Yes, the VAT can be increased, but with a reduction in the VAT on food, as almost all of Europe is doing. This leaves more money for poorer people who spend more of their income on food.
The beginning of this year was stormy in the Estonian political landscape. Just a few days before the Riigikogu elections, the Reform Party once again confirmed that taxes will not increase. Annely Akkermann, the finance minister at the time, explained that the country’s financial situation is in the best shape and promised to take poison if the tax increase does come.
After the election, we found out that there will be an unprecedented tax increase. Both VAT and income tax will rise, and a whole series of new taxes await us. The outgoing finance minister left us with a huge budget hole, but instead of poison, Annely accepted the position of chairman of the Riigikogu’s finance committee – perhaps not very good news for the state’s finances, but at least a nice person survived.
The sunrise government was replaced by a tax increase government under the leadership of the same prime minister. And suddenly the whole of Estonia realized that the promised white forces are not so pleasantly soft and white. The main political debate now revolves around whether the lying of the Reform Party’s top politicians or their incompetence is to blame for today’s situation – both options do not seem the most inspiring.
The otherwise very exciting topics of the coalition agreement, such as marriage equality, euthanasia, were put on the back burner, and if today’s coalition decided to legalize cannabis, for example, no one would even notice. The entire country of Estonia has fastened the seat belt and is heading into the depths of another economic crisis under the leadership of the new government.
The Reform Party supports members of the Riigikogu with 400 euros
However, the political technologists of the Reform Party have not disappeared anywhere and do their work with soul. Immediately after the elections, we learned that the previous Kaja Kallas government did everything it could, but the people failed again and could not maintain budget discipline. The governments of Jüri Ratas, who did something wrong years ago, are also a little to blame.
And now the socialists and especially the Estonian 200 are interfering with state governance, who fortunately are naive enough for the prime minister’s party and are already trying to defend the stupidities of the Reform Party. Lauri Hussar’s words before the elections, that Estonia 200 supports the initiatives of the Reform Party, have come true. Everyone is to blame, except for the Reform Party itself, which is going to single-handedly take half a billion euros out of the state budget every year by “getting rid of the tax hump”.
Unfortunately, the reality is that the previous government of Kaja Kallas is to blame for the huge budget gap, record inflation and the coming economic crisis, which decided to give up supporting Estonian entrepreneurs in the situation of rising energy prices. This caused record inflation (since the state did not cover the price difference, it was borne by consumers), which in turn meant the loss of competitive advantages of companies in export markets.
Other European Union countries supported their business, which is why the products of these companies became cheaper than Estonian products. The last, most painful phase of the crisis is upon us right now. Inflation is a thing of the past – expensive local products are replaced by cheaper foreign products. Estonian manufacturers, who lost in unequal competition, are retrenching workers and closing factories, in the coming months we are expecting record unemployment.
The situation is so critical that a window of opportunity has emerged in politics – money is needed in the state budget, there is no way out of reforms, and today’s political decisions will determine the future of Estonia for years to come. We have the opportunity to build a more equal society, which would remain more equal even after the end of the economic crisis.
Yes, the VAT can be increased, but with a reduction in the VAT on food, as almost all of Europe is doing. This leaves more money for poorer people who spend more of their income on food. Yes, income tax can also be increased, but not for everyone, but only for the richest. Progressive income tax is similarly a feature of developed countries.
Unfortunately, the government led by the Reform Party decided otherwise. For example, the new government’s income tax reform takes money from poorer people and gives it to richer people. As a result of this reform, a member of the Riigikogu will have 400 euros more money per year, while the recipient of a 1,200-euro salary will instead lose his income.
The increase in sales tax will hit those who have to count pennies in the store the hardest. The sudden increase in hotel VAT from 9% to 22% will cause another wave of unemployment in a sector already battered by the corona crisis. The new government had the opportunity to get tens of millions from property tax by taxing the so-called “second apartment” – that is, taking money from people who own several properties. Instead, they go to the taxation of underground land, that is, they start taking money from those who have only one home.
The finance minister is setting an example with Subaru
Even with the implementation of the car tax, the Reform Party can create class hatred. Instead of focusing on taxing luxury cars, the new government plans to tax old cars more. The new Minister of Finance, Mart Võrklaev, explains that rural people could buy a more economical car, such as his own new Subaru Forester. Well, indeed, if there is not enough bread, then eat cakes.
The car tax puts the biggest tax burden on the shoulders of rural people, who cannot get things done without a car. And even if he wants to, he can no longer sell his old car to buy a “new and more economical” one – who still wants a car, which is accompanied by the transfer of a thousand-euro car tax. “And we will also lose free public transport!” – reminds the new finance minister.
The narrative of the Reform Party is that success should not be punished. I agree with that, but a more equal society benefits everyone, including successful members of society. Do we really want to live in a country where, in order to increase the salary of a minister or member of the Riigikogu, more taxes are taken from the salary of a kindergarten teacher?
Or where a rural person pays 100 euros a month in car tax for his old Volkswagen, while the state closes the last rural school in his municipality? Is this what the country of successful people should be like? Unfortunately, I cannot agree with that, and that is why the Center Party organizes pickets against tax increases every Thursday in front of Stenbock’s house.
