Estonian Opposition Parties Promise Tax Cuts, but Experts Warn of Growing Budget Deficit
As parliamentary elections approach, several Estonian opposition parties are promising tax cuts, while experts note that the national debt is growing too fast and new taxes will be necessary.
Ahead of Estonia's upcoming parliamentary elections, opposition parties have been actively promising tax reductions, but economists warn that the state budget deficit is widening and new taxes will inevitably have to be introduced.
The Right Party proposes cutting the value-added tax (VAT) to 20% and income tax to 18%. Party board member Indrek Luberg stated that such a comprehensive tax cut provides the greatest effect, while selective cuts create administrative burden.
The Centre Party, on the other hand, promises to reduce VAT on food products both in stores and restaurants, as well as abolish the car tax. To compensate, they plan to introduce a bank windfall tax, which according to board member Andrei Korobeinik could bring in 200 to 500 million euros annually depending on the economic cycle. They also propose a progressive income tax system that would yield around 350 million euros.
The Social Democrats propose reducing VAT on food to 9% and introducing a progressive income tax. Party chairman Lauri Läänemets emphasized that such a system is common worldwide because it places a greater burden on those who can afford it.
Economic analyst Triinu Tapver warned that if the national debt is not restrained, by 2030 Estonia will have to pay 600 million euros annually just in interest on state loans. She noted that international organizations recommend various taxes, such as property tax and progressive income tax. Before elections, politicians avoid talking about tax increases, but the budget trajectory shows that new or increased taxes are inevitable. The current budget deficit is 4.5% of GDP.
