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At Thursday’s sitting, the Riigikogu decided with 73 votes against not to pass in unamended form the amendments to the Value Added Tax Act and the Accounting Act which the President had rejected, and the deliberation of the Bill will be renewed.

The Constitutional Committee and the Finance Committee of the Riigikogu made a proposal to not to pass the Act in unamended form.

Chairman of the Constitutional Committee Rait Maruste said from the rostrum in the chamber of the Riigikogu on Thursday that the aim of the Bill is legitimate: it strives to better tax receipt and prevention of tax evasion.

“The means is also appropriate to the aim pursued, but the extent of application thereof and the substantiation of the effectiveness of the means offered may be disputed. Second, the means is also necessary, that is, relevant, for improving tax discipline and preventing tax evasion. Third, the deliberation and assessment of possible suitable or less infringing alternatives has been presented somewhat insufficiently. Fourth, the greatest problem is with the reasonableness, purposefulness, or sufficient substantiation of the means and the way in which the Bill has been drafted, including negotiation with interest groups and the existence of sufficient time for the persons concerned to make preparations,” Maruste listed the arguments.

Remo Holsmer who spoke in the rostrum of the Riigikogu as a member of the Finance Committee said that to impose on undertakings, in the middle of the financial year, an obligation to reform their accounting software and client database and a greater monthly declaration obligation than is the case today would be constitutional if it could be stated with certainty that the value added tax gap would indeed narrow as a result of the measure.

“The second constitutional aspect is connected with the fact that all information relating to business secrets is pooled into a single large database. The President found it questionable whether security requirements would be thereby sufficiently guaranteed,” Holsmer said.

Holsmer also intermediated to the Riigikogu the explanation of a representative of the Office of the President. According to it, failure by the President to use his right of veto would probably have led to the situation where the Supreme Court would have declared the Act to be in conflict with the Constitution which in turn would have brought about claims for compensation for damage submitted to the state.

Holsmer spoke prospectively that the Ministry of Finance is preparing a more thorough analysis. “Five working groups are working towards the preparation of the new explanatory memorandum and they are engaging in issues relating to impact assessment, administrative burden, the security of handling data, proportionality and analysing the conformity to the value added tax directive. When the preliminary draft of the explanatory memorandum will be ready, then different interest groups will certainly be involved in the commenting and the making of proposals,” Holsmer added.

The further legislative proceeding of the Bill on Amendments to the Value Added Tax Act and the Accounting Act will be conducted in the Finance Committee. Ten working days was set as the term for submission of motions to amend the Bill, so the term is 30 January.

On 18 December last year, President Toomas-Hendrik Ilves decided to use his constitutional right and refused to proclaim the Act on Amendments to the Value Added Tax Act and the Accounting Act passed in the Riigikogu on 11 December 2013. The President found that this Act contains a conflict with the Constitution.

In his decision, the President drew attention that such an intensive restriction of the freedom of enterprise must be based on a more thorough analysis, and he made a proposal to carry out a relevant detailed analysis in the course of the renewed deliberation of the Bill and to present it to undertakings and the public. The President also made a proposal to reconsider the time of entry into force of the Act so that undertakings would have sufficient time to adjust to the changes.

The third reading of the Bill on Amendments to the Taxation Act and Other Associated Acts (507 SE) that was on the agenda was not held.

The verbatim record of the sitting (in Estonian)