Tax burden in Estonia to go up sharply in 2009

Tens of new laws that will take effect in January will only increase people’s tax burden, not decrease it, writes Postimees.

Unlike in earlier years, there are no legal amendments entering into force this January that would have a positive effect on people’s finances. On the contrary, they will decrease benefits and push up taxes.

First of all, the ruling coalition has agreed to suspend the plan to cut individual income tax rate from 21 to 20 percent in 2009, that would annul the Reform Party’s election promise to reduce the tax rate eventually to 18 percent.

Also minimum tax-deductible amount will be left unchanged at 2,250 kroons in spite of election promises to increase it to 2,500 kroons. This means that a person who earns 10,000 kroons a month will lose 93 kroons a month.

The future of the whole tax cutting plan is murky since although the Reform Party claims that this is a one-off compromise, Social Democrats see that the whole plan should be frozen for years. “The tax reform as it is being implemented in Estonia for several years has not made Estonians happier nor the economy richer. We should now agree not to cut taxes further until adopting the euro,” said Eiki Nestor, a leading Social Democrat.

Since August, the state will stop paying parents of school children a one-time 450 kroon benefit. Although it will help to save EEK 80 million in the budget, it is likely to hurt families with multiple children and poorer households for whom education cost will increase.

From January, the state will no longer pay a child benefit to parents who also receive parental benefits. Until now the state paid 600 kroons per child until the age of 1.5 years and 300 kroons until the age of 3.

Although it has been possible only for a year, fathers of newborn babies will no longer be able to take a ten-day paid leave since January during which they received average wages.
Moreover, the state will no longer pay a dental benefit of 300 kroons a year, although it does not apply on pregnant women and mothers of children who are younger than one years of age.

The new amended VAT law will increase the VAT for medicines, newspaper and magazines from 5 percent to 9 percent. From July VAT on accommodation services, concert and theatre tickets and funeral services will increase to 18 percent.

The fee payable for ordering an electronic ID card will go up from 150 kroons to 250 kroons. The fee for issuing a time-fixed or long-term residence permit will increase from 750 kroons to 1,000 kroons. The cost of reviewing a visa application will be doubled to 300 kroons.

Court fees for filing a claim in administrative court will double in average.

People will also be spending much more money in vehicle registration centre since the car’s initial registration fee will go up from 1,000 kroons to 1,900 kroons. Registration of a small vessel will cost 1,000 kroons or 400 more than before while registration fee of an ATV or jet will go up from 300 kroons to 500 kroons.

Source: BBN


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