Today, the Estonian delegation to the Baltic Assembly (BA) is going to the 38th session of the Assembly in Riga. Tomorrow, Estonia will become the BA presidency country for the next year. The Baltic Assembly presidency is held on the principle of rotation.
The President of the Riigikogu Henn Põlluaas said that the three Baltic states were more interconnected globally than ever before. “Our contribution to the national, regional and allied security starts with our individual awareness of the responsibility we have in developing and protecting democracy and the rule of law. When we think about our recent history, we often understand each other almost without the need for words. Our countries are free and democratic, our languages and cultures are here to stay, and we are reliable partners for our friends and allies,” Põlluaas said.
The President of the Riigikogu added that Baltic defence cooperation needs to be enhanced to ensure our security, and we must also involve our NATO allies through a larger permanent presence.
The Head of the Estonian delegation to the BA Aadu Must said that traditions and mutual trust have helped the Assembly to make this form of cooperation an extremely efficient means of achieving common goals. “This cooperation has passed the test of history, strengthening our fight to restore our independence and enhancing our coordinated actions, thoughts and development plans. These traditions are still going strong,” Must said.
Estonia is taking over the BA presidency from Latvia tomorrow, and Aadu Must will become the President of the Assembly. “I would like to acknowledge the huge work done by the current President Jānis Vucāns who put his whole heart into it. It is a great honour to continue his work,” Must said.
At the sitting of the 38th Baltic Assembly and the 25th Baltic Council on 29 November, the Latvian presidency is presenting its report, and discussions are held on the Rail Baltica project, development of the energy market, perspectives on hydrogen, and higher education in the Baltic states. The BA Resolution and the Final Document of the 38th session will be passed and a Joint Statement of the Baltic Council of Ministers will be signed.
At the Baltic Assembly Award Ceremony tonight, Leelo Tungal will receive this year’s BA Prize for Literature.
The Baltic Assembly is a consultative cooperation organisation of the parliaments of the three Baltic States that discusses issues of mutual interest. A 12-member delegation of the Riigikogu represents Estonia in the Assembly.
Riigikogu Press Service Veiko Pesur Phone 631 6353, 55 590 595 e-mail veiko.pesur@riigikogu.ee Questions press@riigikogu.ee
NordenBladet —The Foreign Affairs Committee is on a visit to Paris today and tomorrow. In the meetings, discussions on the future of Europe focus on both the transatlantic security architecture and the global challenges.
“Estonia has active and very good relations with France,” Chairman of the committee Enn Eesmaa said. “We are like-minded with the French in many issues. For example, we have similar interests and a deepening cooperation in cyber issues. We are also ready to closely cooperate with France in the UN Security Council over 2020-2021.”
Eesmaa said that Estonia was grateful to France for having made a significant contribution to the security of the Baltic states through its presence on NATO’s eastern flank and participation in the Baltic Air Policing mission.
The Deputy Chairman of the Committee Marko Mihkelson said that, in the meetings during the committee’s visit to Paris, they wished to become clear on France’s goals in the shaping of the Euro-Atlantic security architecture. Mihkelson also wishes to explain to his French colleagues the need for the European Union and NATO to expand, and Estonia’s positions on supporting the Eastern partnership countries. He also wishes to discuss cooperation in the UN Security Council.
Today, the delegation of the Foreign Affairs Committee meets the President of the Foreign Affairs Committee of the National Assembly of France Marielle de Sarnez and members of the French-Baltic friendship group of the Senate. In the evening, the Estonian Embassy will host a reception to mark the fifth anniversary of e-residency, which the members of the Foreign Affairs Committee will attend.
Tomorrow, the day will start with a meeting at the Ministry of Foreign Affairs of France. Thereafter the committee will meet Emmanuel Bonne, Foreign Policy Adviser to President Macron. A meeting with Christian Cambon, President of the Foreign Affairs, Defence and Armed Forces Committee of the Senate is scheduled for the afternoon. The delegation is also planning to hold meetings with representatives of the Estonian community and analysts of the European Council on Foreign Relations (ECFR) think tank.
The delegation includes Chairman of the committee Enn Eesmaa, Deputy Chairman Marko Mihkelson and members Keit Pentus-Rosimannus, Ruuben Kaalep and Raivo Tamm.
NordenBladet —At his meeting with Governor General of Canada Julie Payette, the President of the Riigikogu Henn Põlluaas spoke of the possibilities of e-governance and the development of the digital state, and the defence cooperation in NATO.
“The relations between Estonia and Canada are excellent, and we recognise similar values in terms of human rights, freedom of speech and free trade,” Põlluaas said. “We also have common goals in the development of the digital state, as well as maintenance of peace and security in the world.”
Põlluaas said that the allied relations in NATO also made Estonia and Canada closer. The President of the Riigikogu thanked Canada for its contribution to increasing the security in the Baltic region. The Governor General said that the contingent located in the Baltic states was the largest mission abroad of her country. She confirmed that Canada supported small states and cooperated with them in international organisations.
Põlluaas noted that despite the long distance Estonia sensed a strong emotional closeness to Canada because a large Estonian community lived there. The Governor General appreciated the contribution of the people of Estonian origin to Canadian society.
Other topics included foreign language skills of citizens, artificial intelligence and digital literacy where countries were willing to exchange their experience. With regard to digital solutions, Canada considers it important to harmonise international law.
Members of the Riigikogu Annely Akkermann and Andrei Korobeinik also participated in the meeting.
NordenBladet —The President of the Riigikogu Henn Põlluaas met the President of Ukraine Volodymyr Zelensky today. Both parties expressed their happiness over the close communication and constructive cooperation of the two countries. Estonia and Ukraine share common values and a similar history.
“Estonia is a steadfast friend to Ukraine, and we remain firm in our support for national sovereignty and territorial integrity,” Põlluaas emphasised. The President of the Riigikogu was adamant that Estonia would never recognise the illegal annexation of Crimea, and would support all initiatives to end the war in Donbass and return the occupied areas to Ukraine. “We will not let our partners in the European Union or NATO forget these topics either. Estonia recognises the efforts of Ukraine to join both organisations,” Põlluaas said.
The President of Ukraine Zelensky thanked Estonia for the friendship and support, and highlighted that Estonia is the largest supporter of Ukraine per capita. The President said that Estonia’s support to Ukraine has been very clear and tangible since the beginning, from medical assistance to hospitals to declarations of support in international organisations. Zelensky added that Ukraine can learn a lot from Estonia’s experiences with reforms and the e-governance success story.
The President of Ukraine and his accompanying delegation were also met by the Chairman of the Foreign Affairs Committee Enn Eesmaa, and the Deputy Chairman of the Estonia-Ukraine parliamentary group Andres Sutt.
NordenBladet —At the meeting of President of the Riigikogu (Parliament of Estonia) Henn Põlluaas and Speaker of the Eduskunta (Parliament of Finland) Matti Vanhanen, issues relating to the Finnish Presidency of the Council of the European Union, the activities of both parliaments and cooperation between the two parliaments were discussed.
Põlluaas and Vanhanen acknowledged that the relations between Estonia and Finland were excellent, and it was relevant that mutual understanding prevailed between the two countries. Vanhanen emphasised that he considered it important to make the first foreign visits after assuming the office of the Speaker to the neighbouring countries Sweden and Estonia.
Vanhanend said that during the month remaining of its Presidency of the Council of the European Union, Finland’s focus would be on the Council achieving a political consensus on the budget of the EU.
The speakers had a lively discussion about the activities and organisation of work of both parliaments, focusing on the work of the committees and how topical issues were dealt with. Ideas were exchanged about security, and issues relating to defence and budget.
Põlluaas and Vanhanen welcomed the cooperation between the parliaments of the two neighbouring countries, which has been especially fruitful at the level of the committees. “The cooperation with the Defence Committee of the Eduskunta has been especially successful, it has lasted without interruptions since 1993,” Põlluaas said. He added that every year meetings took place both in Finland and Estonia. Põlluaas pointed out that it is the longest international cooperation of the committees of the Riigikogu of Estonia since the restoration of independence. The Foreign Affairs Committee of the Riigikogu also has annual regular meetings with their colleagues from the Eduskunta.
Today’s meeting was attended by Chairman of the Foreign Affairs Committee Enn Eesmaa, Chairman of the Economic Affairs Committee Sven Sester and member of the European Union Affairs Committee and Legal Affairs Committee Urve Tiidus.
During his visit, Vanhanen will also meet with President Kersti Kaljulaid and Prime Minister Jüri Ratas.
In the afternoon, President of the Riigikogu Henn Põlluaas and Speaker of the Eduskunta Matti Vanhanen will lay a wreath at the Monument to the Soldiers of Finnish Infantry Regiment 200 at Metsakalmistu cemetery.
NordenBladet — The delegation of the National Defence Committee of the Riigikogu (Parliament of Estonia) will visit Estonia’s representations to the European Union and NATO in Brussels and NATO Supreme Headquarters in Mons during their three-day visit to Belgium.
Chairman of the National Defence Committee Andres Metsoja said that the purpose of the visit to Brussels was to get an overview of the developments in NATO and the European Union. “Developing of allied relations and defence policy requires full cooperation built on continuous communication between states and their representatives,” Metsoja pointed out. In his opinion, it is also essential to deal with better defining of the global space in order to ensure the best possible representation of Estonia’s interests.
Deputy Chairman of the Committee Kalle Laanet believes that in the light of the turbulent security policy messages of today, it is important that the legislators get information from direct sources because it helps prevent assuming demagogic positions.
The delegation will meet with the representatives of Estonia at the EU and NATO, and the representatives of the allies. On Wednesday, the delegation will visit the Supreme Headquarters Allied Powers Europe (SHAPE), the headquarters of NATO’s Allied Command Operations in Mons.
The delegation of the National Defence Committee consists of Chairman of the Committee Andres Metsoja, Deputy Chairman of the Committee Kalle Laanet and members of the Committee Madis Milling, Johannes Kert, Leo Kunnas and Jaak Juske.
NordenBladet —At today’s plenary sitting, the Riigikogu appointed Juhan Sarv a justice of the Supreme Court. Sarv becomes a member of the Supreme Court from 3 February 2020.
The explanatory memorandum to the Resolution of the Riigikogu “Appointment of Juhan Sarva Justice of the Supreme Court” (102 OE), submitted by Villu Kõve, notes that Juhan Sarv is an experienced and recognised lawyer. The Chief Justice of the Supreme Court confirmed that Sarv’s long-time work experience as an adviser to the Criminal Chamber of the Supreme Court and as a judge of Tartu Circuit Court allowed him to contribute significantly to the work of the Supreme Court and the further development of Estonian criminal law.
67 members of the Riigikogu voted in favour of the Resolution and three were against.
On the motion of the Constitutional Committee, the Riigikogu suspended the second reading of the Bill to Implement Regulation (EU) 2019/788 of the European Parliament and of the Council on the European Citizens’ Initiative (74 SE), initiated by the Government. The Bill was intended lower the minimum age for signing a statement of support for a citizens’ initiative from the current age of 18 to 16.
The European citizens’ initiative is an instrument of participatory democracy that allows to make proposals on legal amendments in all fields where the European Commission has the competence to present legislative proposals (e.g. environment, agriculture, energy, transport and trade). A citizens’ initiative must receive the support of one million citizens from at least seven Member States. Initiatives allow citizens of different Member States to influence the policy-making of the European Union.
During the debate, Lauri Läänemets (Social Democratic Party), Hanno Pevkur (Reform Party), Tarmo Kruusimäe (Isamaa) and Henn Põlluaas (Estonian Conservative People’s Party) took the floor.
At the beginning of the sitting, the member of the Riigikogu Kalev Saare took his oath of office.
NordenBladet —At today’s sitting, the Riigikogu passed the Act that helps improve the enforcement of European Union agri-food chain legislation, and the Act according to which the base amount of pension will rise by additional 7 euro after indexation on 1 April 2020.
The Act on Amendments to the Infectious Animal Disease Control Act, the State Fees Act, the Feed Act, the Food Act and the Veterinary Activities Organisation Act (90 SE), initiated by the Government, brings the Act into conformity with a Regulation of the European Parliament and of the Council. The Act will improve the enforcement of European Union agri-food chain legislation and the level of protection against risks to human, animal and plant health in Member States.
The aim is to establish a European Union framework to harmonise the organisation of official controls, and official activities other than official controls, along the entire agri-food chain. The principle arising from European Union law does not allow to duplicate the provisions of directly applicable legislation or to rewrite them in national law. Therefore, it is necessary to update or repeal several provisions of the Infectious Animal Disease Control Act, the Feed Act, the Food Act and the Veterinary Activities Organisation Act.
Among other things, the procedure for performing official controls on the transportation of feed of non-animal origin to Estonia from countries and territories that are outside the European Union customs territory is amended. Imported feed of non-animal origin arriving in Estonia is no longer subject to 100-per cent control at border control posts. Instead, the focus is on the control of feeds that may pose a higher risk to animal and human health and to the environment. A significant amendment to the Feed Act is also the changing of the principles for financing of official controls and of other official activities. The current state fee paid for performing official controls is replaced by the supervision fee charged for controls. Such a charging system takes into account the actual costs relating to controls and enables flexibility in the case of different types of establishments. Due to this amendment, the State Fees Act also needs amending.
80 members of the Riigikogu voted in favour of the Act.
The Riigikogu also passed the Act on Amendments to § 61 of the State Pension Insurance Act (79 SE), initiated by the Government, according to which the base amount of pension will rise by additional 7 euro after indexation on 1 April 2020, and according to the forecast, together with indexation, the average pension will increase by 45 euro.
The extraordinary increase of the base amount of pension as the solidarity component increases the pensions of all old-age pensioners (including persons receiving pensions under the Old-Age Pensions under Favourable Conditions Act and the Superannuated Pensions Act), persons receiving pension for incapacity for work and persons receiving a survivor’s pension. The increasing of the solidarity component will help relatively more the non-working pensioners who receive a lower pension. In 2020, the increasing of the base amount of pension will concern around 330,000 persons, and it will reduce the relative poverty rate among pensioners by 0.6 percentage points.
During the debate, Marika Tuus-Laul (Centre Party), Signe Riisalo (Reform Party) and Indrek Saar (Social Democratic Party) took the floor.
76 members of the Riigikogu voted in favour of the Act.
Five Bills passed the second reading:
First, the Bill on Amendments to the Penal Code and Other Acts (transposition of the directive on the protection of the European Union’s financial interests, and the directive on the procedural rights of minors) (50 SE) was at the second reading. It had not been deliberated at Tuesday’s sitting due to the end of the working hours.
The directive on the protection of the European Union’s financial interests obliges Member States to apply sanctions to natural and legal persons who are guilty of intentional fraud affecting the Union’s financial interests, as well as other related criminal offences (e.g. the laundering of proceeds of crime).
On the basis of the directive, the definition of EU’s financial interests will be inserted into the Penal Code under which ‘European Union’s financial interests’ means revenues, expenditure and assets covered by, acquired through, or due to the EU’s budget and the budgets managed by the EU’s structural units. The scope of application of the Estonian Penal Code will also be extended by providing that it also applies to criminal offences affecting the Union’s financial interests committed outside Estonian territory if they are committed by an Estonian citizen, Estonian official or a legal person registered in Estonia.
With a view to transposing the directive, the Penal Code will be amended by inserting a new provision concerning procurement fraud affecting the EU’s financial interests, and the elements of crimes related to smuggled goods will be amended. In the case of criminal offences affecting the EU’s financial interests, foreign officials will also be deemed to be officials. The maximum sanction for fraud and smuggling will be increased by raising the maximum term of imprisonment from three years to four years.
On the basis of the function of the government committee on anti-money laundering and countering the financing of terrorism, the maximum term of imprisonment imposed for money laundering agreement will be raised from one year to two years, and the liability of legal persons will be provided for.
The directive on the procedural rights of minors concerns procedural safeguards for children who are suspects or accused persons in criminal proceedings. With a view to transposition of the directive, the rights of suspects or accused who are minors will be provided for more clearly. As major amendments, the Bill will provide the right of a minor to an individual assessment, and to a medical examination upon deprivation of liberty, and the right of his or her legal representative or another person to participate in the criminal proceedings. For individual assessment, in the future, in the case of suspects who are minors, a pre-trial report will have to be prepared at the latest before indictment.
The Bill on Amendments to the Military Service Act and Other Acts (59 SE), initiated by the Government, will amend the Military Service Act with the aim of organising the planning of special pensions and the prosecutor’s work ability allowance in the state budget.
At present, many special pensions and the prosecutor’s work ability allowance are planned in the budgets of different areas of government, and they are paid centrally in the Social Insurance Board. Under the current law, different ministries, as well as the National Audit Office and the Office of the Chancellor of Justice calculate the special pensions, and in practice the personnel records relating to the calculation have already been mainly consolidated into the State Shared Service Centre.
With the amendment, special pensions and the prosecutor’s work ability allowance will be paid from the state budget, and the reference to the area of government of a specific ministry will be omitted. According to the amendment, in the future, the Ministry of Social Affairs will plan special pensions and the prosecutor’s work ability allowance in its budget, using the data prepared by the State Shared Service Centre. The amendments will not affect the amount of special pensions or the prosecutor’s work ability allowance, or the rights of the persons receiving them. Nor will there be any changes in the payment. Special pensions and the allowance will continue to be paid through the Social Insurance Board.
The Bill on Amendments to the Value Added Tax Act (76 SE), initiated by the Government, will transpose the amendments to the EU Value Added Tax Directive which harmonise the VAT treatment of call-off stock and chain transactions at EU level. The deadline for the transposition of the directive is 1 January 2020.
The explanatory memorandum notes that “call-off stock” means goods that the seller transports to a warehouse in another Member State for the buyer on the basis of an agreement with the buyer, to be redeemed from the warehouse by the buyer. Goods are in the seller’s ownership until they are transferred to the buyer. The amendment will simplify the procedure for cross-border VAT treatment of businesses engaging in business-to-business goods transactions which will reduce the administrative burden for businesses. Under the current procedure, in such cases, the seller of the goods must be identified for VAT purposes in the respective Member State and must declare the sale of the goods as a domestic sale there.
According to the amendment, the seller of goods will declare only intra-Community supply of goods at the moment when goods transported as call-off stock to another Member State are transferred there. That is, the sale of goods will be declared and taxed at a zero rate in Estonia and the seller will have no obligation to register or report such transactions in the other Member State.
The Bill will establish the rules for the VAT treatment of cross-border chain transactions. Chain transaction is a successive transfer of goods, or a chain of transactions whereby goods are transported directly from the first seller to the last buyer of the goods in another Member State. In a chain of transactions, transfer of taxable goods to resellers of other Member States who transport the goods either themselves or through a third party acting on their behalf to the last purchaser of the goods in the chain of transactions is subject to a zero per cent rate. The remaining transactions in the chain are regarded as domestic revenue.
The practice of the VAT treatment of chain transactions varies by Members States and therefore operators lack legal certainty in this regard. Varying practices may result in double taxation or non-taxation of transactions.
The Bill on Amendments to the General Part of the Environmental Code Act and Other Acts (55 SE), initiated by the Government, will optimise the processes for environmental decisions and reduce the administrative burden in environmental law through consolidation and coordination of the proceedings for permits. The Bill is part of the codification of environmental law that was begun with the General Part of the Environmental Code Act. The requirements for the proceedings relating to environmental permits in the Acts of the special part of the Environmental Code will be systematised, controversies will be solved, and a basis for issuing a single environmental permit will be established. The Bill will eliminate parallel proceedings for environmental permits, reduce bureaucracy, and enable obligations arising from legislation to be fulfilled more conveniently and effectively.
The Bill on Amendments to the Consular Act and Amendments to Other Associated Act (44 SE), initiated by the Government, is intended to determine the list of consular acts in the event of which a consular secretary can also provide consular services. As the concept “consular secretary” is not in the current law at present, the concept is provided for in the Bill. Under the Bill, consular secretary is a member of staff working in a non-diplomatic post who can provide consular services, under the proposed amendments. The Bill also points out that the services will be provided under the supervision of a consular officer.
The amendments will not automatically involve the right of all consular secretaries to provide the services listed in the Bill, but the Bill will create the legal basis for such a possibility. The right to provide the services will be decided separately for each particular member of staff. Along with that, members of staff will be granted relevant access to the register of professional acts of a consular officer for registration of acts. Relevant training is a prerequisite for the right to provide the services and access to the register, among other things, with the aim of ensuring compliant and correct identification of persons.
A Bill passed the first reading:
The Bill on Amendments to the Penal Code and Amendments to Other Associated Acts (fines arising from European Union law) (94 SE), initiated by the Government, will amend the General Part of the Penal Code so that the Act would enable to meet the requirements provided by European Union law and to apply a higher upper limit of fine for certain breaches in specific areas (financial sector and data protection). The Bill provides for the legal framework for establishing fines with a higher upper limit. The specific elements of misdemeanour and sanctions will be set out in a separate Bill.
The explanatory memorandum notes that the fine with a heightened upper limit is an exceptional type of fine which can be applied in justified cases and when this is necessary for the fulfilment of an international obligation binding on Estonia. The definition of international obligation includes both international agreements concluded and sources of European Union law.
In the future, a fine of up to 20 000 000 euro or up to three times the amount of the profits gained or losses avoided because of the infringement can be imposed as a punishment on both natural and legal persons as a fine with a heightened upper limit.
A fine for a legal person may also amount to up to 15 % of the consolidated turnover of the legal person or, in cases provided by law, its consolidation group.
In connection with the previous amendments, the upper limit of the fine prescribed for legal persons for criminal offences will also be raised from 16,000,000 euro to 40,000,000 euro. The principle under which a fine calculated by reference to turnover may not be higher than the fixed upper limit for a fine will also be abandoned.
The term for payment of fines will be extended from the current 15 days to 45 days in order to balance the impact of the fine with a heightened upper limit. Amendments will also be made that will highlight more the option to pay a fine in instalments.
NordenBladet —At today’s sitting of the Riigikogu, the matter of significant national importance “Tax system – How to go on?” initiated by the Estonian Centre Party Faction was deliberated.
In her report, Chairman of the Centre Party Faction Kersti Sarapuu noted that Estonia’s tax burden was one of the lowest in the European Union. In 2018, tax burden was 33 per cent in Estonia, while the European Union average was 40 per cent of GDP. In Latvia, Lithuania, Bulgaria and Romania, tax burden is lower than in Estonia. Sarapuu added that Estonia’s tax burden would remain at 33.2 per cent over the coming two years and would fall to 32.7 per cent by 2022.
In Sarapuu’s words, the second reading of the state budget for 2020 had showed that there were many sectors that needed additional funds. “Speaking of the opposition’s motions to amend, we would not be against their content if there were specific sources to cover them, but there are none, as matters stand today,” Sarapuu said.
“The state budget is nothing else than a budget of a family, and the people of Estonia are the family,” Sarapuu made a comparison. “And just like in every family budget, there are revenues and expenditure and a balance in the state budget. The equation is there, and if we want to have more services, we need to contribute more; there simply are no other options.”
Dmitri Jegorov, Deputy Secretary General for Tax and Customs Policy of the Ministry of Finance, spoke of the taxation of the digital economy. He described the international principles for the taxation of profits which he saw as problematic. “They originate from mid-19th-century Germany, and the official rules originate from a decision of the League of Nations at the beginning of the 20 century, but everybody understands that these basic criteria are of absolutely no importance to the digital economy. Physical borders and physical assets are not important when business is conducted on the Internet,” Jegorov said. “The problem is that, in all countries, companies who do not even exist in the countries under the taxation rules in place actively participate in the economies, and of course they never have to pay profit tax in such a case.”
As a proposed solution, Jegorov presented the European Commission’s plan to impose a 3-per-cent tax to be charged on the digital services turnover, consisting of three different objects of taxation on which the tax would be charged. Internet advertising, that is, provision of the advertising service over the Internet, is one of them. Bringing together buyers and sellers, or platform revenue from such activity, is another object of taxation. Jegorov mentioned Bolt, Uber and Amazon as examples. “That is, where there is a buyer, where there is a consumer of a service, and where there is a seller of goods or a provider of a service, and the platform makes revenue from bringing them together,” Jegorov explained. The sale of user data is the third object of taxation.
In the conclusion of his report, Jegorov drew attention to the fact that the labour market was changing, but active and passive revenues were differentiated upon taxation in a large part of Europe. Jegorov said that it might no longer be reasonable to make such distinctions between the forms of earning income, because in fact everybody would need pension and health insurance in the future. He proposed that everyone should have social insurance, and that we should all also pay for social insurance.
Jegorov noted that social tax only for working people would soon no longer be the optimal solution, and that countries should think of moving away from that. He also mentioned digital nomads who work on the Internet and who can choose the country to which they pay their taxes. Therefore it should be ensured that the Estonian social insurance system is attractive and that such people join the Estonian system.
In his speech, entrepreneur Indrek Neivelt pointed out that the Estonian tax system was stuck in the 1990s. In his words, the tax payment discipline and the tax collection capability had been different back then. “There was also no wealth to tax. Besides, as recently as 15 years ago or more than 15 years ago, capital was lacking – at the time when the corporate income tax exemption was introduced in Estonia,” Neivelt noted. He added: “The situation is totally different today. We have a well-functioning Tax Board that is doing a good job, we have a very good tax payment discipline, and there has been a surplus of capital in the world for some time now. At the same time, the concentration of wealth is also one of the largest world problems, not to speak of work relations that have changed and are changing.”
Neivelt drew attention to the fact that consumption taxes played a very large role in our tax system; however, if consumption no longer increased but began to decrease, the question would arise how we would cover our costs in society.
Neivelt said that the world had changed and it would keep changing faster and faster, and tax system also had to change. At the same time he noted that if taxes were to be changed, that had to be done little by little, not in big steps, because abrupt moves were too risky.
Neivelt proposed several ideas to change the situation. For example, he spoke of trans-European taxes, taxation of natural resources, VAT exemption for organic farming, taxation of assets, taxation of incomes and a ceiling for social tax.
Neivelt said that he supported progressive income tax. In his words, there is a much deeper philosophy behind it than it seems at first glance, and it clearly directs people’s behaviour. “First, many people who work overtime would be able to achieve a more balanced life and, second, it would be good if there was enough work for everyone. It is not good if some people work for 70-80 hours a week while others have no work at all,” Neivelt said. In his words, the highest level of income tax does not have to be 50 but for example 25-30 per cent.
At the same time, Neivelt thought that the corporate income tax system had to be reviewed. As to the taxation of harmful activities, he suggested that alcohol and tobacco excise duties should definitely be accrued in the budget of the Estonian Health Insurance Fund, and it would also be indispensable to tax products containing sugar.
“If we are not planning to increase the general tax burden, we can only redistribute it. The number of people who work and create value is not growing in Estonia. This means that we can shift the tax burden on various population groups,” Neivelt said in conclusion of his speech. “We should reduce the proportion of consumption taxes, and impose more taxes on harmful activities, assets and larger incomes. We should shift the tax burden more towards large companies, wealthy private persons and people who earn larger incomes.”
Representatives of factions took the floor during the debate on tax issues. Kai Rimmel spoke on behalf of the Estonian Conservative People’s Party Faction. Maris Lauri spoke on behalf of the Reform Party Faction and Andrei Korobeinik on behalf of the Estonian Centre Party Faction. Riina Sikkut presented the positions of the Social Democratic Party Faction, and Aivar Kokk presented the positions of the Faction Isamaa.
Jürgen Ligi (Reform Party), Aivar Sõerd (Reform Party), Marika Tuus-Laul (Centre Party), Erki Savisaar (Centre Party), Marko Šorin (Centre Party), Peeter Ernits (Estonian Conservative People’s Party) and Tarmo Tamm (Centre Party) also took the floor.
NordenBladet —At today’s plenary sitting, the Riigikogu heard the Government’s report on Estonia’s participation in the European Stability Mechanism (ESM). The Minister of Finance Martin Helme, who made the report, highlighted that no new payments were being made from the ESM, and the ESM reform was reaching its final stage.
Helme said that the active stage of all ESM assistance programmes was over, that is, for the first time since the establishment of the ESM, new loan payments were no longer being made. The minister added that a total of three countries had been supported with ESM assistance programmes: Greece, Spain and Cyprus. Helme confirmed that, when the active stage of the programme ended, supervision continued, in order that the countries could repay the funds borrowed from the ESM. “So far we have no signals that any of the abovementioned countries might have difficulties with payments,” the minister said.
As another issue, Helme pointed out the planned ESM reform which was reaching its final stage after the recent years’ discussions. “The essence of the reform is that the mandate of the ESM will be broadened. If up to now the ESM supported only Member States who had got into difficulties, in the future the intention is that the ESM would also be the anchor for the euro area in the reorganisation of systemically important financial institutions,” the minister explained. In addition, in his words, the ESM will have a greater role and say in the preparation of assistance programmes supported from ESM funds.
The Minister of Finance also noted that, at present, the ESM has 410 billion euro worth of reserves, that is, 82% of its lending capacity that could be used in crisis resolution if necessary. In Helme’s words, Estonia’s participation in the ESM has remained unchanged since the establishment of the ESM. Helme said that the paid-in capital amounted to 148.8 million, and the capital callable on demand amounted to 1.15 billion euro.
A Bill passed the first reading
The Bill on Amendments to the Income Tax Act and Amendments to Other Associated Acts (106 SE), initiated by the Government, will solve several mismatches that have arisen in taxation. In particular, the amendments concern maternity benefit and redundancy payment, benefits for families with many children, and the increased basic exemption starting from the third child. The Bill will also resolve the mismatches in taxation involving third countries.
The persons who receive maternity benefit or redundancy payment in the fourth quarter will have the option of postponing part of their benefit to the following year for taxation purposes, so that they can use their basic exemption at the current level. When the benefit is partially transferred to the following year, the situation achieved in terms of taxation is similar to the situation where the maternity benefit or redundancy payment is paid monthly. The supports to improve the living conditions of a family with many children and to increase the energy efficiency of a small residential building paid from the state budget will be exempt from income tax. According to the Bill, the increased basic exemption for a child will not decrease when the child receives survivor’s pension or national pension in the event of loss of a provider. The increased basic exemption for a child will increase by 100 euro per month starting from the third child.
The Bill will also transpose the European Union directive on mismatches in taxation involving third countries. The aim is to avoid double taxation resulting from differences in the characterisation of financial instruments, payments and entities in different jurisdictions, or from the allocation of payments between the head office and permanent establishment or between two or more permanent establishments of the same entity. Since such mismatches in taxation could lead to a double deduction or to a deduction without inclusion, the Bill provides for provisions under which, depending on the situation, tax is charged on payment, expenses or losses that can be deducted in another country or that are exempt from income tax in another country, or alternatively it is not allowed to apply income tax exemption on income that has been deducted or is exempt from income tax in another country.
In light of the objective of the directive to avoid double taxation and to ensure taxation of profit of companies, in the future, dividends received from abroad will be exempt from income tax in Estonia only in the case when income tax on the dividend has been withheld or income tax has been paid on the share of profit which is the basis therefor. In addition, it will be ensured that, if a resident natural person receives income, including pension, from abroad, deductions from taxable income will be equivalent to deductions from income received in Estonia. The same will be provided for for residents of the Contracting States of the European Economic Area who receive income in Estonia. At present, deductions from income taxable in Estonia are restricted in proportion to the share of the income taxable in Estonia in the total taxable income received in the period of taxation. As a result of an amendment, it will be possible to make all deductions to the full extent regardless of how large an amount of the income is earned in Estonia.
The deadline for submitting income tax returns will be extended to 30 April and the deadline for the payment and refund of income tax will be extended to 1 October for natural persons, non-residents, management companies of common investment funds, and public limited funds. Also, the limit for making advance payments will be increased from 64 euro to 300 for sole proprietors.