Estonia, Financial Services, Legislation, Markets and Companies, Taxation

Photo: koda.ee

The prime minister explained that upon establishment of the government it was decided to formulate strategic challenges for Estonia and find the best possible solutions in cooperation with three coalition parties.

Rõivas pointed out Estonian national security as the first and most essential priority. "It is not self-evident that Estonia is well protected. To achieve this, we must work hard every day," said Rõivas and added that well guaranteed security and safety are essential for our investment climate as well.

The gvernment has decided to cut labour taxes, in order to offer a favourable business environment and attract investors to Estonia. “I agree that cutting social tax by one per cent is not a big step, but it is certainly a step in the right direction,” said Rõivas. “It is a step towards increasing income of the people and reducing the tax burden of employers,” he added.

While speaking about the state reform, prime minister stressed that the purpose of the reform is to make public sector more efficient. As for the administrative reform which Estonia has tried to implement for nearly 20 years, prime minister thinks that it is most essential to improve service quality. “We cannot implement the administrative reform by “overpainting” the map, instead we need to provide necessary services to local people and improve the quality thereof,” said Rõivas.

The prime Mminister also talked about tax changes aimed at reducing differences in taxation and imposing taxes on harmful consumption.

“Which type of harmful consumption must be taxed remains to be discussed. The current government has decided to impose taxes on consumption instead of ownership, as this seems to be a step in a fairer direction,” said Rõivas and added that the collected tax revenue would enable to implement essential goals of the government – to increase child benefits, cut labour taxes and, for example, support the activities of the hobby groups of local governments.

Rõivas said that the government will observe the impact of increase in fuel price on different sectors and how is excise duty policy made in neighbouring countries. The prime minister is of the opinion that it is necessary to decide in a couple of years whether to continue with the increase in excise duty or adjust the planned increase.

According to the current calculations, a direct impact of the increase in excise duty on consumer prices is 0.26 percentage points per year on average and it does not reduce essentially the purchasing power of Estonians. Price difference in Estonian fuel stations is already more than 5 cents.