Estonia Needs More Tax Take, Debate Likely Not Until after Election

Rembrandt van Rijn: Moneychanger // Public domain

While the state does need to find new revenues, there will not be any substantive debate on taxation over the next four months, new Finance Minister Annely Akkermann (Reform) says. Akkermann said she expects political parties to include taxation proposals in their election manifestos

Appearing on ETV politics show “Esimene stuudio” Thursday evening, Akkermann said the current and ongoing state budget deficit must be corrected during any period of economic growth.

This would be achieved: “If the economy begins to grow, tax revenues rise, then we will not up costs as quickly. This is the only way the deficit will shrink.”

Reform has traditionally been a party of balanced budgets but the current security and energy situation, coming off the back of the Covid crisis, has meant a deficit of under 3 percent has proved necessary.

Russia’s invasion of Ukraine justifies running a deficit of 2.6 percent for the meantime, Akkermann added, while new taxation types are also required – likely after the March 2023 general election due to the political risk to all parties of tax hikes, though including tax proposals in pre-election manifestos would be a way of getting a mandate from the people on any possible changes.

“I do think that it is necessary to find new revenues for the state. But the tax debate is sure not to be held within the next four months. Changes in taxation will not be adopted during that time. The elections are, however, coming and it is actually my hope that the political parties will also include tax proposals in their manifestos and ask for a mandate from voters. Elections are a good opportunity for that,” he said.

Land tax, in her opinion, should be increased – due in part to most of the lang in Estonia having been snapped up and under ownership, which, while it allows its owners to keep it, sometimes undeveloped, and watch its value appreciate, this hardly contributes to the national economy if it is not generating income.

“At the same time, this is nothing new – the Land Board is planning a scheduled re-evaluation of land, which is expected to result in price increase of several times in various regions, on different properties, which should start to apply in 2024. Additional tax revenue should come from there, and I think that would be the right thing to do,” she said.

On the other hand, the minister said she opposed a proposed vehicle tax as a way of maintaining, improving and building roads, adding that the fuel excise duty is already in place. Moreover, this excise is a levy on driving a car, not a source of funding for road building, she added.

Of other potential revenue sources, Akkermann pointed to the burgeoining wind energy sector, adding that tens of millions of euros could come into state coffers from the planned Gulf of Riga offshore wind farm.

First-time degrees should be free to students, but subsequent higher education degrees etc. should incur a fee, she also said.

Akkermann became finance minister earlier this week after Keit Pentus-Rosimannus, who is Estonia’s candidate for its next representation at the European Court of Auditors, stepped down.

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Edited by Andrew Whyte

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