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Coalition reaches agreement on 2018 state budget

IRL chairman Helir-Valdor Seeder with Prime Minister Jüri Ratas (Center).
IRL chairman Helir-Valdor Seeder with Prime Minister Jüri Ratas (Center). Source: (Postimees/Scanpix)

The government coalition reached an agreement on Estonia's 2018 state budget at a Cabinet meeting on Thursday evening. For the first time next year, the state budget will exceed €10 billion in size. The budget's bill is expected to be presented to the government at its Sept. 27 meeting.

The ruling government coalition, which consists of the Center Party, the Social Democratic Party (SDE) and the Pro Patria and Res Publica Union (IRL), agreed on the 2018 state budget on Thursday evening.

A long-planned tax on sweetened beverages was left out of the state budget bill after being quashed during budget talks by IRL.

"We agreed that there will be no sugar tax in 2018," IRL chairman Helir-Valdor Seeder told ERR. "There are many arguments for this. One is all of the problems surrounding the sugar tax — applying for permission for state aid is very vague, whether we succeed in securing permission for state aid, the fact that the president has sent this bill back to the Riigikogu, businessmen have contested the sugar tax matter in the European Commission, etc."

In addition, he continued, IRL has always been against introducing this tax. "We brought up this topic in the spring already, but we didn't find enough funding sources to cut [this tax}," he noted.

Asked what sources were found which allowed them to cut the sugar tax from the budget now, Seeder responded that there was no exact answer to this question, as they considered the budget as a whole. "We have a budget of over €10 billion and sugar tax receipts would have totaled approximately €15 million," he explained. "It didn't quite go, 'Let's take €15 million and see what line items we start crossing off.'"

According to the IRL party chairman, the coalition currently found the opportunity not to introduce the planned sugar tax in 2018 and managed to agree upon the general framework of the 2018 state budget. "Some line items remain to be specified," he noted. "The final approval will come next week or the week after that."

Whether this agreement meant that the sugar tax won't be added to the 2019 budget or sometime in the future, Seeder found it difficult to say for sure at the moment.

"Discussion within the coalition will continue after this," he said. "We need to discuss things with our coalition partners, but we were currently able to agree that this tax will not be introduced in 2018. Future discussion and everything else will tell now, but we are of the position, yes, that this tax shouldn't be introduced at all."

Permission for state aid must be granted in order to grant natural juices and sweetened yogurt beverages from the so-called sugar tax.

Budget deficit to be reduced

The government decided to reduce the general government structural budget deficit by half compared to the planned budget deficit, reducing it to 0.25 percent of the Estonian GDP.

The coalition also discussed next year's wage increases.

"Teachers may get a raise, for whom there is some €36 million," said Minister of Finance Toomas Tõniste (IRL) during the final stretch of budget negotiations on Thursday. "We likewise want to increase the wages of state employees who are earning near the minimum wage. [Wages] may also increase somewhat for national defense and paramedics.

General government's debt burden to decrease

"This is the current government's first full budget, which reflects our greater goals in improving life in Estonia," said Prime Minister Jüri Ratas (Center). "The budget includes tax-free income reform and healthcare reform. Estonia's municipalities and cities will begin receiving more money than before for organizing their own lives. Society is moving toward greater balance — toward an Estonia where every person is valued and cared for."

On the subject of general government investments, Ratas said that they will be aimed at supporting the long-term growth capacity of Estonia's economy. "I am glad that, in addition to strategic investments, smaller, but no less important cultural and sports-related projects will not be overlooked either, such as the renovation of Kääriku Sports Center, which will modernize training opportunities available for youth and top athletes, or the renovation of Tallinn City Theatre's great hall," he noted.

The prime minister stressed the fact that Estonia would continue pursuing responsible fiscal policy. "The general government's debt burden will decrease and its tax burden will remain at the same level in the coming years," Ratas said. "The general government's budget position is currently close to being balanced, according to the current forecast."

Editor: Aili Vahtla

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