At today’s remote-participation sitting, the Riigikogu approved eight Acts and two Resolutions.
The Act on Amendments to the State Budget Act (436 SE), initiated by the Government, increases the detail and transparency of the state budget, optimises the processes of drawing up the state budget and the state budget strategy, and lays the basis for the establishment of the long-term development strategy for the state. The Act is linked to the state budget for 2022.
The Act amends the provisions concerning the division of the state budget, which will increase the detail of the activity-based view of the annual Act on the state budget. According to the motion, the level of detail will increase by two degrees, to the activities of the programmes. Instead of the 38 programmes in the budget strategy for 2022–2025, the activities of a total of 240 programmes would be specified in the budgets for areas of government for 2022. As regards investments, the items with a volume of 10 million or more in the specific year will be detailed out in the Act. Other economic content will continue to be described in the explanatory memorandum to the state budget.
The Act adjusts the flexibility rules of the state budget, which will enable to maintain a balance in the decision-making competence of the legislative and executive powers when the state budget becomes more detailed. Starting with the state budget for 2022, a textual section of the annual state budget will set out the extent to which the Riigikogu will give the minister an opportunity to amend the budget during use. The State Budget for 2022 Bill provides for the possibility to transfer funds between programme activities to the extent of up to 25 per cent without amending the Act when the budget of the programme activity is up to four million euro. In the range from four million to 200 million, the growth of flexibility will be linear and it will increase from one million to five million, and will remain at that level. In the case of investments, it will be permitted to transfer up to 20 per cent of the relevant volume between the budget lines.
The resource cost of the process for the state budget and the budget strategy will also be cut by reducing the number of annual Government-level discussions on the content and details of the budget from two to one and transferring the preparation of the state budget strategy / state budget documents to autumn. The submission of a stability programme with budget policy directions (budget position, debt burden, and revenue and expenditure levels) to the European Commission in spring will continue.
The Act also formulates the long-term national development strategy as a new strategic development document that creates a legal basis for the comprehensive strategy for policies “Estonia 2035”.
During the debate, Riina Sikkut (Estonian Conservative People’s Party) and Urmas Reinsalu (Isamaa) took the floor on behalf of their factions.
A majority vote of the members of the Riigikogu was needed for the Act to be passed. 83 voted in favour of passing the Act and there was one abstention.
The Act on Amendments to the Gambling Tax Act and the State Budget Act (459 SE), initiated by the Government.
Under the current Act, 47.8 per cent of the gambling tax received goes to the Cultural Endowment of Estonia, and the remaining share goes to four ministries – the Ministry of Social Affairs, the Ministry of Culture, the Ministry of Education and Research, and the Ministry of Finance. According to the Act, ministries or particular spheres of their areas of administration, or gambling tax are no longer set out as funding sources in the Act. In the future, the gambling tax revenue will be received in the overall national revenue and the ministries will have the flexibility to decide on the spheres as to what will be financed and to what extent. The funding model of the Cultural Endowment of Estonia is not amended under the Act and the current procedure remains in place.
The State Budget Act is also amended, so that local authorities would continue to have an opportunity to apply the support programme for the implementation of the development strategies of counties that is at present partially financed form gambling tax.
During the debate, Eduard Odinets (Social Democratic Party) and Viktoria Ladõnskaja-Kubits (Isamaa) took the floor on behalf of their factions.
A majority vote of the members of the Riigikogu was needed for the Act to be passed. 53 voted in favour of passing the Act and 34 voted against.
The Act on Amendments to the Value-Added Tax Act, the Bank of Estonia (Eesti Pank) Act and the Act on Amendments to the Value-Added Tax Act and the Customs Act (460 SE), initiated by the Government, transposes the amendments to the EU Value-Added Tax Act Directive that change the taxation of electronic commerce between Member States and eliminates the tax exemption for goods of negligible value, that is, up to 22 euro, imported from outside the European Union. Consignments of a value of up to 150 euro will be taxed either at the time of import or under a special scheme. If a transferor of goods who is a business chooses the implementation of a special scheme, upon the payment for the order of goods, the person who places the order will also pay the VAT due upon the importation of goods, and the seller of the goods will declare such VAT to the tax authority on a monthly basis.
In the case of distance sales (sale of goods by a business to a final customer established in another Member State), 10,000 euro per calendar year will be the uniform threshold across the European Union at which a tax obligation arises in the other country. This means that if the supply exceeds 10,000 euro, the business of the other Member State will have to pay VAT on distance sales in the country of the consignee. Under the current procedure, every Member State establishes a limit and the limits vary by country – it is 35,000 euro in the majority of countries, including Estonia.
In addition, the Act provides for the possibility to adjust the VAT obligation in the case of “hopeless loans”. Under current procedure, unpaid invoices (“hopeless loans”) do not affect the amount of the seller’s supply or VAT accounting. According to an amendment, a business will have the right, upon compliance with certain requirements, to reduce its tax obligation to the extent to which buyers fail to pay for goods or services totally or partially. This will ensure more equal treatment of businesses.
The purpose of the amendment of the Customs Act is to ensure legal clarity. The right of the customs to obtain data from state databases and businesses has been provided variably in the sections of the Customs Act, which may bring about problems in the interpretation of provisions. Therefore it is necessary to harmonise the wording.
The calculation of the taxable value of supply upon the resale of second-hand goods is also specified. As regards the imposition of VAT on commemorative coins, it is provided that Eesti Pank as the national central bank does not pay income tax, with the exception of income tax payable on fringe benefits.
A majority vote of the members of the Riigikogu was needed for the Act to be passed. 87 voted in favour of passing the Act and there was one abstention.
Under the Act on Amendments to the Land Reform Act and Other Acts (418 SE), initiated by the Government, the administration of the instalment agreements in respect of land entered into upon the privatisation and return of land, and the performance of the duties of the mortgagee on behalf of the state are consolidated to the Land Board who is the organiser of the privatisation of land. It is also expedient that all terms and conditions of mortgage contracts and the related rights and obligations are provided for in the Act and are harmonised in terms of content.
In the land reform process, more than 7000 non-reformed plots of land that cannot be used independently have emerged between immovables. The Act amends the Land Consolidation Act and the Land Reform Act so that, in the future, non-reformed land that cannot be used independently can be joined with the immovable bordering on it by a simple land consolidation act. In such cases, non-reformed plots of land will no longer be entered in a separate register part in the land register, but the boundaries of an existing immovable will be changed.
In the interests of more expedient and rapid implementation of the land reform, in the future, no contract will be entered into in the proceedings for the constitution of the right of superficies for the benefit of owners of construction works. It is expedient to constitute all rights of superficies under administrative acts. This way, entitled persons are burdened less and their rights as owners of construction works are protected to the same extent as when entering into a contract.
According to the Act, the Land Board will also be able to submit digitally signed applications to extinguish mortgages established in the course of the land reform where the restricted real rights established for the benefit of the Land Board no longer have legal effect or their term has expired.
With the amendments to the Acquisition of Immovables in Public Interest Act, the proceedings for the establishment of compulsory possession are simplified. The use of the procedure of simple land consolidation upon acquisition of immovables in public interest is extended. The access problems that have originated from the land reform can be successfully resolved by establishing compulsory possession on private roads. The advantage is that a single administrative act can determine the whole area necessary for public use and this information is visible in the land cadastre to everyone. The Act provides for a single rate for use fees in order to simplify the determination of road tolls in public interests.
During the debate, Heiki Hepner took the floor on behalf of the Faction Isamaa.
75 members of the Riigikogu voted in favour of passing the Act and three voted against.
The Act on Amendments to the Financial Supervision Authority Act and Other Acts (422 SE), initiated by the Government, makes amendments to the current financial sector legislation. They are related to the implementation and transposition of European Union legislation.
The Act provides for the bases according to which crowdfunding service providers will be able to start to apply for authorisation from the Financial Supervision Authority, and the Financial Supervision Authority will be able to start to exercise supervision over them. The amendment concerns only crowdfunding platforms offering opportunities to invest in businesses, and they will be able to apply for authorisation from 21 November. In addition, the Act provides for the bases under which crowdfunding service providers will start to pay a supervision fee to the Financial Supervision Authority.
The Financial Supervision Authority will be given the authority to exercise supervision over the information on environmental sustainability and on sustainability risks that banks and other financial market participants submit.
The Act also specifies what information must be provided to foreign listed companies regarding their shareholders located in Estonia, and what information to share to the Estonian shareholders of such companies.
The Act also establishes the basis for the Financial Supervision Authority to exercise supervision over crowdfunding service providers, regulates the relevant responsibility and increases the threshold for offers of securities of a total consideration between one and eight million euro. The conditions for drawing up prospectuses for offer of securities are specified and the provisions concerning the obligation to provide information and liability are amended.
67 members of the Riigikogu voted in favour of passing the Act and 16 voted against.
The Act on Amendments to the State Budget for 2021 (431 SE), initiated by the Government, has been drafted in accordance with the State Budget Act under which, in order to amend the state budget without amending the total amount of funds, the Government may initiate a draft State Budget Amendment Act not later than two months before the end of the budgetary year.
Considering that the State Budget for 2021 Act was prepared in the autumn of the preceding year and some of the funding needs have changed, it is expedient to initiate an amendment of the state budget to achieve more effectively the aims set by state agencies.
During the debate, Urmas Reinsalu took the floor on behalf of the Faction Isamaa.
75 members of the Riigikogu voted in favour of passing the Act and 11 voted against.
The Act on Amendments to the Electronic Communications Act, the Building Code and the State Fees Act (437 SE), initiated by the Government, brings the Electronic Communications Act into conformity the directive of the European Parliament and of the Council establishing the European Electronic Communications Code.
The Act increases the transparency of communications contracts with pre-contractual information and the contract summary, which will help prevent misunderstandings regarding the communications contracts and the actual service. Consumers will have a better overview of the communications service to be provided when they enter into communications contracts. At the same time, the extent of the regulation applied depends on the essence of the communications service provided.
In addition, the requirements for granting harmonised radio frequencies are set out, the deployment of small-area wireless access points (small cells) are facilitated, which will accelerate rapid establishment of a new generation communications network, and the requirements for co-investment are set out.
In addition, the requirements for communications networks and services with a view to ensuring national security are specified. In the processing of authorisations to use hardware and software, security authorities and the Information System Authority will assess threats to national security. According to the Act, communications undertakings are required to apply for authorisation from the Consumer Protection and Technical Regulatory Authority to use the hardware or software of a communications network. The potential bans and conditions for use are coordinated by the body specified in the Statutes of the Security Committee of the Government of the Republic.
73 members of the Riigikogu voted in favour of passing the Act, two voted against, and there was one abstention.
The Act on Amendments to the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act and Other Acts (461 SE), initiated by the Government.
With an amendment to the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act, the excise duties for electricity and certain fuels were lowered from 1 May 2020 to 30 April 2022. The rates were lowered with the aim of mitigating the effects that the crisis due to the spread of the COVID-19 virus would have for fuel consumers, and facilitating economic subsistence. Although the economy has recovered rapidly, not all sectors have achieved the pre-crisis level, and under the conditions of rising inflation it is not advisable to stimulate a rise in prices. In connection with that, the effect of the lowered rates will be extended by a year so that the lowered excise duty rates will remain in place until 30 April 2022. In addition, a gradual four-year restoration of the excise duties for fuel and electricity to the pre-crisis level will be introduced starting from 1 May 2023. The latter will allow both the private sector and consumers time to adapt to the price increase in good time.
With the amendment to the Fiscal Marking of Liquid Fuel Act, the right of oil shale mining undertakings to use diesel fuel for specific purposes will be extended by one year, until 30 April 2023, instead of the earlier term of 30 April 2022. According to the Act, it is permitted to use diesel fuel for specific purposes on the territories of oil shale mines and open cast mines, in open cast mine technology and equipment, including in mining machinery, and the machinery used for transporting oil shale and ash. The extension will support the competitiveness of oil shale mining undertakings.
The Atmospheric Air Protection Act is amended by adding a provision that allows to provide in the conditions of and procedure for the use of revenues generated from the auctioning of allowances that the local authority performs the tasks related to the proceedings relating to the application for supports and the organisation of the grant of supports.
During the debate, Kersti Sarapuu (Centre Party), Aivar Kokk (Isamaa), Raimond Kaljulaid (on behalf of the Social Democratic Party Faction) and Peeter Ernits (Estonian Conservative People’s Party) took the floor on behalf of their factions.
69 members of the Riigikogu voted in favour of passing the Act and 16 voted against.
The Resolution of the Riigikogu “Approval of the Consolidated Report of 2020 of the State” (432 OE), submitted by the Government.
The Ministry of Finance has drawn up the consolidated report of 2020 of the state. The consolidated annual report is based on the reports of the state accounting entities and the accounting entities that are under the dominant influence of the state, and other reports.
The aim of the consolidated annual report of the state is to give an overview of the achievement of the goals set in the state budget, and of the financial situation, financial result and cash flows of the state, and to enable the Riigikogu to exercise its auditing function with regard to the Government of the Republic. The consolidated annual report of the state includes the audit report of the National Audit Office.
During the debate, Heiki Hepner took the floor on behalf of the Faction Isamaa.
75 members of the Riigikogu voted in favour of passing the Resolution and there were five abstentions.
The Resolution of the Riigikogu “Appointment of Heili Sepp a Justice of the Supreme Court” (485 OE), submitted by Villu Kõve, Chief Justice of the Supreme Court.
The Chief Justice of the Supreme Court Villu Kõve made a proposal to appoint Heili Sepp a justice of the Supreme Court as of 1 March 222.
Kõve notes in his cover letter that Heili Sepp’s long and very diverse experience of civil service will allow her to contribute significantly to the work of the Criminal Chamber of the Supreme Court and to the further development of Estonian criminal law. In addition to Sepp’s long service record in the public sector, she has published numerous articles and opinion pieces on legal topics. She is also one of the co-authors of the annotated edition of the Constitution of the Republic of Estonia. Sepp has made a remarkable contribution to the drafting of Bills and amendments concerning penal law and criminal procedure. She has passed on her knowledge in the annual lectures and seminars at the University of Tartu and the Estonian Academy of Security Sciences as well as in trainings for judges and advocates general. Sepp is on the list of OECD and GRECO experts as an expert on the legal protection and justice system as well as criminal procedure and anti-corruption measures.
54 members of the Riigikogu voted in favour of passing the Resolution, 21 voted against, and there were three abstentions.
Ten Bills passed the second reading
The Bill on Amendments to the Employment Contracts Act and the Taxation Act (403 SE), initiated by the Government, will create the possibility to enter into more flexible employment contracts in retail. The new regulation is based on the agreement of goodwill entered into between the Estonian Trade Union of Commercial and Servicing Employees, the Estonian Traders’ Association, the Estonian Trade Union Confederation, the Estonian Employers’ Confederation and the Ministry of Social Affairs, which is piloting the use of variable hours agreements in retail.
The sector is often faced with the problem that it is necessary to change work schedules or to increase workload temporarily, which gives rise to the need to enter into contracts under the law of obligations when the volume of work increases temporarily. Under a variable hours agreement, the employee can work additionally up to eight hours per seven-day period in addition to their usual working time. Variable hours agreements enable employers to engage more labour force part-time and flexibly, thereby providing work for more people and ensuring them greater protection with an employment contract as compared to a contract under the law of obligations.
A variable hours agreement can be entered into with an employee who works part-time 12 hours or more over a seven-day period and whose hourly wage is at least 1.2 times the minimum hourly wage. A variable hours agreement must be concluded in writing. All variable hours that an employer can offer within the framework of the new agreement are voluntary and are agreed separately.
The Bill provides that the employer can enter into a variable hours agreement with up to 17.5 per cent of its employees, that is, retail employers who have at least six employees can use this possibility.
The variable hours agreements regulation is established for a specified term and it will be in force for 2.5 years. The amendments have been established for a specified term because this will enable their impacts to be assessed before the end of the period, as a result of which it will be possible to decide whether it will be expedient to extend the conclusion of variable hours agreements or to expand it to other sectors as well.
The second reading of the Bill was suspended on 10 November in connection with additional amendments added to the Bill.
The Bill on Amendments to the Health Insurance Act (467 SE), initiated by the Government, will extend the target group of people who receive the dental care benefit in a heightened upper limit to include the registered unemployed and people who receive the subsistence benefit.
At present, persons of over 63 years of age, persons receiving pension for incapacity for work, old-age pensioners, persons with partial or no capacity for work, pregnant women and mothers of children under one year, and persons with an increased need for dental care service in connection with their illness or a health care service provided receive a benefit in a heightened limit (85 euro per year with a 15 per cent cost sharing).
In the future, people who are registered as unemployed with the Estonian Unemployment Insurance Fund and those who have received subsistence benefit during the two calendar months preceding the month when they receive dental care will be entitled to receive a dental care benefit in a heightened upper limit. The planned date of entry into force of the Act is 1 January 2022.
During the debate, Heljo Pikhof (Social Democratic Party) and Peeter Ernits (Estonian Conservative People’s Party) took the floor.
The Bill on Amendments to the Act on Amendments to the Occupational Health and Safety Act and Other Acts, and the Act on Amendments to the Employment Contracts Act and Amendments to Other Associated Acts (456 SE), initiated by the Government, will extend until the end of next year the procedure for the payment of sickness benefit under which employees receive sickness benefit from the second day of their sick leave.
The Bill provides for continuing until the end of 2022 the procedure whereby the employer pays sickness benefit from the second to the fifth day of sick leave, and the Estonian Health Insurance Fund pays it from the sixth day of sick leave. Thus, according to the Bill, the current system will continue until the end of 2022. The first day of sick leave is the employee’s own liability, the second to fifth days are the employer’s liability in the payment of sickness benefit, and the liability of the Estonian Health Insurance Fund begins on the sixth day of sick leave.
The explanatory memorandum notes that earlier compensation for days of sick leave enables people to remain at home already when the first symptoms of illness appear without a significant loss of income.
When the amendments are implemented, additional expenses of 19 million euro will be incurred in 2022, of which 12.4 million euro will be covered form the state budget and the rest from the own resources of the Estonian Health Insurance Fund.
The Act is planned to be in force for a specified period of time, from 1 January 2022 to 31 December 2022.
During the debate, Riina Sikkut (Social Democratic Party) took the floor.
The Bill on Amendments to the Environmental Monitoring Act (440 SE), initiated by the Government, will provide for the legal bases for the provision of the paid services of analysing the environmental data of the Environment Agency (KAUR), and forecast. The purpose of the amendments is to reduce the workload for KAUR and the administrative burden for clients. It will be possible to enter into contracts for the provision of services with interested companies under which the companies will no longer need to submit frequent queries.
According to the Bill, KAUR can provide the paid service of analysing the environmental data relating to its core activity and the paid forecast service outside the environmental monitoring programme. Such services include special-purpose weather forecast, forecast models, paid weather helpline, creating wind roses, analysis of meteorological and hydrological data, and hydrological engineering calculations. The paid services are used by clients who, due to their personal needs, need more specific data compared to the publicly available free services. Collecting such data often entails extensive analysis and drawing up separate forecasts. Media, energy and construction companies and ports are the most frequent users of the paid services.
The Bill will also provide for, by service, the maximum and minimum rates for the paid services, and a provision delegating authority to the Minister of the Environment to establish a specified list of the paid services and the rates of the fees.
The explanatory memorandum notes that national environmental monitoring is funded from the state budget but historically there has been a need for such paid services. For example, last year 61 clients submitted 267 orders for services to KAUR, with a volume of own revenue of about 140,000 euro. In Estonia, there are no other providers of meteorological and hydrological services because the services are closely connected with large data volumes. The predecessors of KAUR have, in addition to their core functions, already been servicing the small target groups who need these services.
The Bill on Amendments to the Copyright Act (transposition of copyright directives) (368 SE), initiated by the Government, will transpose two European Union copyright directives that entered into force in summer 2019. They were part of the “copyright reform package” published by the European Commission in September 2016 (transposition deadline 7 June 2021). The amendments will ensure consumers better access to content protected under copyright, while at the same time protecting the rights of authors and performers.
The amendments will improve the negotiating position of authors and performers when entering into author’s contracts, and will obligate their contractual counterparts to provide information on the exploitation of the rights to them at least once a year.
It will also be possible to enter into extended collective licensing agreements upon the use of works where obtaining authorisations from rightholders on an individual basis would be too onerous for the user. This will concern for example the provision of television and radio services.
Among other things, obligations will also be established for web platforms (e.g. YouTube, Facebook) the main purpose of which is to enable users of the service to upload content and to access works, performances and other content that may be protected by copyright or related rights (video clips of concerts, extracts from films and television series, music recordings, etc.).
More cases of free use will also be provided where users are allowed to use protected works and subject matter of related rights (e.g. performance or phonogram) without the consent of the rightholder and without payment of remuneration. For example, it will be possible to use works without the consent of the author and without payment of remuneration for the purposes of text and data mining for both commercial and non-commercial purposes. Under the current law, this is permitted only for non-commercial purposes. In addition, better opportunities will be created for cultural heritage institutions (libraries, museums, archives) to use out-of-commerce works to promote cultural heritage.
During the debate, Tarmo Kruusimäe (Isamaa) and Peeter Ernits (Estonian Conservative People’s Party) took the floor.
The Bill on Amendments to the Maritime Safety Act (455 SE), initiated by the Government, is intended to continue supporting international maritime transport through Estonian ports and to motivate consignors to direct their trade flows through Estonian ports where possible.
In the course of the second reading, a motion to amend submitted by the Conservative People’s Party Faction was supported. The fairway dues payable for January to December 2022 will be reduced by 50 per cent. The motion of the Economic Affairs Committee as the lead committee to reduce the dues by 45 per cent was not supported.
During the debate, Aivar Kokk (Isamaa), Tarmo Kruusimäe (Isamaa), Kristen Michal (Reform Party) and Peeter Ernits (Estonian Conservative People’s Party) took the floor.
The Bill on Amendments to the Code of Misdemeanour Procedure, the Traffic Act and the Taxation Act (457 SE), initiated by the Government.
The purpose of the amendments is to increase road safety by granting local governments an opportunity to install automated traffic supervision systems in administrative territories in cooperation with the state. 50 per cent of the proceeds from fines received for the violations detected with such systems will be transferred to local government budgets. With the money allocated, local governments will be able to cover for example the costs of the procurement and management of automated traffic supervision systems or to procure new equipment, or to use the proceeds from the fines in other ways to improve local road safety.
According to the Bill, the amount used to calculate the amount of a fine for exceeding the speed limit in written caution proceedings and in alternative proceedings will increase from the current three euro to five euro. On the basis of this amendment, the rate for the maximum cautionary fine, that is, the fine imposed with the automated traffic supervision system, will be increased from 190 euro to 300 euro and the maximum rate for the deterrent fine from 80 euro 100 euro in the Code of Misdemeanour Procedure. In addition, the Bill provides for amendments to the Code of Misdemeanour Procedure and the Taxation Act, in order to create more effective opportunities for the Tax and Customs Board to collect the deterrent fines imposed in the course of the alternative proceedings applied from 1 January 2019. The amendment will allow the deterrent fines imposed by the Tax and Customs Board to be collected without an enforcement agent.
The amendments included in the Bill in the course of the second reading specify that, where receipt of a notice of fine sent by electronic means is not confirmed within 15 days of sending thereof, the notice of fine will be sent in a registered letter with advice of delivery. The amendment will create more flexible options to pay the fine or to confirm the receipt of the notice of fine and to forward it where a breach is not committed by the owner or authorised user of the car and, on the other hand, will allow sufficient time to challenge the notice of fine. The amendments also specify the activities of local governments in participating in the traffic supervision function, establish the requirements regarding the location of installation of the automated traffic supervision system, specify that the equipment and systems installed must be compatible with the interfaced data exchange system, and establish the administrative supervision obligation for the Police and Border Guard Board.
During the debate, Tarmo Kruusimäe (Isamaa) and Kalle Grünthal (Estonian Conservative People’s Party) took the floor.
The Faction Isamaa moved to suspend the second reading of the Bill. 25 members of the Riigikogu voted in favour of the motion and 49 voted against. Thus, the motion was not supported and the second reading of the Bill was concluded.
The Bill on Amendments to the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act (458 SE), initiated by the Government, will transpose EU directives on excise duties.
The main amendments arising from the directive regulating the general arrangement for the payment of excise duty are connected with the establishment of the requirement of electronic delivery note for excise goods across the EU. The Bill provides that, upon transport of goods subject to excise duty to other Member States, an electronic delivery note will have to be filled in the Excise Movement and Control System (EMCS).
The EMCS is an EU-wide electronic system for delivery notes that is used to formalise delivery notes for excise goods on which excise duty has not been paid upon transport between Member States. The EU is also extending this system to formalise delivery notes for excise goods that are subject to excise duty in the place of dispatch and that are transported to other Member States. Today, Estonian businesses are using the national electronic system for delivery notes SADHES. In the future, delivery notes will have to be processed on EMCS.
For seamless export, in the future, it will also be possible to use the external transit procedure in addition to the export customs procedure. Under the current law, excise goods are deemed to have been exported from the moment when they are taken out of the EU excise territory. According to an amendment, goods can also be deemed to have been exported from the moment of the application of the external transit procedure, that is, already before the goods are physically taken out of the EU excise territory. Such an amendment will allow economic operators to save resources on account of excise guarantees. Upon application of the external transit procedure, taxes will be ensured under customs rules that also cover the excise duty.
On the basis of the amendments to the directive regulating specific issues relating to alcohol, the Bill will update the codes of the combined nomenclature used to describe alcohol products, specify the principles for exemption upon the use of alcohol for cleaning manufacturing equipment, and set out the principles how economic operators will prove their status as small undertakings to public authorities of other countries.
The costs of the implementation of the Act will be mainly connected with IT-development activities, which will be about 200,000 euro. The IT development costs will be covered from the budget of the Tax and Customs Board for 2022, and the annual maintenance costs of about 20,000 euro will be applied for within the framework of the state budget strategy for the year preceding the costs.
The Bill on Amendments to the Funded Pensions Act, the Taxation Act and the Income Tax Act (468 SE), initiated by the Government, will create a new solution for paying fixed-term pensions in the 3rd pillar – the supplementary pension fund. The payments will be made from voluntary pension funds, and if a person has acquired units of several different pension funds, the units will be taken back in all their funds.
This scheme is similar to that of the payment of the 2nd pillar funded pension. Upon retirement, the person will set the term specifying for how long they wish to receive the pension, and the frequency of payment. After that, the Estonian Funded Pension Registry will start making payments from the pension funds, dividing the number of units belonging to the person by the period of receiving the pension and taking into account the frequency of paying the pension. All pension funds where the retired person has acquired units will be taken into account.
The explanatory memorandum of the Bill explains that the tax exemption on the pension payments determined on the basis of the Statistics Estonia average number of years left to live, or for a longer term, entered into force on already on 1 January 2021. Until now, this benefit has only been available for the 3rd pillar insurance contracts, as there has been no corresponding product for payments from voluntary pension funds. From the new year, people retiring under the 3rd pillar will now be able to opt for a fixed-term pension from voluntary pension funds, in addition to other pension options.
The Bill will also make amendments in relation to the 2nd pillar. The first amendment will concern the payment of the contributions to the 2nd pillar in the situation when the employer has incurred tax arrears. According to the logic of the general prepayment account, the amounts paid are used to settle obligations according to their due dates. Under the Taxation Act, the payments of the 2nd pillar will be separated from the general order of obligations, which ensures that the payments will reach the 2nd pillar faster in the case the employers has other tax arrears. In the order of payment of the claims that arise on the same day, the payment of the 2nd pillar is in the first place also according to the existing legislation, but in the case the employer has obligations with an earlier date they will be met in the first order. The provisions on paying in instalments will also be amended, and it will not be allowed to pay the contributions of the 2nd pillar in instalments.
Another amendment relating to the 2nd pillar concerns the derogation on the taxation of income earned from the financial assets acquired through the investment account, where no reference to the 2nd pillar pension investment account has been made previously. In the case of the 2nd pillar, the payment is taxed (except the lifetime pension or the fixed-term pension divided on at least the average number of years left to live, which are exempt from income tax), therefore the taxation of income earned from investments should not be taxed in the meantime here either. With the Bill, a relevant amendment will be made to the Income Tax Act.
The Bill on Amendments to the Income Tax Act (469 SE), initiated by the Government, provides an income tax exemption for people of retirement age to the extent of the average old-age pension.
Under the Bill, the provisions on the general tax-exempt income will no longer apply to people who have reached the old-age pension age. Instead, they would receive the tax-exempt income of a person of old-age pension age up to the amount of the average old-age pension, regardless of the size of their income. The Social Insurance Board will be the first to apply the basic exemption on the income, followed by the Estonian Funded Pension Registry. If a person’s pension and mandatory funded pension payments combine into a lower total amount than the tax-exempt income of the person of old-age pension age, the remainder of their tax-exempt income can be applied to their other income, such as their salary. To receive this, the pensioner must submit an application to the withholding authority, i.e., the authority who makes the pension payments.
All persons of old-age pension age have the right to the tax-exempt income of a person of old-age pension age, regardless of whether they have retired or which type of pension they receive. This means that people who have postponed their retirement can also deduct the tax-exempt income of a person of old-age pension age.
When a person reaches the old-age pension age during the taxation period, they receive the right to use the tax-exempt income of a person of old-age pension age for the whole taxation period, i.e., 12 times the monthly rate just like in the case of the general tax-exempt income.
The size of the average old-age pension within the meaning of the Income Tax Act is set out for the taxation period under the annual State Budget Act. According to the summer forecast of the Ministry of Finance, in 2023, the average old age pension will be EUR 654, taking into account the extraordinary EUR 20 pension increase.
The Bill also retains the tax-exemption on the payments of mandatory and complementary funded pensions to persons with incapacity for work once they reach the old-age pension age. For this purpose, payments of mandatory and complementary funded pensions made to persons who were incapacitated for work immediately before reaching the old-age pension age will be exempt from income tax. Currently, payments to persons with certified incapacity for work are not taxed. When such persons reach the old-age pension age, they are no longer eligible for the certificate of incapacity for work, which results in them losing the tax-exemption. The planned amendment will ensure that the tax-exemption for persons with incapacity for work will apply to them even once they reach the old-age pension age.
The Act is planned to enter into force on 1 January 2023, and the tax-exemption for persons with incapacity for work will be applied retroactively as of 1 January 2021.
During the debate, Aivar Sõerd (Reform Party), Aivar Kokk (Isamaa), Heiki Hepner (Isamaa), Riina Sikkut (Social Democratic Party) and Jevgeni Ossinovski (Social Democratic Party) took the floor.
The Faction Isamaa moved to suspend the second reading of the Bill. 15 members of the Riigikogu voted in favour of the motion, 59 voted against and there was one abstention. Thus, the motion was not supported and the second reading of the Bill was concluded.
Seven Bills passed the first reading
The Bill on Amendments to the State Pension Insurance Act (466 SE), initiated by the Government.
The Bill is intended to increase the base amount of pension and the national pension by EUR 20 from 1 January 2023. Currently, the base amount of pension is 235 euro.
All pensioners have an equal base amount of pension; the part calculated on the basis of years of pensionable service, the insurance part and the combined part, that are different for each person and depend on their length of service and size of income, are added to it. From 1 April 2021, the amount of pension for persons who have worked for 44 years is 552.38 euro. After increasing the base amount of pension, the amount of pension for such a pensionable service would be around 611 euro.
Currently, the rate of national pension is 255.18 euro. The national pension is paid to persons who have not earned the required pension qualifying period (15 years) by the old age pension age.
During the debate, Heljo Pikhof (Social Democratic Party), Helir-Valdor Seeder (Isamaa) and Õnne Pillak (Reform Party) took the floor on behalf of their factions.
The Bill on Amendments to the State Pension Insurance Act and the Funded Pensions Act (475 SE), initiated by the Government, is intended to solve the problems that arose during the implementation of the State Pension Insurance Act and to ensure legal clarity. The Funded Pensions Act will also be amended.
The amendments to the State Pension Insurance Act will ensure continuing the payment of survivor’s pension to 18–24-year-old students in the month of September regardless of whether the information on their studies has been entered in the national database (EHIS) or not. Under the current rules, the survivor’s pension for the previous month is paid in arrears in October, but this will result in a one-month period of no income for pension recipients.
In the future, the pensioners residing in foreign countries can prove that they are alive also through an electronic channel. Under the current rules, they have to submit a written document approved by an administrative agency of their country of residence or an Estonian foreign mission.
The Bill also provides that the time of being a member of a management or controlling body of a legal person will be included in the pensionable service if the social tax was paid for this period.
According to the amendments to the Funded Pensions Act, persons with incapacity for work who have retired from the 2nd pillar can start collecting money in the 2nd pillar again or suspend receiving the pension if they have not yet attained the old-age pension age but their capacity for work has been restored. Currently they do not have such a right.
The amendments to the State Pension Insurance Act are planned to enter into force in 1 February 2022 and the amendments to the Funded Pensions Act on 1 January 2023.
The Bill on Amendments to the State Secrets and Classified Information of Foreign States Act and the Public Information Act (410 SE), initiated by the Government, intends to ensure national security and foreign relations by protecting classified information from disclosure and becoming known to persons without the right to access.
The Bill is intended to update the requirements on processing classified information to establish a regulation that would follow the principles of modern information management and paper-free office and cover modern ways of information processing and information carriers. The requirements on the processing of classified information currently in force have been drawn up mainly in regard to paper documents, and therefore they cannot be applied to the full extent and reasonably to classified information processed electronically. On the basis of this, the rules on marking and destroying of classified information will be updated, bringing them into conformity with the requirements of the Archives Act. The marking of classified media with classification markings and the issues relating to checking the existing files will be regulated in more detail at the level of a Regulation of the Government of the Republic.
The Bill will expand the decision-making competence of the originator of information concerning premature declassification and extension of the term of classification of information. In view of the need-to-know principle and effectiveness of decision-making process, the Bill will give the heads of security authorities, Defence Forces and surveillance authorities the right to decide on premature declassification of the state secrets created by their agencies. On the basis of the same purposes, the right to decide on the extension of the term of classification of information created within the area of government of a ministry will be given to the minister responsible for the area, and in the case of a state secret created by the Government Office, to the State Secretary. According to the Bill, the decision on the extension of the term of classification of state secrets created by security authorities will be made by the head of a security authority. The Government of the Republic as a collegial body will continue to decide on the extension of the term for the classification of such state secrets that are entered in a medium submitted to the Government of the Republic or government committee for adopting a decision.
Granting natural persons outside the services in the area of government of a ministry the right of access to a state secret classified as ‘restricted’ will also be made more flexible.
Kert Kingo (Estonian Conservative People’s Party) took the floor during the debate.
The Estonian Conservative People’s Party Faction moved to reject the Bill at the first reading. 16 members of the Riigikogu voted in favour of the motion and 45 voted against. Thus, the motion was not supported.
The Bill on Amendments to the Performing Arts Institutions Act and the National Opera Act (419 SE), initiated by the Government, will amend the organisation of state funding of performing arts institutions so that it would be clearer and more flexible and would cause less court disputes. Based on the existing practice, the work processes of performing arts institutions will be updated. The Bill will reduce the obligations and administrative burden of performing arts institutions. At the same time, all organisers of public performances and concerts will have an additional obligation to disclose information relating to the accessibility of the performance or concert and its venue as regards the participation of people with special needs in culture. The aim of the amendments is to better support the diversity of the sector and the accessibility of performing arts across Estonia.
The amendments to the Act will affect all (around 50) performing arts institutions in Estonia. In the context of this Bill, organisers of private concerts are not included among them.
According to the latest statistics, an adult theatre-goer had to pay on the average 14.85 euro for a ticket in 2019. That year, the average net monthly salary in Estonia was around 1162 euro. The ticket price that is in the region of one per cent of the average monthly salary is considered affordable. In 2019, the average price of a theatre ticket formed 1.28 per cent of the average monthly salary. In order to maintain the balance between ticket prices and people’s incomes, performing arts institutions will continue to be supported from the state budget in the future, and besides performing arts institutions operating as foundations established by the state, municipal and private performing arts institutions will be supported as well.
During the debate, Viktoria Ladõnskaja-Kubits (Isamaa) and Eduard Odinets (Social Democratic Party) took the floor on behalf of their factions.
The Bill on the Ratification of the Agreement Amending the Treaty Establishing the European Stability Mechanism (479 SE), initiated by the Government of the Republic.
The Agreement Amending the Treaty Establishing the European Stability Mechanism (ESM) was signed on 27 January and 8 February 2021. The agreement is intergovernmental and it is amended by an intergovernmental agreement where all member states of the euro area are parties.
The agreement that amends the Treaty Establishing the European Stability Mechanism, which entered into force in April 2012, will provide the legal basis for the reform of the ESM, agreed upon by the euro area heads of government and heads of state at an inclusive format summit in December 2018. The Agreement is a part of a wider package of measures endorsed at this summit to deepen European Economic and Monetary Union and to work on completing a banking union.
The essence of the reform is the broadening of the mandate of the ESM. In addition to supporting member states that have temporarily lost access to market funding, the ESM will also have a stabilising role in the banking union that is being created in the European Union from 2012. The ESM will become a backstop provider to the banking union’s Single Resolution Fund, with the task of supporting the functioning of the single crisis resolution mechanism. Besides that, the reform will update the ESM’s support instruments and extend the role of ESM in crisis resolution. The reform will not change the scope of the ESM.
During the debate, Martin Helme took the floor on behalf of the Estonian Conservative People’s Party Faction.
The Estonian Conservative People’s Party Faction moved to reject the Bill at the first reading. 17 members of the Riigikogu voted in favour of the motion and 42 voted against. Thus, the motion was not supported.
The Bill on Amendments to the Act on the Ratification and Implementation of the Treaty Establishing the European Stability Mechanism (480 SE), initiated by the Government of the Republic.
The national procedures relating to the implementation of the ESM are provided in the Act on the Ratification and Implementation of the Treaty Establishing the ESM. As the Agreement Amending the Treaty Establishing the European Stability Mechanism will make changes to the existing ESM instruments and the task of providing a backstop will be added, this Bill will provide for the changes resulting from amending of the Treaty in the procedures of the Government of the Republic and the Riigikogu relating to the ESM issues.
During the debate, Martin Helme took the floor on behalf of the Estonian Conservative People’s Party Faction.
The Estonian Conservative People’s Party Faction moved to reject the Bill at the first reading. 17 members of the Riigikogu voted in favour of the motion, 59 voted against and there was one abstention. Thus, the motion was not supported.
The Bill on the Ratification of the Agreement amending the Agreement on the Transfer and Mutualisation of Contributions to the Single Resolution Fund (481 SE), initiated by the Government of the Republic.
Under the original Agreement, which entered into force in 2015, the European Union Member States committed to transfer to the EU Single Resolution Fund the contributions that they raise from banks.
Due to legal reasons, it was decided to separate the procedure for transferring contributions raised from the banks to the Resolution Fund and the order of using the funds collected there from the Single Resolution Mechanism Regulation which establishes the EU’s Single Resolution Board and sets out the general principles for forming a Resolution Fund, and to provide them in a separate intergovernmental agreement. Thus, the agreement amending this agreement is an intergovernmental agreement.
Due to earlier (i.e., before 2024) introduction of the backstop measure of the Single Resolution Fund and implementation of the amendments provided in the amending agreement, the Single Resolution Board will have more resources for the possible crisis resolutions of systemically important banks during the transition period. The main feature of the amendments is that, during the transition period, when the Single Resolution Fund is still being formed from the contributions of banks and all resources are not yet in common use, the possible taking into common use of the extraordinary ex post contributions collected from banks will become faster.
In the debate, Martin Helme took the floor on behalf of the Estonian Conservative People’s Party Faction.
The Estonian Conservative People’s Party Faction moved to reject the Bill at the first reading. 14 members of the Riigikogu voted in favour of the motion and 44 voted against. Thus, the motion was not supported.
The Riigikogu did not pass a Resolution
Draft Resolution of the Riigikogu “Making a Proposal to the Government of the Republic” (428 OE), submitted by the Social Democratic Party Faction.
The draft Resolution was intended to make a proposal to the Government to compensate to Elering Ltd the costs of the payment of the renewable energy charge for 2021 to the full extent in order that it would be possible to temporarily release all electricity consumers from the renewable energy charge.
The proposal of the Finance Committee as the lead committee was to hold a final vote on the draft Resolution. A majority vote of the members of the Riigikogu was needed for the Resolution to be passed. 39 voted in favour of passing the Resolution and 30 voted against.
The sitting ended at 00.55 a.m. on 25 November.
Photos of the sitting (Erik Peinar, Riigikogu)
Video recordings of the sittings of the Riigikogu can be viewed at https://www.youtube.com/riigikogu.
(Please note that the recording will be uploaded with a delay.)