Läänemets said that revisiting the Reform-SDE-Eesti 200 coalition agreement in the course of discussions on taxation is unnecessary, though added a review of the VAT hike planned for 2025 could be considered.

In an interview given to ERR Friday, Finance Minister Jürgen Ligi said he is weighing up a 2-percent additional tax on all employee wages, rather than a prepayment on corporate profits as had earlier been proposed.

According to Ligi, this tax would be easier to collect, and less burdensome on business.

Läänemets told ERR Monday that: "One positive thing is that the finance minister is coming up with ideas.

However, "the government can discuss and make decisions, but that doesn't necessarily mean we need to alter the coalition agreement," Läänemets went on.

On the specific proposal, Läänemets said there are major concerns.

"First, Ligi's proposed wage tax targets the process of becoming wealthy, not the state of being wealthy.

"This would limit progress towards wealth, which may not be the best principle. Second, it would significantly impact Estonia's startup sector. Startups typically involve high payroll costs, initially without generating profits. This would place a heavier burden on them, and likely slow their growth," Läänemets went on.

Läänemets also noted that the proposed wage tax could hinder economic growth.

He said: "It would certainly take a bigger chunk of our export capabilities. Taxing labor effectively hikes input costs, but when input costs rise, it becomes much more challenging for Estonian companies to compete in export markets."

"We have agreed on the principle that a security tax should be something everyone can contribute to. When we talk about profits, it's true that only those who generate profits contribute, but when it comes to labor, many companies do not actually contribute to Estonia's security. And from what I've understood from speaking to business leaders, this principle is important to them. These are concerns that we will surely discuss, but I haven't heard any solutions to these concerns yet," Läänemets added.

Läänemets said that it is up to the finance minister to address employers' concerns that a profit tax would hike bureaucracy, a solution of that kind is outlined in the coalition agreement. "This issue can struck down. The Ministry of Finance is certainly one of those ministries which requests a lot of various statistics and bureaucracy from entrepreneurs, so they surely have a good overview of where support could be provided," the minister said.

ERR asked Läänemets whether he could assure his voters that as long as SDE are in government, the wage tax proposal would not be implemented.

His response was: "No, I'm not going to say what the ultimate solution will be right now. We will hear out the finance minister; I have described the concerns associated with this idea. Maybe we'll agree on something else entirely."

"In exactly the same way that employers are concerned that more bureaucracy might ensue, there is also a concern that the agreed VAT hike might hinder economic growth more significantly than, for example, a tax on profits would do," Läänemets added.

"We may eventually reach that point in our discussions where we come to reconsider even more aspects of tax policy if the coalition partners wish to do so. We also have had some very good ideas. And that doesn't mean amending the coalition agreement," Läänemets continued.

"If there comes a sense that issues agreed upon in the coalition agreement just three weeks ago might need further discussion, naturally. I think the VAT part might not be something which needs to stay as it is," Läänemets concluded.

The so-called security tax, really a raft of tax hikes as set out in the coalition agreement, consists of three parts: A 2-percent tax on revenues; starting from July 1, 2025. A 2-percent tax on personal income, effective from January 1, 2026. A-2 percent tax on corporate profits, also starting from January 1, 2026.

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