education, in science, in healthcare - in order to get the economy growing again. I think the defense industry fund that the government has set up is also a really good initiative," the Bolt co-founder added.

"And if we look at the statistics, it has been the startup sector that has grown throughout all these crises. Even last year, for example, labor costs grew by 18 per cent, while industry and many other sectors were contracting. So we have to make a bit of a choice – if we tend to have smart people, but maybe fewer natural resources, then pick those areas and invest there. That's my view," the entrepreneur said.

According to Villig, the government should also review whether all the services the state currently provides are necessary.

"Maybe there are some parts of the budget where, year after year, [the funds] go on programs or measures that have less impact, could be automated and changed, or which are not necessary. And maybe in some other cases, for example, there are private initiatives that provide these things more efficiently, or more cheaply. In that sense, it would still be worth taking a really serious look at the state budget," Villig explained.

According to Villig, the Estonian government has to consider all options to help improve the state of the budget, but should act in ways that might prolong the recession. "We need to look at those measures that would lead the economy toward faster growth."

Wealthier people could donate 5 percent of their income

Villig recently suggested to business portal Äripäev that everyone earning more than €5,000 a month could, for instance, donate 5 percent of their income. On "Esimene stuudio," he explained that each person should contribute as much as they can to their community.

"Helping can be about giving your time, for example volunteering at a food bank or somewhere else close to your community where there is a need. Or if you are better off in life, earn a higher salary or have business income, then you could also give some money back to society," he said.

Villig argued that while the state could also take more money from wealthier people through higher taxes and redirect those funds to areas where it is most needed, the private sector can often do things better.

"The state certainly has a lot of data, it can see things in general terms, it has certain things laid down in laws and programs, regarding where money ought to go. However,  what I see is that citizens and the third sector are actually much closer to things and can often react more quickly than the state. The state has to go through procurement procedures, contracts, and so on, but for a citizens' initiative you can start piloting [solutions] to these problems more quickly. And if certain initiatives work well, you could then move on to working with the state," he explained.

Although Villig's idea is similar to a graduated rate income tax, he believes Estonia is not yet ready for that. "I can see that maybe in the future we will move in that direction, and in principle I believe that those who earn more should pay more, but it will take time."

Villig: All small businesses should be treated equally

The Estonian government does not support the European Union's agreement on VAT on platform services, which would oblige digital accommodation and taxi platforms such as Bolt and Airbnb to pay VAT. The European Commission has proposed that if private individuals or small businesses that provide accommodation or travel services are not themselves liable for VAT, the platforms should add VAT to the services they buy through them.

Bolt co-founder Martin Villig backs the Estonian government's position, saying that all small businesses should be treated equally.

"We should treat all these small businesses in the same way. If we look at hairdressers or market traders and so on, they should all be subject to the same rules. If a small business has a turnover of less than €40,000, they shouldn't actually have to pay VAT, if we are talking about this VAT directive. So, I think Estonia is absolutely standing up for the right thing here. And if we were to put VAT onto these services, inevitably they would be used less, and so, on the other hand, again, this tax revenue could be reduced," he said.

"We can see that the government is proceeding from a sensible worldview when it comes to this directive, and that there should be a level playing field. It should not be the case that some are charged VAT and others are not. If we look at platform services, we would have a situation where, for example, if you order a taxi through the Bolt app, VAT would be added, but if you order it on the side or take a car from the street and the driver provides that service as a self-employed person, then VAT would not be added. In fact, there should be a level playing field for business. In which everyone can operate," said Villig.

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