Incoming Estonian coalition gov't plans investment, tax reform

The incoming Estonian coalition government is eyeing an investment program and wide-ranging tax reform, the local online newspaper Postimees reported on Friday.

A total of 315 million euros (334 million U.S. dollars) will be invested in infrastructure, housing, and defense, said the report.

The new coalition government being established promises to impose a banking tax for the financial sector, abolish income tax incentives on loan interests and redistribute taxes to raise the minimum income level exempt from tax from the current 170 euros a month to 500 euros from 2018.

The tax reform concerns more than half a million people out of the total 1.34 million Estonian population, according to Juri Ratas, leader of the Center Party, who is expected to establish the new coalition government with Pro Patria and Res Publica Union and the Social Democratic Party.

The tax reform will alleviate paid poverty, create more equality inside the system, and ensure that labor taxes will fall as a whole, said Jevgeni Ossinovski, leader of the Social Democratic Party.

Tax incentives for new companies are also planned and the shipping and maritime industry is expected to have access to tax breaks, with the general social tax rate to be maintained at the current 33 percent.

However, the new banking tax will definitely not affect the volumes of the banks or discourage banks from coming to Estonia as the rate will be very modest, according to Margus Tsahkna, leader of the Pro Patria and Res Publica Union. (1 euro = 1.06 U.S. dollars) Endit