Raising the income tax-free threshold to EUR 800 per month, from its current level of EUR 500, is the best way to combat high levels of inflation in Estonia, Social Democratic Party (SDE) deputy chairwoman Riina Sikkut says, adding that such a policy is a central goal for the part in its ongoing coalition discussions with Reform and Isamaa.
Sikkut, a former health minister, said: “In order to prevent people on lower wages from being hit but without having to apply for support, the tax-free threshold could be raised to EUR 800,” adding that this would boost basic wages by EUR 60 in a month, or by EUR 720 in a year.
“SDE understands full well that inflation in general is hitting everyone hard. However, it is in no way viable or reasonable to compensate everyone for that in full. We do not want to make people have to apply for, or become dependent on, benefits. It is elementary that a worker or a pensioner should be able to live on his or her monthly income,” she went on.
This had been the case even before the current crisis, Sikkut said.
The relative poverty rate among single-parent families has been higher for many years and is also growing among households with one or two children, and support could also be targeted better, she added.
Rather than cutting fuel excise duties, which would require careful consideration of its longer-term effects, support could instead be paid to those in need while prices are high, Sikkut added, citing the example of Sweden, which had such schemes for those living in rural or remote areas.
At the same time, while each party has its own flagship goals, which they have brought to the table in the current coalition discussions, none has drawn “red lines”, which they would not retreat from, though SDE’s tax threshold proposal has not come as a surprise to Reform or Isamaa, given the party has already submitted bills along similar lines in the past.
Isamaa’s main policy, that of raising family benefits, has not been discussed much in the discussions so far, Sikkut adds, noting that while all three parties support doing so, solutions should be realistic and might also be introduces piecemeal, as a compromise.
The current income tax-three threshold stands at EUR 6,000 for the year, or EUR 500 in a month.
Estonia’s CPI inflation for April stood at 20%, among the highest in the Eurozone, while energy prices have been soaring since last fall. (ERR/Business World Magazine)
