Finance minister criticises study looking into government's tax package

Finance minister criticises study looking into government's tax package A study by the Praxis think tank on the impact of the government's tax package has sparked disagreement. It concludes the tax changes have had the greatest negative impact on lower-income households. An analysis conducted by the Praxis think tank found that the government's tax package has had the greatest impact on low-wage earners, single parents and elderly women living alone. Although the study was completed last year, its findings are only now drawing attention. Finance Minister Jürgen Ligi (Reform Party) said the study's conclusions are careless and based on outdated data that does not reflect the current economic reality. "To say that poor people have a harder time than wealthy people — yes, I agree with that. But overall, you can't say, as this study does, that taxes must not be collected, taxes must not be increased and the budget must not be cut. That's schizophrenia," Ligi said. Christian Veske, the gender equality and equal treatment commissioner, who commissioned the study, said that even seemingly small amounts are critical for low-income households because indirect taxes and the rising cost of living consume what little financial cushion they have. "It may seem like a small amount of money, but for a great many people it is actually a very large sum. If your monthly income falls by, say, €24 or €18, that is a significant amount that you have to factor into your budget and it means you have to give something up," Veske said. Tax increases leave low-wage earners feeling less financially secure. In many cases, the effects of tax changes do not occur in isolation but accumulate alongside rising prices. Veske said the Ministry of Finance's universal, short-term crisis support measures are ineffective in the long run. "They themselves acknowledged in their response that, because the issues were urgent for them, they may not have carried out impact assessments as thoroughly as they should have. If everyone receives support, the effect is diluted for the people who actually need it," Veske said. In absolute terms, the tax burden clearly falls more heavily on wealthier people, Ligi said. The government has increased subsistence benefits, but eliminating taxes is not a way to help lower-income residents. "A number of policy choices, including the motor vehicle tax, have been designed to have as little impact as possible on people's ability to make ends meet while placing a greater burden on wealthier people. /.../ Its burden is very strongly correlated with income, meaning that wealthier people and wealthier regions pay more," Ligi said. The finance minister said last year was indeed economically difficult, but the current rapid growth in the minimum wage and the incomes of lower-paid workers disproves claims that poor people are becoming even poorer. An increase in the single-parent benefit will also take effect this fall. The study analyzed tax changes entering into force in 2025 and 2026 and concludes that they have a negative effect on subsistence, hitting especially hard those who already find themselves in a more vulnerable socioeconomic situation. "People with low incomes are in an especially difficult position, particularly when they also belong to another at-risk group. Although the Gender Equality Act requires government agencies to systematically and purposefully promote gender equality, the tax changes in question have had the greatest negative impact on women in vulnerable situations," the study's summary reads. The study can be found in its entirety (in Estonian) here. -- Editor: Marcus Turovski, Aleksdander Krjukov