Tõniste proposes tax peace

Toomas Tõniste.


Even though the finance ministry cut this year’s alcohol excise duty receipt forecast again, Minister of Finance Toomas Tõniste (Pro Patria) does not see this as a problem as other taxes are coming in nicely. He would also propose a tax peace.

The state budget plan prescribed alcohol excise duty revenue of €333 million for this year. The ministry cut the estimate by €46 million to €287 million in spring and again in summer, this time to €259 million. Why is tax receipt so poor?

Receipt is not poor. It is on par with previous years. It’s just that our expectations have grown. Some people are paying the duty and it is helping us. Another part of people has found alcohol to be too expensive. They buy theirs in Latvia. The end result is that tax revenue equals what we had four years ago. The only thing we’ve missed is the additional revenue we were hoping for. If we can maintain recent levels of alcohol consumption, it is sensible policy.

What I mean is that the forecast is missing the mark. It was adjusted down for the second time in one year this summer. Does this worry you?

It does not. That said, I did perceive a certain discrepancy here when I became minister. I have pointed out that it is not the right path. Luckily, we managed to cut the excise duty hike in half earlier this year. Secondly, we have decided not to hike duties next year. However, that will impact forecast revenue.

Next year’s budget talks will begin soon. Which taxes should be lowered, which hiked?

The Estonian business environment needs tax peace. Looking at promises parties have made, they all require tax hikes. I would like for us to exercise restraint when it comes to promises and give companies time to adjust to the tax environment.

You do not want to lower duties on motor fuel and alcohol next year?

I would like to lower the duty on alcohol to where we wanted to take it in spring. To revise a decade of Estonian excise duty policy and lower the duties to Latvia’s level… We can talk about it. It would not be too expensive. However, it would create new problems. We can discuss some minor adjustments in the grand scheme of things.

About fuel duties: just lowering the duty on diesel to the Latvian level would create a tax hole of €90 million. Promises to lower duties are a neat populist trick, but the state has to collect taxes at the end of the day.

Should Estonia change its complex income tax system that forces people to predict their income?

There are attempts to make it look like a very complicated system, but I feel people have gotten used to it. It (complexity – ed.) was an inevitable side-effect of the reform as hiking everyone’s basic exemption to €500 a month would have been too expensive. That is why we created a cheaper but more complex system.

There will be no tax changes in the state budget?

Let the next coalition make changes. The current one made its decisions during state budget talks in spring where we did not prescribe any tax changes.