Mid-month this month, a substantial, "omnibus" bill will reach the Riigikogu, which among many other things in one paragraph postpones the elimination of the so-called tax hump, a Reform Party policy, by a year.

Another provision raises significantly the ceiling on tax-free allowances, such as daily allowances and promotional gifts.

Additionally, the bill alters the rules under which employers can cover public healthcare costs without paying fringe benefits tax.

Under current law, the limit for this support is €100 per quarter. Under the terms of the bill, this calculation would switch to an annual basis, even though the limit would still remain €400 per year.

However, it was a change in the list of tax-free expenses which caught the Ministry of Social Affairs' attention most readily.

The ministry said it agrees with adding therapeutic or sports massages to the list. Beyond that, however, it does not like the fact that in the future, costs for all types services provided by healthcare workers may be reimbursed.

Ministry of Social Affairs concerned about wrong signals

Minister Sikkut noted that the original idea of the tax relief was to promote health. These legislative changes would however allow paying for employees' treatment, but based on non-expert opinions in many cases.

Sikkut said: "Employers are actually not very competent to decide whether an employee requires the help of a neurologist or a psychologist; whether a psychologist-counselor is enough, or whether they should turn to doctor."

In a letter sent on September 20, the minister noted that according to the bill, employers who in effect want to help employees buy their way past waiting lists, via the help of private healthcare, would be supported with tax relief.

Sikkut wrote: "We find that the proposed policy change sends the signal to employers and the public that the social tax-funded health insurance system is not working, and so there is reason to move towards an alternative solution funded by employers," adding that although while are also shortcomings, the current system functions very well overall.

"Our employees work tirelessly every day to solve these problems," Sikkut continued in her letter.

The Minister of Health announced that the solution as proposed in the bill is unacceptable. "This would exert a predictably negative impact on the functioning of the healthcare system, and it would bring additional setbacks in the availability of services provided by the national health insurance," she noted.

If one doctor's visit paid for, others have to wait longer

Sikkut told ERR that the scarcest resources in the healthcare sector is its doctors. "Their appointments must go to people who have a medical need for that specific type of assistance. And if some of these appointments are distributed simply based on desire or ability to pay, then there will be fewer for those who have a genuine medical need," the health minister said.

She gave by way of example psychiatrists, whose appointments already have long waiting lists. "Plus if employers across Estonia reimburse even 500 appointments in a year without a specialist's decision that a person needs psychiatric help, this will affect the length of waiting lists and the availability of services for other people," Sikkut went on.

The minister also said the range of tax-free services should indeed be expanded, albeit much more narrowly. "It should be expanded to dental care and actually also to services supporting mental health, such as services provided by psychologists and psychological counselors."

Ministry of Finance hoped amendment would create more clarity

Lemmi Oro, an adviser at the Ministry of Finance's tax and customs policy department, noted that the change criticized by the Ministry of Social Affairs is one long requested by representatives of Estonian companies.

He recalled that the roots of the proposal go back to Keit Pentus-Rosimannus' (Reform) time in office as Minister of Finance (January 2021-October 2022). At that time, the Ministry of Social Affairs reportedly backed the idea. "Their change of heart surprised us," Oro said.

Oro stressed that his ministry does not intend to go to the mats with the Ministry of Social Affairs about the specifics of the workings of the health sector. However, by making the list of tax-free services incrementally longer, more confusion arises, he said.

"We don't want to start arguing whether this was health promotion or a treatment procedure, when an employee went for a massage," Oro said, adding that keeping track of specific services listed in the law would impose an unreasonable administrative burden on the Tax and Customs Board (MTA).

"We ultimately can't put someone to monitoring every line," Oro said. "In this case, we have to assume that the employer knows best what is needed for their employees."

Government disregarded Ministry of Social Affairs' concerns

Oro noted that in the opinion of the Ministry of Finance, the bill does not need to be changed.

However, Riina Sikkut had already written on September 20 that her ministry would only approve the bill if the point that caused them concern was amended.

That written warning, however, remained just that. On September 25, the government sent the bill to the Riigikogu on a unanimous basis. The bill was accompanied by a coordination round schedule, but which did not mention the opinion of the Ministry of Social Affairs.

Minister Sikkut noted that the bill was last week transferred to the Riigikogu together with the 2025 state budget, meaning the process was rushed.

This does not mean all is lost, she added.

"As with all bills, the discussion continues at the Riigikogu. And we can make our proposals via the finance committee," Sikkut concluded.

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