Today, the Riigikogu discussed the situation in the Estonian economy as a matter of significant national importance, initiated by Isamaa Parliamentary Group.
Member of Isamaa Parliamentary Group Urmas Reinsalu said that, besides national security, the Estonian economy was a top priority. He called on drawing up and concluding an economic growth agreement with business organisations. “In an uncertain time, cooperation of all political powers to agree upon basic values that form the basis for facilitating the economic development of the country would be an additional guarantee for the feeling of security,” he said.
According to Reinsalu, the economic growth agreement should, among other things, contain making the competitiveness of the state the first priority. “All decisions of the state, be they national or at European Union level, must protect and improve competitiveness. It is necessary to carry out a quick analysis of the competitiveness of economic sectors and to develop a strategy to increase competitiveness on the basis of it,” he explained.
The second issue, according to Reinsalu, is that the cooperation between governance and business organisations must be practical, comprehensive, and real. The business environment must be stable and predictable. To achieve this, it is necessary to follow all laws and regulations and good practices that have been working well for 30 years. In addition, the cooperation between business and the state will have to go to the next level. A common vision of the strengths and opportunities of the Estonian economy is needed,” the representative of Isamaa added.
According to the Director General of the Estonian Chamber of Commerce and Industry Mait Palts, the Estonian economy is not doing very well at the moment. “In such a small country, a country with an open economy on the edge of Europe, it is inevitably necessary to constantly think of how to develop business, how to motivate businesses, and how to ensure that businesses are sustainable and wish to invest in and contribute to the Estonian economy,” he said.
Palts pointed out that there was not enough adequate assessment of the changed state of economy in the country, the situation and what could be the quickest and least painful way for us to overcome it and to turn the economy to growth. “The strategies that have been prepared and are in place today have mostly been prepared before the beginning of 2022, that is, before the beginning of the war in Ukraine, and they do not take into account the impacts that are inevitably influencing businesses in today’s situation,” the Director General explained.
Palts said that the corporate income tax system that was regarded to be the best by businesses as well as experts, that had been envied and had been tried to be copied, and that had been negatively criticised mainly by our competitors, had still helped us to survive several earlier economic crises relatively well. It should be kept by all means. “In our opinion, it has been one of the most successful steps of our modern economic and tax policy that is continuing to support us, and it is necessary to stand for it with all possibilities both in Estonia and in Europe,” Palts added.
In his report, Member of the Management Board of TREV-2 Grupp Plc Sven Pertens brought forth both good and bad news. As to good news, he said that Estonia’s strength had been its business environment. “The income tax exemption on profit that remains in the business has enabled businesses to accumulate reserves for investments and to survive tough times. This regulation is one of the few remaining competitive advantages of the Estonian business environment,” he underlined.
According to Pertens, public administration has been digitalised and transparent, the budget has been in balance, and all this has created credibility and has kept interest rates low. However, the situation has changed over recent years. The Estonian economy has been decreasing for six consecutive quarters. From the first quarter of this year, the unemployment rate has been increasing in Estonia. “The Ukrainian war refugees in our labour market are not the only reason for this. Industrial businesses that have historically been giving 65 per cent of the Estonian export volume are laying off staff, and businesses in construction, information technology, communications, transport, and storage are also laying of staff. The competitiveness of Estonian businesses on external markets has declined sharply. No improvement of the economic situation is on the horizon, and the receipt of tax revenues has begun to fall,” he said.
Member of the Management Board of TREV-2 Grupp Plc said that Estonia needed a comprehensive economic policy and, among other things, a long-term plan, cross-party agreements, stability, and predictability. “Bringing the state budget into balance is necessary but it must not be done ad hoc through an increase in taxes. If we damage our business environment, Estonia’s competitiveness will decrease, the economic downturn will deepen, and the revenue base of the state will decrease. Therefore it is the most reasonable for the state to focus on reducing bureaucracy and public sector expenditure and on measures to promote economic growth, as economic growth automatically brings about an increase in national tax revenue,” Pertens said in conclusion.
During the debate, Toomas Uibo from Estonia 200 Parliamentary Group, Andres Sutt from the Reform Party Group, Tanel Kiik from the Centre Party Group and Helir-Valdor Seeder from Isamaa Parliamentary Group took the floor.
After the sitting, it was planned to form the Civil Protection Support Group on the initiative of Mati Raidma and the Estonia-Switzerland Parliamentary Friendship Group on the initiative of Anti Poolamets.
Photos (Author: Erik Peinar, Chancellery of the Riigikogu)
Video recording will be available to watch later on the Riigikogu YouTube channel.