Kallas: rapid price advance a conscious choice

Photo: Eero Vabamaegi/Postimees /

Viimsi rural municipality mayor Siim Kallas, who has spent years serving in important offices in Brussels, describes as slander claims that the Reform Party ensured its long reign in Estonian politics by backstabbing its coalition partners and suggests those making such claims take a look in the mirror.

Rumor has it you will lead the Reform Party’s election list in Tallinn’s city center district come March. Is that true?

It has not been formally decided yet. I have expressed willingness to run wherever I can bring the party the most votes. We have been pondering where that might be. That (the city center district – U. J.) is one possible option, but the lists will remain open until January. Let us say it is a likely option.

Would that be your personal preference?

I do not have a plan. I will run where I can benefit the party most. Potential support for me is greatest in the district which is why it would make sense.

Another former prime minister of the Reform Party Taavi Rõivas must now run in West Viru County even though he mentioned Tallinn’s city center at first. Others will have to move for your benefit?

The lists are not final yet. Putting those lists together presents a tough challenge as they must ensure the best result. A lot of people, also in the Reform Party, think that our seats in the Riigikogu are a given and the only thing that matters is their position within. It is far more important to secure those seats first.

There is little doubt you will make it to the Riigikogu. Will your office in Viimsi remain empty?

That depends on the election result. We will make that decision once we have those results. I like it here and would gladly stay.

It is a problem for the Reform Party that you have a lot of strong members and not everyone can run. How to solve that equation so everyone would be satisfied?

Politics only has two tenses – there is no past. There is only today and tomorrow. This means that lists will have to be assembled based on the potential people have today, not based on services rendered in the past. This has to be understood.

I could start listing all the offices I’ve held, but really, I have no right to ask for anything based on that. If I’m interested in contributing to the party’s elections victory, I will run where it makes most sense, not where I demand to be based on my CV.

To what extent do you expect it to be said Siim Kallas got his seat because his daughter is chairman?

(Laughs.) Who really cares about that? We have Kadri Simson and Aadu Must, Jüri Ratas and Rein Ratas. Kaja and I are not codependent. I’m not demanding a position because my daughter is the party’s prime ministerial candidate and chairman.

I want to help her as much as I can, but it is not one of those situations where she tells someone to appoint me somewhere. She often says she doesn’t want to be in her father’s shadow. And she isn’t, she’s an independent person.

What are your thoughts regarding some former members recently discovering that your program is not their cup of tea and leaving the party?

No one has been kept from working on the program. We have seen many such departures in Estonian politics. They are often tied to conjuncture: people are not satisfied with their position in the party and go look for the rainbow elsewhere. I dare say it rarely pays off.

How are things at the Reform Party five months before elections?

All parties are looking for the main question of these elections. It was the Ukraine crisis in 2015, effects of the Bronze Soldier and the switch to the euro in 2011. What could it be this time?

It seems to me people are beginning to realize we have never seen price advance like what we have today. The price of gasoline is pushing 1.5 euros per liter, whereas it stood at 1 euro per liter only recently. Villu Zirnask recently wrote in Eesti Päevaleht about how much prices have really grown in the past year; inflation is around 3 percent. Bank of Estonia publications suggest 0.6 percent of inflation is a direct result of tax policy. It is a lot.

The economist in me perceives a vicious circle: prices rise, followed by salary advance pressure, followed by dwindling competitive ability. That is perhaps one of the main questions of these elections.

As a liberal party, Reform’s position on price advance should be that it is market economy and that prices should to go up.

They should if there are objective reasons for it. It is believed to be the greatest weakness of Keynes’ concept that it pushes inflation that will eventually spiral out of control. Post-WWII policy has been aimed at keeping inflation in check. This means price advance cannot be ignored.

For us, the question is how much we can realistically do about it as a member of the Eurozone. But hiking excise duties that inevitably translates to price advance is a conscious choice.

The Reform Party wants to discuss the economy, taxes and prices, but others are not keen to pick up the thread. Reform is kept out of the debate.

I couldn’t say, there is debate.

The whole of Europe is looking for things to change in taxation. Cross-border trade is one thing, the Googles and the Amazons. There is a lot of money in play most of which passes countries by. It is the same here in Viimsi: as a local government, our revenue comes from residents. We have no warm sentiment toward industry because there’s nothing in it for us.

The trouble with Est-For Invest’s pulp mill is largely that local governments have no use for a single company: why should they allow those kinds of things on their territory? Local governments do not share in dividends or economic activity of companies.

We would like to get a part of dividend. A businessman pays themselves the minimum salary on which we collect social tax, but he takes out most of his profit in dividend on which the local government makes nothing.

The Center Party’s slogan is “A fair state for everyone”. We could say that all parties want a fair state…

Equalization is never fair. Center’s ideology has always been equalization. Progressive income tax and all that.

What is fair?

Opinions differ. I find that it is fair when a person earns what their work is worth and when it’s not taken away from them.

What is fair tax burden is a much tougher question. No one is against taxes, no one is against people who make more money paying more, they already do. Tax burden is distributed evenly and fairly.

What is not fair is that Estonia lacks a real estate tax. There is a man on my street who definitely doesn’t pay the local government anything. However, he would not be able to get out of property tax.

The Reform Party heavily criticized the current government’s basic exemption reform. Now you want to extend that €500 exemption to everyone. Is this overbidding really the right approach?

It would be simpler.

Is simplicity some kind of individual value we need to maintain when it comes to the tax system?

It usually is. Let us take corporate income tax. It would not be a fair tax.

Andrus Ansip argued with Gerhard Schroder back in the day, saying that if we look at corporate income tax, Germany collects less of it than Estonia. How is it possible in a situation where the tax rate is 40 percent in Germany? It is perfectly simple: there are so many exemptions. And political relationships and connections are definitely one component in the latter.

You also sought to outbid the Center Party regarding pensions – they proposed a €100 hike over four years while you proposed €200. Overbidding again. Why?

(Sighs.) It is necessary to have such promises because the Reform Party is based on a people’s party model today, but they have to be feasible of course.

Valve Kirsipuu wrote an article once where she said that we should aim for pensions to be half of the national average salary. Pensions are catastrophically low in Estonia. It would be overbidding were that hike not sorely needed. But we have several hundred thousand pensioners and pension that very recently fell below the subsistence level. It is atrocious!

Pro Patria is suggesting we abolish the mandatory II pillar of pension. What do you think?

I created that second pillar as finance minister, and I believe giving it up would be a very serious mistake.

It earns virtually nothing!

Because it has been kept down. The relative importance of the second pillar was much greater at first. But pressure to increase the importance of seniority and decrease that of the second pillar began already back then. It cannot earn anything if we keep cutting it.

But the system considers the demographic situation. You will earn more pension when times are better irrespective of political decisions. It is another thing we did and that they’re looking to throw out now.

The Center Party is saying that if they will not come to power, Estonia will have a government of the Reform Party and the Conservative People’s Party (EKRE). Reform is threatening the opposite. Why this policy of threats?

We are not suitable for the EKRE voter, while they look favorably at Center. That said, we are not discussing a potential coalition with EKRE.

When I was a rookie party chairman, people asked me whether I would form a coalition with various parties. And I told them I would not form a coalition with them or them or them. But then I was asked how I planned to rule alone without enough votes.

That is why it is wise to wait for election results and then see. We would not like a Center-EKRE coalition though.

Various coalitions run by the Reform Party have thrown members overboard half-way into the elections cycle. Why do you think anyone would even want a coalition with Reform?

This claim of backstabbing partners is slander. Coalitions change when conflicts grow out of hand. People who are complaining today should take a look in the mirror.

Res Publica won the elections under Urmas Reinsalu in 2003 (Center got more votes than Res Publica, but the parties had the same number of mandates; Res Publica was run by Juhan Parts who became prime minister – ed.) and had ceased to exist two years later. The Reform Party had no hand in this achievement. Those who are complaining should first and foremost blame their voters for leaving them.

It has been a long time since we saw a coalition of the two biggest parties, even though election results suggest voters would like to see one. Will we get one now?

My coalition was like that, and it worked just fine. It would be more convenient, especially seeing as they have a different profile and are not fishing in the same pond as us. We inevitably have rivalry with Pro Patria and have to fight for the spotlight.

It would be better if it was possible. But perhaps you should put this question to the chairman (Kaja Kallas – ed.).

How many parties will the next Riigikogu have?

The three big ones (referring to the Reform Party, Center Party and EKRE – U. J.) will definitely be there. The social democrats will also get in, but I think Pro Patria will also… The Free Party is making a new statement every day, but will they be able to pull it off…

It gets complicated from there. (Thinks.) Of the three – Pro Patria, Estonia 200 and Free Party – I believe only Pro Patria will make it. So, that would be five parties.