The Legal Affairs Committee decided today to initiate a Bill that would simplify the options of foreign investors to invest into Estonian start-ups, and thus improve the attractiveness of the Estonian business environment.
The Chairman of the Legal Affairs Committee Jaanus Karilaid said that the amendment should help to avoid situations where foreign investors decide not to invest into Estonia because transactions with a private limited company are simply too complicated and costly. “Compared to our neighbours, we have too much red tape. A busy foreign investor might not find the time to come and sign a document at a notary’s office in Estonia. This is why we are legislating for the option to do it from a distance if all the partners agree,” Karilaid explained.
Member of the Committee Kaja Kallas said that the cumbersome nature of the current system is to blame for many transactions going to our neighbouring countries instead. “Rigid formal restrictions have set massive obstacles on the path of fledgling companies, and this money is lost for Estonia. The amendments will increase the attractiveness and competitiveness of Estonian limited companies as a form of enterprise in the European Union,” Kallas said.
The amendment would enable the shareholders of private limited companies to opt for unattested written forms that did not require notarial authentication to conclude certain disposal transactions. These amendments were already planned with the review of the company law prepared by the Ministry of Justice, but as these are seen more urgent, the goal is to enforce these much earlier. The Bill is a response to the request of the Estonian start-up community to resolve the situation where Estonia loses millions of euros worth of investments because these are never made here in the first place, or are withdrawn from here.
The Riigikogu ratified the Act on the Ratification of the Arrangements for Working Holidays between the Government of the Republic of Estonia and the Government of Japan, which allows Estonia and Japan to issue multiple-entry working holiday visas to their citizens of 18 to 30 years of age with the duration of up to one year.
79 members of the Riigikogu voted in favour of the Act (46SE).
The bilateral agreement allows both Japanese and Estonian young adults to work without previously registering their visa with the Police and Border Guard Board. The Japanese government determines the number of visas that may be issued to Estonian citizens annually.
The agreement will enter into force 120 days after Estonia notifies Japan of the completion of the national procedure necessary for issuing working holiday visas to Japanese citizens.
The agreement will tighten relations between Estonia and Japan, support youth tourism, allow people to stay longer in the country, and seek short-term employed in addition to holidaying.
Estonia has previously concluded similar agreements with Australia, New Zealand, and Canada.
The Bill that will transpose the directive regulating the resolution of disputes arising in the application of international agreements eliminating double taxation of income and capital concluded between Member States passed the second reading in the Riigikogu today.
Compared to the existing options for resolving cross-border tax disputes on the basis of agreements for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, and the Convention on the elimination of double taxation in connection with the adjustments of profits of associated enterprises, the directive provides for more detailed and effective procedural rules, provides a more certain time frame for resolving disputes, and strengthens the rights of the taxpayers in the process. A final decision to resolve a tax dispute is binding on tax authorities and it is enforced if the taxpayer accepts it.
The amendments to the Courts Act will enable judges to participate as independent recognised persons in the work of an advisory commission or an alternative dispute resolution commission in the resolution of such disputes. The publishing of the personal identification codes of candidates for lay judges will also be regulated.
According to the Bill, it will be possible for the Tax and Customs Board to disclose data subject to tax secrecy to the implementers of national support programmes so that they can check compliance with the conditions for granting supports and with targeted use of the support, as well as to the Environment Agency so that it can check compliance with specific requirements of the Liquid Fuel Act and the Atmospheric Air Protection Act.
The explanatory memorandum to the Bill on Amendments to the Taxation Act, the Courts Act and the Liquid Fuel Act (29 SE), initiated by the Government, states that, in order to ensure a fairer tax environment, an effective dispute resolution system is needed that would make it possible to eliminate double taxation.
Video recordings of the sittings of the Riigikogu can be viewed at https://www.youtube.com/riigikogu (Please note that the recording will be uploaded with a delay.)
NordenBladet —At today’s plenary sitting, the Riigikogu concluded the first reading of two Bills intended to additionally increase pensions in the coming year.
The Bill on Amendments to § 61 of the State Pension Insurance Act (79 SE), initiated by the Government, concerns the increasing of the base amount of pensions by seven euro on 1 April 2020 after the indexation of pensions. According to the forecast, together with indexation, pensions will increase by 45 euro.
According the explanatory memorandum, 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. The explanatory memorandum notes that the extraordinary increasing of the base amount of pension will increase the pensions of all old-age pensioners, 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.
During the debate, Jürgen Ligi (Reform Party), Oudekki Loone (Centre Party) and Indrek Saar (Social Democratic Party) took the floor.
The Bill on Amendments to § 61 of the State Pension Insurance Act (31 SE), initiated by the Social Democratic Party Faction, will provide that the base amount of pension will rise by 100 euro and the national pension will rise by 60 euro after the indexation due on 1 April 2020.
The explanatory memorandum notes that the Bill is intended to improve the subsistence of the elderly. It is intended to increase old-age pensions to the extent that the average old-age pension would be above the relative poverty rate. According to the explanatory memorandum, the increase in the national pension proposed by the Bill will help the elderly out of absolute poverty.
Helmen Kütt (Social Democratic Party) took the floor during the debate.
The Riigikogu did not support a proposal by the Chancellor of Justice:
The Chancellor of Justice Ülle Madise made a proposal to the Riigikogu to bring clause 18 (1) 6) of the Local Government Organisation Act into conformity with the Constitution. In the words of the Chancellor of Justice, the clause is in breach of the right to stand as a candidate and the fundamental right to freely choose profession, area of activity and position of employment.
The Chancellor of Justice explained that the restriction under which people who had a contract of employment with a city or a rural municipality could not be members of a municipal council was in conflict with the Constitution. As examples she mentioned bus drivers, cleaners and stadium guards, who must choose between their job and their mandate when they are elected at local elections.
“The right to stand as a candidate and to start working in the representative body after being elected, as well as the right to vote and to retain one’s job are very important fundamental rights. Clear and logical justifications must be given if these rights are restricted,” Madise said. In her words, there were no such justifications in that case. Madise noted that active local people were often members of municipal councils, and the Local Government Organisation Act and the Anti-corruption Act set out clear and strict rules for withdrawal.
During the debate, Hanno Pevkur (Reform Party) took the floor, and noted that drawing a border in the issue of the membership of municipal councils was a legislative policy choice. He called on the factions to think along in that matter.
Paul Puustusmaa spoke on behalf of the Estonian Conservative People’s Party Faction. He said that his faction saw no conflict with the Constitution in that issue. He noted that the proposal of the Chancellor of Justice could bring about a greater risk of proceeds of corrupt practices, and the Estonian Conservative People’s Party did not support that.
Siim Kiisler (Isamaa) noted that the legislative amendment proposed by the Chancellor of Justice would not resolve the situation, and that there was no substantial conflict with the Constitution. Thus, in his words, there was no reason to support the proposal of the Chancellor of Justice. He added that the question of how to increase trust in municipal councils deserved further analysis.
Tarmo Kruusimäe (Isamaa) said in his speech that the concept of official was narrow in Estonia. He noted that, currently, employees had the right to stand as candidates, but a problem arose when they were elected and had to decide between their office and their mandate.
31 members of the Riigikogu voted in favour of the proposal of the Chancellor of Justice, 37 were against, and there were two abstentions. Thus, the proposal of the Chancellor of Justice was not supported.
NordenBladet —The Bill that will transpose into Estonian law the EU directive which aims to enhance cost-effective greenhouse gas emission reductions and low-carbon investments, initiated by the Government, passed the second reading in the Riigikogu today.
Another aim of the Bill on Amendments to the Atmospheric Air Protection Act (54 SE) is to bring the Act into conformity with the EU Regulation amending the purposes of the use of revenues generated from the auctioning of aviation allowances, and the decision concerning the establishment of a market stability reserve for the Union greenhouse gas emission trading scheme.
The directive updates the system for greenhouse gas emission allowance trading and specifies the rules for the following trading period, 2021-2030. In addition to that, additional opportunities to make investments will be created. The main new possibility in the following trading period will be the Modernisation Fund which will allow Estonia to support investments in the modernisation of energy systems and in the transition to a low-carbon economy in other sectors. The Government will also be given a possibility to implement the measure under which allowances will be allocated to installations for electricity generation which make investments in the modernisation of the energy sector.
In addition, the purposes of the use of revenues generated from the auctioning of aviation allowances will be amended, and as of 2021 aircraft operators will be obligated to decrease by a linear factor of 2.2 the quantity of allowances allocated for free, similarly to stationary installations.
The Act will also be brought into conformity with the decision of the European Parliament and of the council concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading scheme.
The explanatory memorandum notes that the aim of the market stability reserve will be to control the surplus of allowances in the market. So far, the surplus has been very large, and therefore the price of allowances was low until the beginning of 2018. The European Commission will begin to gradually reduce the allowance surplus by increasing a certain part of the market stability reserve. The market stability reserve will apply for the first time in 2019. The European Commission will allocate allowances to a certain extent for as long as the surplus remains large. Should the quantity of allowances in the market for some reason fall below the critical level, the European Commission will place the allowances from the market stability reserve back on the market.
NordenBladet —Today, the 141st Assembly of the Inter-Parliamentary Union (IPU) will vote on the joint statement of the delegations of France, United Kingdom, Germany, Switzerland and Egypt that calls on Turkey to end its military operations on Syrian territory. The Estonian Delegation to the Inter-Parliamentary Union intends to join this resolution.
Head of the Estonian delegation Aivar Kokk said that the military offensive launched by Turkey had caused dozens of civilian casualties within a few days. “According to the estimation of the UN, about 100,000 people have fled the combat zones, and this number is increasing rapidly. Turkey’s unilateral decision to launch the military operation threatens the ongoing peace negotiations and may cause new large-scale refugee crisis,” Kokk added.
This week, the Estonian Delegation to the Inter-Parliamentary Union (IPU) attends the 141st Assembly of the IPU in Belgrade, the capital of Serbia. The theme of the general debate of the Assembly is strengthening international law. The discussions will focus on the role of parliaments, and on regional cooperation. Improving gender equality, empowerment of young people, protection of human rights and achieving universal health coverage will also be spoken about.
Members of the Estonian delegation Helle-Moonika Helme, Toomas Kivimägi and Marika Tuus-Laul also represent Estonia at the 141stAssembly of the IPU in Belgrade.
The Inter-Parliamentary Union (IPU) is the oldest and largest global organisation of parliaments. It was established 130 years ago, and its membership is made up of 179 national parliaments from the entire world. Estonia was a member of the Union between 1921–1940, and restored its membership after regaining independence in 1991.
For more information, please contact: Aivar Kokk, +372 50 30 954
NordenBladet —The Chairman of the Foreign Affairs Committee Enn Eesmaa is taking part in the meeting of the chairmen of the foreign affairs committees of the Nordic Countries and Baltic States (NB 8) in Stockholm. Their discussions will focus on Brexit, the EU Eastern Partnership programme, and relations with China, among other topics.
“It has remained unclear whether UK will leave the European Union with an agreement or without one. The current deadline of 31 October is almost upon us, and Estonia and the European Union are prepared for every eventuality,” Eesmaa said. He also highlighted the discussion on the Eastern Partnership programme. “Cooperation with the Eastern Partners of the European Union is very important for Estonia. We are doing our bit to keep the topics important for Ukraine, Georgia, and Moldova on the agenda of the other Member States as well,” Eesmaa said.
Tonight, the colleagues will exchange their thoughts on current European Union topics and Brexit. The discussions tomorrow will focus on recent political developments, EU Eastern Partnership programme, China, and possible EU Global Sanction Regime.
Today, the Chairman of the Foreign Affairs Committee will also visit the Estonian House in Stockholm, where he will meet with children attending the hobby school, and members of the community. Tomorrow, Eesmaa will have a one on one meeting with the Chair of the Foreign Committee of the Swedish parliament Kenneth Forslund, to discuss the work of the Riksdag in 2017–2018 when Sweden was a non-permanent member of the UN Security Council.
The purpose of the regular meetings of the Nordic and Baltic chairmen of the foreign affairs committees is to discuss the current regional and international topics. The next meeting of the chairmen of the foreign affairs committees of NB8 will take place in Estonia during the first six months of 2020.
NordenBladet – On Friday an honorary Estonian consulate was reopened in Bordeaux, France to enable better business links with the region of Nouvelle-Aquitaine. Jacques de Galzain has became Estonia’s new honorary consul in Bordeaux, France.
Andre Pung, the Director of the Western Europe Division at the Department for European Affairs of the Foreign Ministry, presented Jacques de Galzain with the honorary consul patent today. His consular region will cover Nouvelle-Aquitaine.
The new honorary consul and the reopening of the honorary consulate makes it possible to further deepen cooperation between Estonia and the Nouvelle-Aquitaine region, and boost business and cultural relations. It also enables Estonia to provide better consular services to Estonian citizens.
Estonia’s new honorary consul Jacques de Galzain is an auditor and a partner at Grant Thornton and the director of its Bordeaux office.
Pung thanked Estonia’s former honorary consul in Bordeaux, Christian de Barillon, for his long and excellent work and presented him with the Order of the Cross of Terra Mariana, 4th Class, issued by the decision of the President of the Republic of Estonia.
NordenBladet —Members of the Estonian Delegation to the NATO Parliamentary Assembly (PA) Ants Laaneots, Leo Kunnas and Sven Sester attend the Annual Session of the NATO PA in London.
Member of the delegation Ants Laaneots said that he intended to ask Secretary General of NATO Jens Stoltenberg in London what would be NATO’s response to the decision of the USA and Russia to withdraw from the Intermediate-Range Nuclear Forces Treaty. “I would like to know what NATO and the European Union intend to do to defend themselves against Russia’s intermediate range missiles because the EU itself does not have intermediate range missiles,” Laaneots explained.
Member of the delegation Sven Sester thinks that the main purpose of the NATO PA is the cooperation of member states in defence and security issues. “In order to meet the targets set for the alliance, governments of the allied states have to bring their defence expenses to the agreed-upon level of two per cent of gross domestic product. NATO increases the security of each member state, and Estonia continues to support fairer and more even distribution of expenses in contributions to operations and the presence of the allies,” Sester said.
The Committees of the Assembly will consider and assess several reports.
The Committee on the Civil Dimension of Security will discuss border security and addressing the refugee crisis. Corruption and human rights situation in Russia and Ukraine will also be spoken about.
The Defence and Security Committee will deal with responding to the Russian challenge, and the issues relating to nuclear deterrence and arms control. Transatlantic defence and security cooperation and renewing the strategy toward Iran will also be discussed. The Committee will also consider the resolution on supporting allied forces and their international partners’ efforts in Afghanistan.
The Economics and Security Committee will speak about British trade policy after the UK’s withdrawal from the European Union, including the trade relations with the EU, USA and Canada. The reports of the Committee also concern digital markets and cyber security, and the developments in North Macedonia and their NATO accession. The efficacy of international sanctions in relation to Russia will be discussed as well.
The topics of the Political Committee focus on the 70 years of the activities of the Alliance and the state of play of transatlantic relations. The reports analyse the challenges and opportunities for NATO in ensuring security and stability in Africa, and the regional security dynamics in the Gulf Region.
The Science and Technology Committee will consider technology trends and artificial intelligence in security. The main topic of discussion will be NATO in today’s cyber age, and strengthening of security and defence.
NordenBladet —The matter of significant national importance “The Future of Pension – Who Will Provide for the Elderly?”, initiated by the Social Democratic Party Faction, was deliberated at the Riigikogu today.
Presentations were made by the Head of the Management Board of Praxis Center for Policy Studies Tarmo Jüristo, Senior Research Fellow of Tallinn University Lauri Leppik, doctoral student of the University of Tartu and economic expert Kaspar Oja, and member of the Social Democratic Party Faction Riina Sikkut.
Tarmo Jüristo said that the theoretic net replacement rate of the Estonian pension system is the lowest in the European Union at around 40 %. Estonia has the highest at-risk-of-poverty rate in the EU among the over 65 year olds who live alone, amounting to nearly 80 %. As a large proportion of the people aged 65 and over receive income that is close to the poverty threshold, even the slightest drop in the relation between salaries and pensions leads to a rapid increase in the number of people living at risk of poverty, Jüristo warned.
“Estonia leads the ranking in Europe in the employment rate of people over the pension age, which is reflected in the lowest relation between the average length of retirement and of working career among the Member States. Whichever way you look at these numbers now, the current situation leaves no doubt that social problems will appear in the future, followed by political pressure to push Estonia’s pension system towards a wider choice. It is more than likely that there will be considerable pressure towards increasing the volume of funds in the Estonian pension system in the future,” Jüristo said.
The second pillar foundations in Estonia hold a total of EUR 4.5 billion. “This is the money we have been putting aside over the last 17 years individually and collectively, and it should reduce the burden of the next generation to fund our pensions,” Jüristo said. Jüristo sees further ways to enhance the second pillar disbursements system, which has already been considerably improved by the recent changes. “The risk profiles of foundations and the choice of foundation by the individuals across their life cycles can be further optimised, more information can be provided, and average service fees have plenty of room to come down. All this creates the conditions for higher productivity than has been achieved so far.”
Lauri Leppik spoke about the two fundamental ways of funding pensions. “The first is something we call permanent financing, inter-generation redistribution; and the second, what we call pre-financing, where every generation collects their own pension funds,” Leppik explained. Very many European countries use what he termed as a mixed model, i.e. using both permanent and pre-financed pension systems; sometimes such mixed financing is used within one pension system.
Leppik said that in a situation where the Estonian replacement rate of the first pillar with its permanent financing is one of the lowest in Europe, an individual who wants to rationally plan their future, not depend financially on their offspring, and disperse risks, but is able to save money only in small instalments, has very few opportunities, other than to turn to a pre-financed pension scheme. “Because it is not possible to buy additional pension from the state; the state does not provide that service, and sadly would also be unable to provide it,” Leppik said.
“Estonia’s second pillar pension foundations have attracted severe criticism, and I do agree that some of that has been well justified. However, we could view the second pension pillar as a cooperation effort between the public and the private sector. The private sector is providing a public service,” Leppik added.
Kaspar Oja focused on collecting pensions in the context of macroeconomics. He sees the topics around ageing and pensions gaining increasing importance in the society. In light of the demographic situation, less people are of the age to enter the labour market than in the age to leave it; over the last years, nearly 6,000 less have entered the market than left it, and Oja does not foresee this situation changing.
He does not think it’s enough to simply save for retirement. “In order to live off the pension alone, purely thanks to savings and with no insurance solutions, one should save up significantly more than would actually be efficient. In order for funded pensions to work, we need some sort of insurance solutions, we need the kind of payment solutions that would allow us to pay pensions in the long term,” Oja said.
Oja also said that the slowing down of Estonia’s economic growth reflects similar past developments in Finland. “The first pillar system, which is based on the tax revenue, is unlikely to ensure us growth as quickly as capital revenue would, if the investments have been made in sufficiently numerous instruments.”
Riina Sikkut stressed the need to remember that we are developing our pension system for the benefit of the people. She listed four aspects that should not be forgotten: people want to receive more in the future; theoretic knowledge that the people have does not translate into their behaviour – neither in taking care of their health nor their personal finances; there is massive inequality of incomes and assets – it would be useful to keep an eye on the income distribution curve when changing taxes, pensions, or any other benefits; children are not a pension pillar – the economic coping of an elderly person cannot depend on whether they have children, and what the financial situation of their children is like.
“We are already feeling a pressure towards an extraordinary increase in pensions, and we are seeing how difficult it is to secure even a seven euro increase,” Sikkut said. “In a situation where the percentage of working-age population is falling, we are unable to ensure a living pension from the current taxes. And of course it makes sense to find other solutions as well, whether they involve saving up for your own retirement, or something else. The second pillar can be improved but it would be irresponsible to jeopardise the coping of the future pensioners to such an extent for the benefit of short-term gains tomorrow,” she added.
During the debate, Indrek Saar (Social Democratic Party), Jürgen Ligi (Reform Party), Tõnis Mölder (Centre Party), Urmas Espenberg (Estonian Conservative People’s Party), Priit Sibul (Isamaa), Heljo Pikhof (Social Democratic Party), Oudekki Loone (Centre Party), Aivar Sõerd (Reform Party), Heiki Hepner (Isamaa) Kalle Grünthal (Estonian Conservative People’s Party) and Andres Sutt (Reform Party) took the floor.