The Ministry of Finance has submitted another draft amendment to the State Budget Act for approval. The amendments suggested in the draft could enter into force in 2025. The State Budget Act has already been amended three times over the last decade.
According to Reform MP and former finance minister Aivar Sõerd, in an environment of increased interest rates, Estonia will have to borrow €1.2 billion next year. Part of this new, more expensive loan will have to be used to pay back a previously taken, more inexpensive loan.
An income tax system set five years ago when average wages, not to mention inflation rates, were lower than they are today is seeing more wage-earners hit a 'tax hump', sometimes referred to as 'bracket creep' when their salaries rise than was previously the case ERR reports.
Aivar Sõerd (Reform), a member of the Riigikogu Finance Committee, said that Estonia's state budget is significantly unbalanced and that it is unreasonable to expect a balanced budget for next year.
The coalition agreement of the new government is not yet public, but the negotiators have already announced the most important issues they have agreed on. The agreements concern increased tax-free income, energy subsidies, compensation for nursing home places, family allowances and the Estonian-language school. It is a rather expensive agreement, which will increase the state's fixed costs not only for eight months, but also in the coming years.