On Wednesday, the 12th of April, the parliament of Latvia’s northern neighbour finally authorised Kaja Kallas to compose a basically already composed government. It will be composed of two liberal parties – reformists and Eesti 200 – and social democrats.
Even before it started working, Reform Party leader Kaja Kallas government received bashing from its opponents – three parties agreed in coalition talks that it is necessary to raise taxes in order to satisfy the country’s and nation’s needs. According to Kallas, the weight of this burden is far away from the actual situation. The country’s budget has a large deficit, which needs reducing.
Only social democrats were in favour of increasing taxes in the election campaign. This is why such decisions were shocking to society. Now the right-wing Reform Party is accused of misleading voters and moving away from its ideological postulates.
Kallas later admitted to the media: the topic was silenced to avoid scaring off voters.
She said it was a difficult choice for her to make, but it was inevitable. Estonian governments have known this since 2019, and someone has to make the choice.
From next year onward the turnover [value added] tax – which is currently at 20% base rate – will increase by 2%. In 2025 it is planned to increase personal income tax by 2% (to 22%). Additionally, the gradual rate increase will be cancelled. The non-taxable minimal wage will increase to EUR 700 a month.
A “solution” was found to raise teachers’ wages. There are plans to partially adopt paid studies, doctorates included. Defence costs will increase to 3% of GDP. Compulsory military service will be increased to two years [eight to eleven months at the moment] so that recruits are able to better learn modern weapon systems. It is hoped that some of the recruits will agree to the extension of military service voluntarily in exchange for compensation.
The ministry that supervises agriculture will be liquidated.
A new ministry will be created to resolve various regional problems. The government will also reduce forest logging volumes. From 2024 onward education at state schools will be provided only in Estonian language. Russian citizens living in Estonia on a permanent basis will not be allowed to participate in municipal elections.
Information about the new government can be found here. Kallas was Estonia’s prime minister twice already. She created herself a reputation with EU and NATO management perspectives.
It was expected Kallas would be granted government formation authority at the first meeting of the parliament – the 11th of April. The day before Estonian President Alari Karis announced he would offer Kallas to the parliament as the official to compose the new government immediately, instead of the usual two-week pause.
But the opposition, using the rights to interview candidates, slowed this procedure. Kallas called such behaviour from the opposition “a master calls in mockery”.
She said she did not expect “such low behaviour” from legislators.
59 deputies voted in favour of the new government and 38 legislators from three opposition parties voted against. As previously mentioned, two of them – Russian resident-focused and Latvian Harmony-like Centre party and Motherland party – were coalition partners in Kallas’ previous governments.
Only the third opposition party – the radical populist EKRE – is the only one truly unrelenting opponent of the Reform Party. The feeling is deeply mutual.
The situation in Estonia is currently similar to what is happening in Latvia now. Only Kallas’ new government seems more stable and more confident than that of Krišjānis Kariņš. Perhaps not to all of Estonia’s society, but to its political elite, as well as business and intellectual elite – the new government has presented a very motivating Nordic general welfare model. This is due to an even bigger tax burden.
This is why it is possible that Estonia will be ahead of Latvia is such an unpleasant area as tax growth again.
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