"The budget deficit we submitted to the Riigikogu falls within the permitted minus three framework, meaning minus 3 percent. According to the current forecast, it will be minus 1 percent by the end of the year. That difference of 2 percentage points means we have managed 800 million euros better. This shows that spending is under control, we have timed investments, slightly reduced operating expenses, and it should also be stressed that wage growth has boosted tax revenues, both from corporate income tax and personal income tax," said Michal.

"Estonia's economy and budget have performed better than expected. On the one hand, spending growth has been brought under control. And since wages have risen rapidly, tax revenue has also been better than forecast. The Estonian people and economy have done better than critics thought possible," Michal said.

"We've managed to repair the budget more effectively than anyone could have expected," Michal said.

Host Arp Müller asked Michal how it can be guaranteed that the latest forecast will hold, since last year's forecast predicted 3.3 percent economic growth for Estonia, but in reality it remained below 1 percent.

"Forecasts are always flawed. I don't want to be unfair to the forecasters, because their job is certainly not easy," Michal replied.

"Looking at forecasts and trend averages, what matters is the direction things are going. And that direction is toward economic recovery. I think no one disputes that," said Michal.

"When the state's finances are in order, we must also look ahead: if, for example, personal income tax revenues – which is the case now – are better, then we can consider foregoing some planned tax hikes in the future. In any case, we will reduce the income tax burden," Michal said.

"If this forecast shows — and it did show — that income tax and overall tax revenues are stronger, then we can consider, if we are able to find salary increases for teachers and cultural workers, as well as for rescue workers and police officers in internal security and still remain within the budget rules, then we can also consider canceling the planned increase in income tax," the prime minister said.

"We are working to make such an option possible — to further reduce the income tax burden. This is important, because if we want to strengthen business competitiveness and help people better cope with rising prices, then leaving more money in their pockets is the solution," he added.

"If anything is Reform Party policy, then this certainly is Reform Party policy," he added.

Former Finance Minister Mart Võrklaev (Reform) told ERR recently that a sharp increase in defense spending would not allow the state to cancel the income tax hike planned for next year. Võrklaev, who himself was one of the authors of the car tax, was also critical of the direction the draft legislation on the car tax has taken. According to him, the original idea was that the tax should not contain many exemptions.

"You're attributing something to him very unfairly. The only person I can think of who might claim ownership of the motor vehicle tax is Jevgeni Ossinovski. I don't know of any other sensible person who would want to take responsibility for that mishmash," Michal said.

The hosts asked whether the complete repeal of the motor vehicle tax is actually on the table.

"At the moment, as you put it in bureaucratic terms, it's not on the table, but in my view it's not exactly a successful tax either. I've always said that," Michal said.

At the same time, Michal said the government plans to continue with spending cuts. "We are certainly looking for opportunities to reduce state expenditures where possible. There are definitely budget lines that can be trimmed," Michal said.

ERR reported Monday that the Ministry of Climate is redirecting €580,000 from the budget for a rural residential real estate support measure, distributed via the Estonian Business and Investment Agency (EIS), to cover a shortfall in the ministry's payroll budget. According to the ministry, there was surplus funding in the support scheme, but a shortage for salaries.

"This is perhaps a slightly more philosophical question. If money remains unused in one measure but is needed in another, should every adjustment require going to parliament for a change? In any case, there will be a supplementary budget where this will be corrected. Some flexibility must exist in budget implementation. Ministers and ministries are responsible for something, after all. And if one budget line has a surplus and another a shortfall, then you must be able to make those decisions yourself. Ministers are paid to take responsibility for something," Michal commented.

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