Estonian state budget came close to breaking even

Factoring in adjustments for actual revenue and expenditure, last year’s state budget came close to breaking even.

The state collected 7.61 billion euros last year, which represents 101.7 percent of the plan, while expenditure was clocked at 7.74 billion, 99.5 percent of the initial budget, the Ministry of Finance revealed today.

The deficit was predicted at 300 million euros, but has now been revealed to be only 130 million.

The increase was mainly driven by tax on business profits, which increased by 40 percent as many companies opted to pay dividends for the first time in years. Personal income tax, social tax and VAT also increased, by 15.3, 7.2 and 3.8 respectively.

Fuel excise duty was the worst performer, as only 92 percent of the planned sum was collected.

Social benefits made up the biggest slice of the expenditure, 2.83 billion euros, an 5.9 percent increase compared to 2012.

Since 2003, the nation’s budget has ended up in the red half exactly of the times, with the last surplus recorded in 2010. This year’s budget has forecast 8.00 billion in income and 8.06 billion going the other way, but the norm in Estonia is to underestimate income and overestimate expenses.

Source: Estonian Review / ERR

Standard & Poor’s affirms Estonia’s rating at AA-

The international rating agency Standard & Poor’s (S&P) has affirmed its long-term sovereign credit rating on Estonia at the present high level of AA- with stable outlook.

Estonia has the European Union’s lowest debt-to-GDP ratio, a stable political environment and a highly adaptable economy, the agency said.

Source: BBN

The state budget for the year 2014

The Riigikogu has passed the state budget for the year 2014, with planned revenue of 8.02 billion euros and planned expenditure of 8.06 billion euros. The increase in state revenue is five percent, soon to reach all spheres of life. The budget was prepared conservatively, as indicated by the 0.7 percent structural surplus measuring the substantive coping with expenditure.
Estonia’s budget for the coming year is also acknowledged by the European Commission which assessed it to be fully compliant with the rules of the Stability and Growth Pact.
Nearly four billion euros will directly reach the people again as various benefits from the 2014 state budget. A large share of that is the state pension and the second pillar pension paid from social insurance tax. The first and the second pension pillars will grow by a total of 10 percent i.e. to 1.8 billion euros; this is 21.9 percent of the entire budget revenue.

The pension increase in the year 2014 will be nearly 6 percent; it is the largest increase in the past six years and means an average of 240 euros more paid to each pensioner per year. Moreover, it was decided to increase the basic exemption, leaving the average pension to be fully exempt from tax.

The state will direct 900 million euros into the health insurance scheme; this is 70.6 million euros more i.e. 8.5 percent more than in the year 2013. There are plans to use this money for increasing the funding of general medical aid, for significant expansion of the list of special medical services and for ensuring additional means for community care.

Estonia spends more than the EU average on education; nearly a tenth of the 2014 budget is education expenditure. In relation to increasing accessibility of non-chargeable higher education, the activity support for higher education will increase in the next year and the minimum wage for teachers will grow by 12 percent.

In addition to teachers, the social and cultural field can also expect a higher than average wage increase. The salary funds of other areas of governing will increase by 5.1 percent. Regardless of the country’s small size, the government’s salary expenditure remains near the EU average.

In comparison with other EU Member States, the Estonian government sector’s investment volume is at the top, although the volume will decrease by 8.9 percent in the coming year, i.e. down to 832 million euros. As recently as in 2012, Estonia made nearly a percent of GDP more investments than Poland did on the second position.

Tax expenditure in the 2014 budget is ca. 332 million. This includes additional tax-exempt income for pensioners and for families with two or more children, deduction of residence loan interests, and other.

Source: Estonian Ministry of Finance

Municipalities near Tallinn losing residents

Local governments located around Tallinn are suffering because more residents decide to register as residents of Tallinn in order to use the benefits such as free public transport, writes Postimees.

While Tallinn had 393,232 residents in 31 December 2011, it now has over 430,000 people in its register.

Read more from BBN

Mayor of Tallinn to earn 4,420 euros a month

The council of Tallinn last week adopted a regulation by which the Mayor of Tallinn Edgar Savisaar will earn 4,420 euros a month starting from 2014.

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Tallinn City Government may lay off 200 people

The Tallinn city government announced yesterday that it plans to decrease the number of city officials and raise wages of those who remain, writes Postimees daily.

The committee’s aim is to make proposals for making their work more effective so that it would be possible to decrease the size of the workforce and increase the wages of existing staff by between 10 and 15 percent, according to the committee’s head Deputy Mayor Taavi Aas.

.. In 2010, Tallinn City Government employed 1,500 people as city officials. (Tallinn population is about 400 000).

 

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Slight deficit predicted in 2014 budget

Parliament today passed next year’s 8-billion euro budget, with the forecast deficit at 38 million euros.

The budget, the first ever to pass the 8-billion mark, has received criticism from both the opposition and coalition members in recent weeks.

Despite the best efforts of Finance Minister Jürgen Ligi to cut VAT deductions on business-owned vehicles, a number of coalition MPs and the opposition rejected the idea. As the income from the planned cut was already written into the budget, Cabinet members had to reach deep to find the missing 24 million euros.

Opposition parties criticized the budget for failing to increase the 19-euro monthly child allowance, which has not been increased in a decade.

The projected income is 8.018 billion, up 5 percent compared to the current year, while expenses are calculated at 8.056 billion euros.

The state forecast a 7.5 billion-euro budget for 2013, with expenditure set at 7.7 billion. In the first ten months of 2013, the budget was far more balanced than predicted, with 6.36 billion euros collected and 6.1 billion spent.

State pensions are set to increase by nearly 6 percent, while health services will receive an additional 70.6 million euros or 8.5 percent. Public sector workers will receive, on average, a 5.1 percent pay rise.

The state investment fund will decrease by 8.9 percent to 832 million euros.’

Source:  ERR via Estonian Review

MP: freeze of public sector wages unacceptable

Chairman of the parliamentary financial committee Sven Sester says that the parliament will not support the latest proposal made by Finance Minister Jürgen Ligi who last week made a new attempt to introduce restrictions on VAT refunds of company cars and made an ultimatum to cut costs of government ministries if his demands are not met in the parliament, writes Postimees.

Ligi says that there is an EUR 24m hole in the budget revenues and if his proposals are not met, he would have no option but to cut spending of government ministries by 1.2%.

Read more from BBN

Finland follows Estonia’s footsteps in e-governance

The Estonian national ID card is used for logging into government services such as filing taxes online.

The prime ministers of Estonia and Finland, Andrus Ansip and Jyrki Katainen, will meet later this month to discuss Finland’s plans to adopt the X-Road system, the “backbone” data exchange layer that connects the different databases used by Estonia’s various e-services.

It was reported in September that Finnish officials were planning to start using the X-Road system, which was introduced in Estonia in 2001 and uses an open source software. Estonian officials hope that getting Finland on board will open a window for promoting e-services elsewhere in the EU.

The Estonian prime minister has been urging European leaders to transition major government activities to electronic systems. Ansip has said the reforms would improve data sharing and save millions of euros by cutting down on paperwork.

Source: Estonian Review / ERR

Commission praises Estonia for budget compliance

Draft budgets 2014 of only two Eurozone members – Estonia and Germany – comply with the Stability and Growth Pact rules, the European Commission said in its assessment of the budgetary plan published on Friday.

“Estonia has made some progress in addressing the structural part of the fiscal recommendations issued by the Council in the context of the European Semester,” a representative of the European Commission said.

Read more from BBN

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