This week, a petition to lower VAT on food from 24 percent to 10 percent crossed the 80,000-signature threshold, making it Estonia's most popular online petition.

VAT rose from 22 percent to 24 percent in July 1. Estonia is one of the only countries in Europe that does not have a reduced rate for foodstuffs.

ERR asked the prime minister at the government's weekly press conference whether the coalition would discuss the issue.

The prime minister replied that, according to the rules, it will be debated by the Riigikogu. All petitions that are signed by 1,000 people or more are discussed by MPs.

Michal acknowledged that rising prices are an understandable concern and that high inflation is a problem in Estonia.

"I have previously described what the President of the Bank of Estonia, Madis Müller, said when presenting the economic forecast – this is an approximate estimate, I emphasize – that about two-thirds of the price increase comes from wage increases and global raw material prices. About one third comes from taxes – the most significant impact among those was the vehicle registration fee," said Michal.

The prime minister praised the media for addressing the topic of markups. But he claimed that the problem lies in the amount of retail floor space Estonia has.

"This public space, as built for us in the form of shopping palaces, also puts pressure on retailers to ask much more for their goods. If I look at comparable data from the real estate sector. The data I have received still show that in terms of average revenue per square meter, we have about a third less than the European average," Michal said.

"The Bank of Estonia has done an analysis that describes how we have significantly more retail space than elsewhere," said Michal. "Perhaps the key to these markups and increases lies there, not solely with producers, consumers' lack of choice-making ability, or retailers' greed. Maybe we have simply built stores that are too grand."

Michal gave an example that in Keila, a town south of Tallinn, there are already several shopping centers, but more are still planned.

"There seems to be competition between stores, but if that competition means that the number of square meters falls on us as consumers. If we look at what media outlets have pointed out, retail prices have risen significantly faster than any tax component. Producers' share has not increased either. Consumers and producers are on the same side. Retailers have actually taken those square meters away from consumers, from us," the prime minister said.

"When having this debate, we also need to ask ourselves whether it's more reasonable that if we as a state can lower taxes, we leave that money to the consumers who make the choices. The current government has taken the position that if we can collect less tax revenue, then we leave it in people's hands," he continued.

Michal noted that as of January 1, the tax-free minimum income will sharply increase to €700.

"This means 400–500 million, more than 1 percent of GDP, will remain in people's hands. People will decide for themselves whether they buy, go to the gym, or invest, instead of leaving it to the retailers, who can decide whether to give us a discount or build yet another square meter," said Michal.

Minister of Finance Jürgen Ligi (Reform) added that he also defends the retailers, who have enabled consumers to have a very wide selection.

"They are not only offering us very large spaces, but also a very large selection. And for a small nation, we have all the goods that large nations have. The assortment also makes it expensive. But we've wanted it ourselves," said Ligi.

In 2026, the coalition plans to raise the tax-free minimum for all residents, regardless of income, to €700.

Estonia also has a flat income tax rate of 24 percent for all residents, regardless of income.

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