Entrepreneurs ⟩ Appeal by well-known entrepreneurs regarding taxes and national defense

According to entrepreneurs, the country needs a foreign loan to finance national defense. Photo: Arvo Meeks

• Running costs cannot be financed with a loan.
• Indexed growth of the state budget must be stopped.
• The core that defines the country must remain.

Estonian entrepreneurs are proposing to the government to take a loan to improve national defense and to end the so-called tax festival.

Prime Minister of the Republic of Estonia Kristen Michal

Minister of Finance of the Republic of Estonia Jürgen Ligi

Esteemed prime minister and esteemed finance minister,

below, we, the founders, owners, managers and investors of several major Estonian companies, would like to present our own proposals for solving the challenges facing our common country.

We fully understand our need to increase the defense capability, we have contributed to it and we want to continue to contribute. We also perceive the difficult financial situation of the state budget. However, as entrepreneurs, we are used to looking not at the past, but at the future. Therefore, our proposals are driven by the desire not to harm Estonia's competitiveness and long-term prospects. We cannot put out a fire by creating an even bigger fire.

Our proposals are as follows:

To distinguish between ensuring defense capability and stabilizing public finances in the current cluster crisis. The defense need is a need caused by the change in the external environment, which we cannot ignore. This is a situation for which it is exceptionally good that we have kept the state's debt burden low so far. It is very appropriate to use a foreign loan to finance the skyrocketing increase in defense spending and to smooth out its repayment across a generation. However, a loan must not be used to finance the running expenses that are greater than income.

To slow down and, if necessary, stop the indexed growth of the state budget. As entrepreneurs, we have repeatedly had to review our expenses and reduce them: this is a painful thing to do, but these steps are unavoidable and will soon ensure stabilization, and then already growth. We have done it and experienced it.

To keep only the most valuable and critically necessary fields of the country. This does not mean killing the country, but the opposite: maintaining the core that defines the country. What exactly these areas are is of course up to the politicians elected by the people. We all would like to be able to, have and do everything, but this is not possible – it is necessary to decide what is most important and then maintain it even more carefully.

To raise tax on income (or output such as profits, capital gains and dividends) for a limited period. Income taxation hits the weaker layers of society, i.e. the broader foundation, the least painfully, while also giving the government the essential basis for making decisions. The wealthiest layers of society, including the signatories, have repeatedly expressed their willingness to contribute more to the country than before, both in words and in deeds. We do not make proposals for others to fulfill, we ourselves will bear their main burden.

To tax outputs (not inputs) and increase the tax burden based on the current tax base. We welcomed the prime minister's message about ending the hasty «tax festival», but unfortunately this has not yet materialized, but is continuing with new and greater momentum. Taxation of inputs (which include capital, production assets, material, energy, labor) negatively affects all companies, many have to increase the price of products and services, which in turn provokes a wave of inflation. What happens in areas with large fixed assets (electricity grids, district heating, gas grids, water supply) is especially quickly transferred to the consumer, which in turn leads to the next price rally and a re-explosion of inflation.

Income taxation hits the weaker layers of society, i.e. the broader foundation, the least painfully, while also giving the government the essential basis for making decisions.

To abandon balance sheet or equity-based taxation. The consequence of this tax is a dramatic decrease in Estonia's competitiveness. If we introduce a tax aimed at discouraging capital-intensive ventures, we will miss out on the most ambitious deep-tech investments and the most important industries of the future, for example, in energy production and security. As a small country, we have very few advantages to participate in the competition taking place in Europe right now for these industries of the future. Balance sheet-based taxation will take away any hope of investment here, and Estonia will simply start lagging behind other countries. We have already lost some big companies, and balance sheet-based taxation will only accelerate this harmful process. We would be losers, not in the past or the present, but in the future, the fruits of which will be left to our children and grandchildren.

In order to implement the above ideas, we are ready to offer the formation of an advisory body operating free of charge. We have extensive experience in operational restructuring, change management, consolidation and subsequent stabilization. We also have extensive experience in international business, we bring together both classic companies and companies of the future. In our opinion, state institutions and offices currently lack the necessary know-how and experience to make the necessary structural changes (transparency of costs and current reporting; shaping of a tax portfolio aimed at long-term competitiveness; zero budgeting of the administrative apparatus; increasing the quality of public sector management; increasing the efficiency and applicability of research and higher education). We are ready to offer this know-how to our country.

Since the restoration of independence, we have gone through a long and convincingly successful path. We have experienced challenges and hesitations. We have overcome them through cooperation, the contribution of dedicated people, and through the hope that we will build and maintain our country now and in the future. Although the current predicament is new to us, the path to solutions is very similar to how we have solved problems together in the past. We are also sending this letter here together to avoid different economic sectors being constantly pitted against each other in the search for solutions.

This letter is a call not to ineptly damage what we have all built together, but to engage our best minds and hearts to find and implement the best solution. We all want the same thing in this country – a better, stronger and more successful Estonia.

Respectfully

Markus Villig

Erkki Raasuke

Martin Villig

Toomas Annus

Taavet Hinrikus

Rain Lõhmus

Allan Martinson

Priit Põldoja

Sten Tamkivi

Priit Lepasepp

Ahti Heinla

Viljar Arakas

Madis Toomsalu

Kristina Siimar

Kaarel Kotkas

Martin Kruus

Kalle Kiigske

Heiti Hääl

Taavi Kotka