Isamaa leader and MP Urmas Reinsalu said Prime Minister Kristen Michal's (Reform) decision to abandon the planned income tax hike acknowledges the failure of his tax policy. He called the government's prior back-and-forth on corporate income tax, taxing all revenue and temporary taxes a "failed experiment."

"They didn't have the political will to throw that car tax in the trash, despite promising to just weeks ago," Reinsalu said, calling the move "yet another dud."

He added that the government has ignored rising prices, noting its policies are in fact inflationary. "The debt is growing, and inflation is growing," he said.

On wage hikes for internal security and education workers, Reinsalu said the increases are unavoidable amid rising inflation. He had also been expecting the government to reduce administrative expenses, both as previously promised and in line with the wage hikes.

Conservative People's Party of Estonia (EKRE) leader and MP Martin Helme said canceling the income tax hike is sensible, but argued that other recent tax increases  — VAT, excise and the car tax  — should also be reversed.

Helme noted that when these taxes were introduced, the government framed them as a defense contribution, though in reality the funds went into the general budget. "There was no labeled money that went entirely to defense," he said.

"Of course the tax increases that have been implemented need to be rolled back," he added.

Helme described the government's approach as cynical and two-faced. "When this tax was created, we were told it was for defense," he said. "Now it's being canceled and sold to people as a way to increase incomes."
.
He warned voters not to be misled, saying they shouldn't "let themselves be hoodwinked like this."

According to Social Democratic Party (SDE) leader Lauri Läänemets, the tax changes will give the richest people the biggest financial gift they have ever received, will not ease the tax burden on low-income earners, and end up placing the state budget in a critical position.

"For example, a person earning a gross income of €1,000 a month will gain €10 per month from the elimination of the tax wedge and the cancellation of the income tax increase, while a member of parliament earning €6,300 will gain €154 per month, or €1,848 per year. That is a 15-fold difference in favor of the richest," said Läänemets.

The large sums allocated from the state budget to the richest sectors of society should instead be used to reduce the VAT on food to 9 percent, Läänemets added.

Mihhail Kõlvart, leader of the Center Party, said that while the pay rise for public sector employees is positive, it raises questions as to why such a decision was only made just before the local elections.

"In recent years, we have seen the same pattern: after elections, we introduce new taxes or say that the country is in a very difficult financial situation, but before elections, we hand out pay rises and subsidies. Subsidies and pay rises were also handed out before the Riigikogu elections. And even then, it was already known that there was a large hole in the budget. Now the question arises as to whether we have a problem with financial analysis in the country or whether we have a bigger problem with political culture and what awaits us when the elections are over," said Kõlvart.

Parempoolsed party leader Lavly Perling said the country is being governed irresponsibly. Perling questioned how wage increases can be discussed in a situation where inflation is skyrocketing, the economy is essentially at a standstill and Estonia's debt burden continues to grow.

"These wage increases – Parempoolsed have always said that good people in the public sector should be paid a decent wage but the issue is that today there is neither the opportunity nor the time to increase the wage fund. We know in advance that costs will increase, and the resources for this will come either from future tax increases or from loans," Perling said.

--

Follow ERR News on Facebook and X and never miss an update!