Speaking on "Stuudios on peaminister" after the new budget was announced, Michal explained why the government favors taxing profits over other proposals such as the wage fund or property.

"The fixed-term taxation of corporate profits will bring €150 million to the state budget in 2026. The financial impact is smaller, but this option was chosen because its impact on the growth of business and bringing foreign investments to Estonia was the least harmful option," he told the show.

Michal also commented on former Prime Minister Kaja Kallas' criticism of his decision to postpone eliminating the tax hump and tax companies.

"In laboratory conditions, I too could say that the lower and simpler the tax system, the better. But we do not live in laboratory conditions, we have an aggressive neighbor, we need to get weapons. It is not a strong longing for weapons in the government, but so that the enemy does not miscalculate to attack us," the prime minister said.

He added the 2024 Riigikogu elections give a mandate to the Estonian state and if the state is in a difficult situation, these costs must be covered.

Michal added that the parliamentary elections give a mandate to lead the Estonian state, and if the country is in a difficult situation, these costs must be covered: "At the parliamentary elections, a mandate is given to lead the Estonian state, and if the country is in a difficult situation, these costs must be covered. /.../ We can also hope that Russia will be hit by capitalism and democracy. /... A billion will be cut in four years. A total of €1.3 billion with the previous government's decisions."

Government preparing for 2028

The prime minister said it was also agreed at the budget talks that two reforms will be made in view of the 2028 budget.

"First, we are preparing for the revision of investments, i.e. how to use the money efficiently. And second, we are preparing for 2028 how different subsidies can be more precisely targeted."

Michal said it was reasonable to create policies for 2028, even though the next elections take place in 2027.

"Some of the current parties in power are in the coalition, some in the opposition. Preparation means that we have an overview of who will receive which subsidies. And if a new coalition agreement is made in 2027, this overview will be the basis for making decisions by 2028. This is a completely logical cycle," he said.

Although the Ministry of Finance has forecast that by the end of 2024, there may be unused and transferable funds amounting to €2 billion in the state budget, Michal did not find the opposition's proposal to use half of it and save one billion euros to be very credible.

"I think that the illusion of the revenues found there looks bigger than it actually is. Of course, the accuracy of budget planning needs to be improved and the balances reduced," the Reform Party chairman told the show.

When asked why the government did not follow the military advice of the head of the Estonian Defense Forces and buy ammunition for €1.6 billion in the coming years, instead of only by 2031, Michal answered that the decisions were made in coordination with the Ministry of Defense.

Cultural funds allocated for "soft activities" not concrete

The show also discussed the culture budget and the frustration of workers in the sector that cannot be raised in good times or bad.

Michal said the cultural sector must show solidarity. He pointed out that the minimum salary for culture workers with higher education rose from €1,400 to €1,600 in 2023, and this year, the total salary for these workers, including additional compensation, exceeds €2,000 per month.

When asked by the hosts why, among the few areas spared from cuts, is funding for Russian-language content in commercial media, while the Estonian-language foundation SA Kultuurileht must face reductions, Michal responded that the prime minister does not handle cuts within specific ministries, and such questions should be directed to the minister of culture.

However, Michal promised to amend the Cultural Endowment Act to help ease cuts in the cultural sector.

"We plan to amend the law so that less money will go to concrete and more to 'soft activities,' if I may say so. But the relevant details will come from the Ministry of Culture," he said.

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