State taxes certain to drop

The Baltic Times, TALLINN
By Kairi Kurm
Aug 16, 2001

At a time when prices and salaries are going up, some state taxes are about to drop by roughly 50 percent. The initiative comes from Transportation and Communications Minister Toivo Jurgenson, who proposed to the Ministry of Finance on Aug. 8 to reduce some of the state taxes associated with car registration.

Car registration taxes, which are expected to bring in 145 million kroons ($8 million) in 2001, comprise one-fifth of the total national-tax budget.

According to the proposal the tax for issuing a driver’s license would decrease from the present 380 kroons to 200 kroons; on a new temporary driving license it would drop from 250 kroons to 150 kroons; for a motor-vehicle operator’s written theory test it would drop from 380 kroons to 200 and by the same amount for the driving exam itself.

The new proposal would, according to Aap Tanav, spokesman for the Ministry of Communications, cut the state’s tax revenue in next year’s budget by 20 million kroons.

Tanav said that the aim of the tax was to cover the costs of certain activities, rather than to increase the revenues for the national budget. “The size of the taxes are strained and Estonian citizens are complaining loudly,”he said.

The two ministries have already agreed on bringing down the prices of moped licenses and exams from 100 kroons to 80 kroons.

“This is close to its actual cost,”said Tanav. “We’ve proposed to decrease taxes to the levels they were in 1999. There’s still a lot of air in it. The actual costs of the proceedings are much smaller.”

Tanav said that the ministry was not planning to reduce taxes on telecommunications’ licenses even though they were relatively high compared to their actual costs. “The third-generation mobile network licenses, for example, are a limited resource and there is a high demand for them,”he explained.

Kalle Kagi, head of the Estonian Taxpayers Association, said that it was unclear how the state tax rates had been established.

“It’s strange that a building registry certificate, for example, is 20 times more expensive than a trade registry report although there is a similar procedure involved,”said Kagi.

The association is planning in a couple of weeks to propose to the Ministry of Finance a method for calculating state taxes. “People want to know where their money goes,”said Kagi.

Daniel Vaarik, an adviser to the Ministry of Finance, said that all suggestions were welcome. “State taxes are established in different ways. Our task is to control whether they are correct, and sometimes we’ve had problems with that. It’s difficult to say how much things cost.”

Tanav accused the Ministry of Finance for increasing all the suggested taxes rates by two times. “Most of the times it has been the government’s decision to increase the rates in order to balance the budget,”said Vaarik. “We are not planning to decrease other state taxes at the moment. We have a budget to put together.”

The revenue from national taxes increased by almost 50 percent in the year 2000, from 455 million kroons to 665 million kroons. The Ministry of Finance hopes to collect a total of 698 million kroons in state taxes this year.


Local government involved in shady real estate deal

The Baltic Times, TALLINN
By Kairi Kurm
Aug 16, 2001

The city government of Tallinn and the district government of Lasnamae are planning to rent a building for the District Council for the next 10 years from the real estate company Tasmo Arigrupp without a public tender. Although the building lacks a number of necessary qualifications, the officials are happy with it.

Lasnamae is Tallinn’s biggest district and the last one to be built in the 80s with Soviet-era housing blocks. Most of the population is Russian-speaking and arrived in Estonia from other parts of the former U.S.S.R.

The deal is for at least 40 million kroons ($ 2.28 million), which would be paid to Tasmo Arigrupp over the next decade. It would generate more than 3 million kroons in rent annually for Tasmo Arigrupp, whose turnover is about 12 million kroons a year.

“There’s an obligation to carry out public tenders if the renting object exceeds 250,000 kroons,”said Pavel Starostin, head of Lasnamae’s executive district administration. A tender should also be held among construction companies since the city is planning to invest about 5 million kroons in the reconstruction of the building.

The Lasnamae District Council also needs approval for the deal from the executive district administration, which turned it down.

According to Jaan Kurm, head of the housing department, the reconstruction costs would later be subtracted from the rent. He said that the two parties are negotiating on the renting price.

“We made two analyses before we decided to start negotiations with one bidder. First, we analyzed which price is the appropriate one for renting rooms in this area. Secondly, we observed whether there were any other vacant rooms in the district. While there weren’t any of the appropriate size, we decided to abandon the tender,”said Kurm.

According to Aabram Beinenson, owner of Tasmo Arigrupp, the final price is 100 kroons per square meter after reconstruction costs are deducted from the preliminary 120 kroons/m2. The price also includes utility costs.

The building is being held together by a number of stays, which according to some experts may have to do with a weak construction. According to Beinenson the stays were placed there long ago due to ongoing blasting in neighboring construction sites.

“The building is in a satisfactory condition. The technical expertise we ordered confirmed that it would last another 100 years,”said Beinenson.

Besides the above mentioned shortcomings, the six-story building also lacks a permit from the city of Tallinn’s ecological development and planning department stating that the building is safe to use.

Toomas Tauts, head of the department, was surprised about the lack of the permit.

“This is brutal. A building that offers public services should have the permit,”he said.

Safety permits came into use a couple of years ago when the roof of a shop in Mustamae collapsed. Several shops, which failed to get a permit, were closed afterward.

According to Beinenson most of the buildings built before 1993 lack the permit, and it is required only for new buildings. His lawyer Kaarel Halla said that the law was enacted in 1995 and buildings built before that are not subject to it. Beinenson, who was also one of the owners of the bankrupt EVEA Bank, hopes to turn the district into a small city, where an administration center and his trading center would be close to each other.

His company operates the nearby Idakeskus trading center, which rents out office space to several businesses and houses a huge sports center.

Starostin, who also headed the Lasnamae district years ago, is of the opinion that the city should avoid the risky renting deal and build a building of its own, which is much cheaper and more comfortable.

“I’d prefer a spacious big room, where citizens can meet all the officials. The latter wouldn’t have an opportunity to fall asleep or play with their table drawers, where some like to collect envelopes.”

According to real estate firms, a new building with at least 2,000 square meters would cost around 27 million kroons and could be built in 6 months.

Next year the 150 public officials will have to move out of the Lasnamae administration building, which lies in the center of town and has to be demolished, in order to make room for new development projects. The city government is to decide at the end of August whether Tasmo’s building is the right solution.