According to Kristina Kallas, leader of Eesti 200, the discussion on de-indexing is inevitable. "Yes, we seemingly set it aside in the coalition agreement, although we discussed it. But we can't avoid it because we have a structural problem in the budget – our social expenses, the majority of which are pensions, are growing rapidly, and we can't keep taxing the younger generation more and more," Kallas said on the "Terevisioon" show on Wednesday.

Kallas explained that essentially, this would mean that in order to accommodate pension increases, the younger generation, which is numerically smaller than the pensioner generation, would need to be taxed more heavily.

"Our population is aging. I think we need to start making real structural changes, reviewing the pension index and many other indexes. We need to make significantly different structural changes to social benefits, rather than just making minor cuts here and there. While we are cutting back a little today, sooner or later, we will face the same problem because our social expenses are growing very quickly, and our tax revenue is not keeping up. Our younger generation simply cannot pay for all of this," she summarized.

Kallas also spoke about corporate profit tax, admitting that while the initial goal was to collect €212 million, the budget projection for 2026 is now €157 million. She noted that this figure accounts for around 20 percent loss due to tax avoidance schemes.

Kallas added that she disagrees with the view of Lauri Läänemets, chairman of the Social Democratic Party, that profit tax will likely need to continue after the next election.

"That's not entirely accurate. We are significantly reducing the budget deficit. Under the current government, we've set the course to have a much smaller deficit by 2028, which means that by 2029, we can use loans to cover security expenses," Kallas said.

She also expressed hope that businesses will view the profit tax as a temporary measure necessary to cover security expenses.

"The less [profit] we hide, the less likely it will be that we need to extend this tax because of the security expenses. If we manage to cover most of these expenses within the next three years, we won't have to continue with the profit tax after the elections. As I mentioned, the state's borrowing capacity will be significantly better by that time," she stated.

Regarding teachers' salaries, Kallas confirmed that there would be no salary increase for teachers in 2025.

"2025 will be a very tough year in terms of the budget, but for 2026 and beyond, additional funds have been reserved. These funds can be used for salaries in the following years," promised Kristina Kallas, who also serves as the minister of education and research.

--

Follow ERR News on Facebook and Twitter and never miss an update!