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Estonian parliament passes new gov't tax amendments

Xinhua, December 19, 2016 Adjust font size:

The Estonian parliament passed on Monday a bundle of tax amendments initiated by the new governing Center Party coalition government, the Estonian Public Broadcasting reported.

The amendments will cancel a reduction in the social tax rate planned by the previous government, accelerate the hike in excise duties as well as introduce a new system of exemptions beginning in 2018, among others.

The bill of amendments to the Income Tax Act and Social Tax Act was passed with a vote of 55 in favor, and 37 against. There were no abstentions, said the report.

The newly-adopted bill cancels the 0.5-percent cut in the social tax rate planned for next year, as well as an increase from 9 percent to 14 percent in the Value Added Tax (VAT) rate on accommodation services, said the report.

The general basic income tax exemption will increase from the present 170 euros (177 U.S. dollars) to 500 euros a month as of 2018, and the exemption for personal income of 2,100 euros a month or higher will be abolished.

Tax exemptions related to children will be preserved in their present form and tax reimbursements for low income earners substituted with the higher basic exemption from 2018.

Excise duty rates on principal fuels will be cut and a hike in the diesel fuel duty planned for 2018 will be cancelled. The duty rate on natural gas will increase 25 percent over 2018-2020.

The excise duty rates for low alcohol content beverages including beer, cider and wine, will be levelled off with the rates for strong alcohol. In addition, the excise duty hikes for alcohol scheduled for Jan. 1, 2017 and Jan. 1, 2018 will be postponed until February.

The deductible interest paid on a home loan will be capped at 300 euros and the tax exemption for deposit interests abolished.

The possibility for spouses to declare their income in a joint tax return will be preserved as far as home loan interests, training costs and the additional tax-free income per child are concerned.

The Center Party member of the parliament, Mihhail Stalnuhhin, said the party group supported the bill because Estonia and the Estonian people needed it.

Changes introduced by the bill concern 1 percent of the total volume of the next year's state budget, according to Priit Sibul from the coalition partner Pro Patria and Res Publica Union (IRL) Parliamentary Group.

Remo Holsmer from the opposition Reform Party, which did not back the bill, said it would certainly make Estonia's taxation system more complex and raise the tax burden on labor. (1 euro = 1.04 U.S. dollars) Enditem