“I do not agree as this will definitely not affect the volumes of these banks,” Tsahkna said. He added that he does not believe the new tax would discourage banks from coming to Estonia as the rate will be very modest. “I even think it could be bigger,” he said.
“Banks do not come here because our taxes are too high, but because the market is very low,” the IRL chairman believes.
The new coalition also promises to limit the practice of taking profits our of Estonia tax-free, while Tsahkna did not have an answer yet when asked how the coalition plans to achieve it. The exact plan will be put together by the finance ministry, and the move is set to yield initial proceeds in 2020.
Attack on interest income
The new government will also go after interest on deposits by taxing it.
It is true that interest rates have hovered around zero in recent years, making for negligible income. Head of the social democrats Jevgeni Ossinovski said that people on average have deposits of 1,000 euros, which is not enough to make them any money. Interest income is substantial for wealthier people whose deposits are considerable.
However, low interest rates are not perpetual, and abolishing the income tax exemption on deposit interest constitutes a precedent.
The incoming coalition vows to lay down a tax for sweet soft drinks and hike the excise duty on beer, cider, and wine. Another planned tax is a registration fee for new vehicles based on engine power.
The parties have also talked about so-called fair fines the extent of which will depend on the level of income of persons fined.