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The discussion regarding the increasing of fuel excise duty and the tax incentives of accommodation establishments shall be continued this week.

The budget strategy for the next four years reflects the government’s objectives, which are maintaining Estonian military defence expenses at least 2% of the GDP, increasing child benefits, decreasing labour-related taxes and increasing the efficiency of state management.

The government reviewed all options for reducing general government expenditure and agreed on reducing the number of general government employees by 1% from 2016. The agreement builds on the coalition agreement according to which, the decreasing of the general government must be in accordance with the demographic situation i.e. the size of the working age population.

Reducing the administrative costs of the general government by a few% is also planned and is currently under discussion.

The basis for options regarding the discussion on covering sources was the principle of taxing harmful consumption instead of income taxing, primarily taxing activities in which people have a choice (increasing alcohol and tobacco excise duty and the fine level) and reducing tax incentives.

The government set the objective of keeping the 2016 state budget balanced in nominal terms and achieving a structural surplus of 0.6% in 2016, 0.2% in 2017 and 2018, and 0.6% in 2019.

The discussion on cancelling the fuel excise duty increase in 2019 was seriously considered. The final position will be formed when the possibility of increasing alcohol and tobacco excise duty by an additional 5% in 2016 will be clear. To form a decision and map risks, the Ministry of Finance will meet with sector representatives.

Upon discussing the abolition of value added tax incentives for accommodation establishments, the proposal of the Estonian Chamber of Commerce and Industry was discussed, according to which the value added tax rate of accommodation establishments could be gradually increased in smaller steps. Whether and to which extent the entrepreneurs’ proposal can be met will be established during the upcoming discussions.

The government also discussed the proposal of increasing the daily rates of fines, which were last changed 10 years ago. No final decision was made regarding this issue.