Government to increase municipalities' revenue base

Minister of Public Administration Jaak Aab (Center), Prime Minister Jüri Ratas (Center) and Minister of the Interior Andres Anvelt (SDE) at Thursday's government press conference. Source: (Government of the Republic)

The Estonian government at Thursday's Cabinet meeting decided to increase local governments' revenue base and update the equalization fund's distribution principles, for which €185 million has been earmarked in the state budget strategy over the next four years.

"The increasing of local governments' revenue base is one of the core promises of the current government coalition," Prime Minister Jüri Ratas (Center) said according to a government press release. "When forming the government, we clearly stated that the role and decision-making power of towns and municipalities in the organization of local life must increase. Today's Cabinet meeting decision is a significant step demonstrating that the state considers local governments equal partners."

Minister of Public Administration Jaak Aab (Center) noted that the state's administrative-territorial reform had reached its conclusion, but noted that this did not mean that the administrative reform was complete. "Administrative reform does not mean simply redrawing local government borders," said Aab. "It has a substantive aspect as well. Larger local givernments are better capable of fulfilling more tasks, and so we are increasing the role of local governments by giving them new tasks and resources as well as restoring the previous level of the equalization fund."

The government's decision will in large part restore pre-economic crisis crash levels of funding received from income tax and the equalization fund. According to the press release, planned changes to the revenue base will be implemented gradually from 2018-2020. By 2020, €30 million will be directed toward increasing their tax rate, while €25 million will go toward increasing the size of the equalization fund.

Editor: Aili Vahtla

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