Perhaps it should not be surprising how arrogant the Reform Party government is regarding the problems of Ida-Virumaa, since their main voter does not live here.
In the spring, I asked Climate Minister Kristen Michal whether the clause in the coalition agreement, which talks about the need to review environmental fees, means an increase in the tax burden on companies. Michal then noted that in the second half of this year, the Climate Ministry should conduct an analysis of possible changes in environmental fees and their effects. Only a few months later, the government sent a bill to the National Assembly for consideration, according to which the environmental fees will increase. This means that companies have to pay the state tens of millions of extra euros per year.
Several top managers of the Estonian private sector have said that during the economic crisis, taxes should not be cut or raised. The results of the current government’s policies have not been long in coming. In the second quarter of this year, we rose to the leading position in the European Union and the Eurozone. Unfortunately, not among the five richest countries, as the Reform Party once loudly promised, but in terms of the pace of economic decline. While the economy of the European Union grew by 0.5% during the year – the euro area by 0.6% -, the decline of the Estonian economy was 3% (!). According to Eesti Pank’s forecasts, unemployment will continue to grow this year as well as next year. The outlook is bleak to say the least.
Utility costs are rising
We had a good opportunity to make sure that various cuts and tax increases only worsened the economic crisis in 2008-2009, when the GDP decline reached more than 14 percent. The opposite example can be taken from the time of the corona pandemic, when the support measures implemented by the government of the Center Party helped companies survive a difficult period and come out of the crisis with the best economic growth indicators in the European Union. Apparently, economists do not talk about the effectiveness and necessity of countercyclical measures for nothing. But the Reform Party government seems incapable of learning from its mistakes and learning from the experiences of others.
According to the bill, the pollution fees of the oil shale industry will rise by 20 percent in the coming year and by 44 percent in 2025 – the total increase in four years is more than 150 percent. You don’t have to be an economist to understand that raising environmental fees affects absolutely everyone. Companies are forced to look for sources to cover the lost income, and this at the expense of the consumer, i.e. the people of Estonia. How, for example, do electricity producers try to compensate for skyrocketing costs? Most likely by increasing tariffs, which means another increase in electricity and heating bills.
It is also extremely sad that the municipalities of Ida-Virumaa, which receive a small part of the environmental fees paid, have once again been forgotten. At the same time, talk about the need to increase the return of environmental fees to local government budgets has been going on for years. Right now would be a very appropriate moment to finally revise this system. First of all, fees for the use of natural resources to the state budget will increase significantly, and the state could support the municipalities of Ida-Virumaa whose companies bring it large revenues. Secondly, many municipalities are already having difficulties covering current expenses, including paying bills, which is why they urgently need the help of the state. The current government doesn’t seem to think so.
There is no plan for Ida-Virumaa
Last week, I did not manage to get a clear answer from the finance minister to my question about how the current state budget should help Ida-Virumaa. Apart from the fact that Estonia must use the funds allocated to it from the Just Transition Fund wisely and quickly, I have not heard anything relevant from Mart Võrklaev.
Perhaps it should not be surprising how arrogant the Reform Party government is regarding the problems of Ida-Virumaa, since their main voter does not live here. So, why bother with the problems of a region where incomes are one of the lowest in Estonia and unemployment is the highest?
It is much more profitable for the squirrels to raise 500 million euros for the implementation of income tax reform, which will only benefit the wealthiest. In order to find money to fulfill their election promise, they will increase sales tax and income tax, state levies, environmental fees, fuel excise and introduce a car tax, and they do not intend to stop there – the 400 million euro budget hole needs to be filled.
The article has also appeared on epl.delfi.ee
