People critical of income tax reform

Photo: Marko Saarm

Half of the Estonian population is critical of the government’s income tax reform, while only a third like it. Every fifth person is undecided. Experts see several possible explanations.

Entrepreneurs (nearly 65 percent against), people earning higher salary, and working pensioners (nearly 60 percent against in both groups), in other words the more active part of society, are the most critical of the income tax reform, survey expert at pollster Kantar Emor, Aivar Voog, said.

Supporters of opposition forces the Reform Party and the Conservative People’s Party (EKRE) are the most critical (72 and 60 percent against respectively). Surprisingly, supporters of minority coalition partner (IRL) are largely of a mind with them (56 percent against). People who prefer coalition partners the Center Party and SDE tend to support the reform (more than 50 percent in favor).

Reflection of the government’s popularity

Political scientist at the University of Tartu, senior researcher at the Johan Skytte Institute of Political Science Mihkel Solvak said the situation is peculiar: most people should gain from the reform but are nevertheless against it. Looking at the figures, it is clear – the reform benefits most people with low income,” he said.

This means that the benefit is either not recognized or there’s something else at play: it is not just about the income tax reform but the government’s unpopularity. “Dissatisfaction doesn’t always spring from what is said but could lie elsewhere and be reflected in poll results,” Solvak said.

The researcher said there are also a lot of people who cannot say whether they support the reform or not which could point to poor communication as pointed out by PM Jüri Ratas when commenting on modest support for the government in January – 36 percent – over the weekend. “There is confusion,” Solvak said.

“It would be simplest to have your employer ignore basic exemption and receive the money when you file your income tax return next year. It would remedy the problem; however, people earning lower salary probably prefer to receive more money every month. This makes planning one’s tax burden very difficult.

Minute gains

Head of tax accounting at KPMG Baltics Joel Zernask said that abounding negative press coverage is another factor influencing people’s opinions.

“It has been said that the reform is costing people money and making them angry. Also, the income tax system is far more complicated than before. Many people do not fully understand it and feel confused which is complemented by articles in the media of someone having lost,” he said.

Zernask added that people who gained from the reform are probably less vocal about it.

“That gain is minute. The government has probably failed in selling the reform to the people. A slight income tax reduction will not save people barely making ends meet. Those few dozen euros a month will not lift people out of dire straits,” the consultant said.