Lavly Perling, chair of the nonparliamentary Parempoolsed, has expressed significant concerns regarding the new coalition agreement, particularly the introduction of corporate income tax. According to Perling, this move will not bode well for Estonia’s already struggling economy. “Parempoolsed tend to be critical regarding this, in terms of both content and their messages, which certainly don’t provide predictability to the economic environment,” she told ERR.
Perling emphasized that this is a pivotal moment for Estonia’s competitiveness. “After 20 years, income tax will essentially be reintroduced on companies,” she highlighted. “This is a very bad message to the Estonian economy, which is in the worst shape in Europe and has been in recession for over two years.”
Proposed Conditions and Economic Priorities
The party chair noted that Parempoolsed had proposed three substantive conditions for the coalition agreement. “First of all, immediately make this expenditure-based state budget visible, making it possible to say which [budget] lines can be saved on, which lines will contribute to national defense spending,” she stated. “It hasn’t been.”
Perling also mentioned that the coalition’s commitment to prioritizing the economy would be evident if they signed the Estonian Employers’ Confederation (ETK) economic agreement aimed at fostering economic growth. She remains skeptical about the Reform Party’s promises, citing past instances where temporary tax hikes became permanent.
“The Reform Party has ‘temporarily’ hiked the income tax and VAT before,” she pointed out. Perling argued that a more robust negative state budget is needed and criticized the timing of summer vacations amidst economic turmoil. “This is still a Reform Party-led government, therefore the degree of specificity today should be that there are formulas clearly on the table regarding where cuts will come from, where deindexation will take place,” she said.
Focus on Growth and Stability
Perling stressed that expenditures related to indexation run into hundreds of millions and called for clear agreements to freeze such expenditures. “And of course, as Parempoolsed have repeatedly said, the focus must now remain on growth,” she added. “A business peace must be implemented.”
She warned that raising income tax would exacerbate inflation, leaving people with less disposable income and complicating their lives further. “It’s exactly the same with businesses,” she continued. “If [corporate] income tax is introduced, the consequences thereof will be unpredictable. Who will optimize how, or who will in large part decide to continue their business elsewhere altogether. There may be serious consequences.”
Despite her criticisms, Perling approved of postponing the elimination of the tax hump. “That is essentially a good idea,” she said. “We’ve said that this whole tax hump thing should be postponed until the state budget is balanced.”
She concluded by emphasizing that Estonia must start addressing its expenditures. “Because Estonia’s current problem is the fact that our debt is growing at breakneck speed; we can’t manage to halt our fixed costs,” she explained. “We have to address these issues and then focus on achieving long-term, permanent growth faster than our neighbors.”
