Today, the Riigikogu concluded the first reading of the State Budget for 2020 Bill, initiated by the Government. The expenditure of the next year’s state budget is 11.6 billion euro and the revenue is 11.8 billion. Compared to this year, the expenditure will grow by approximately 240 million euro and the revenue by 760 million euro.
The State Budget for 2020 Bill (82 SE), initiated by the Government, is nominally balanced and is moving towards structural balance, being in a deficit of 0.7 per cent of GDP. By 2021, the structural deficit will fall to 0.2 per cent and the budget will achieve a nominal surplus.
The Minister of Finance Martin Helme who presented the Bill said that Estonia’s tax burden would remain at 33.2 per cent of GDP over the coming two years and would fall to 32.7 per cent of GDP in 2022. “The government sector debt burden will increase both in euro and as a proportion of GDP, falling from this year’s 8.8 per cent to 8 per cent in 2020. This will mean a decrease from 2.4 billion to 2.3 billion in absolute amounts. Estonia’s government sector debt burden is the lowest in the European Union with this indicator,” the minister noted.
“The Government will continue with a conservative budget policy, one part of which is the aim of keeping the budget structurally balanced. In this way, the budget policy supports balanced economic growth, and current expenditure of the state is not covered from loans,” Helme said.
From 2020, the state will for the first time have an activity-based budget. This budget concept is based on a system that links the strategic and operational management levels and gives managers the necessary financial and management instruments for making decisions, for implementing the decisions as well as for checking the results,” the minister pointed out.
Helme said that the state budget for 2020 was a responsible one and was based on the five priorities that had been agreed on when the Government had been formed. He said that they included family-friendly Estonia where people feel secure and safe; cohesive society where members of the society feel involved, and gaps between different social groups are narrowing; knowledge-based economy, and lifelong learning; effective governance so that communication with the state would be simple and seamless, and a safe and secure state where everyone’s fundamental rights and freedoms are guaranteed.
“The current state of Estonia’s economy is strong, and according to the summer economic forecast of the Ministry of Finance, the economy will grow by 3.3 per cent this year. In 2020, the growth is projected at 2.2. In connection with that, the state budget volume will also increase,” the minister noted. “The outlook of global economy, and the economy of the countries that have the most impact on Estonia has unfortunately weakened in recent months, and therefore the Estonian economy will grow at a slower pace in the coming years than it has done previously. Nevertheless, the current state of the Estonian economy is better than might be expected in view of the broader picture of the global economy, and Estonia’s economic indicators have remained strong so far,” Helme said.
The minister pointed out that the economy measures that the Government had agreed on in the national budget strategy that spring would need continuing attention in the following year’s state budget. Helme said that, due to the need to economise, state authorities would have to critically review their working arrangements and expenditure which would enable to make the state more economical and efficient. The minister pointed out that, in the following year’s budget process, the Government would also seriously continue the state budget revision. In addition, Helme noted that the next year’s budget was a budget that would bring tax peace to businesses and people. “It will bring no tax rises, and no new taxes will be imposed, and the tax burden is decreasing,” the minister said.
Aivar Kokk, the Chairman of the Finance Committee, gave an overview of the proceedings on the Bill.
Representatives of factions took the floor during the debate.
Kersti Sarapuu from the Centre Party Faction said that the next year’s budget contained positive news in all sectors. Moreover, it is important that it is a responsible budget that provides opportunities to resolve and improve important issues. Siim Pohlak from the Estonian Conservative People’s Party Faction said that the budget supported the preservation of the Estonian people and culture. Priit Sibul from Faction Isamaa said that several priorities were reflected in the budget, and the next year’s budget would ensure that Estonia was defended and competitive, and the Estonian language and culture were valued. Riina Sikkut from the Social Democratic Party Faction said that the budget should not be a failure for rural life and rural people like that budget was. Maris Lauri from the Reform Party Faction said that that was a budget of cheating, lack of vision and irresponsibility.
The Reform Party Faction moved to reject the Bill at the first reading. 39 members of the Riigikogu voted in favour of the motion and 51 were against. Thus, the motion was not supported and the Bill passed the first reading.
The deadline for motions to amend is 6 November at 5.15 p.m.
The Riigikogu passed three Acts:
The Act on Amendments to the Traffic Act relating to the Withdrawal of the United Kingdom from the European Union (61 SE), initiated by the Government, preserves the right to drive on Estonian roads to holders of the United Kingdom’s driving licences during one year after Brexit.
Under the Act, if the United Kingdom leaves the European Union, the UK driving licences of persons who will have settled permanently in Estonia before Brexit will be valid for 12 months from no-deal withdrawal or the end of the transition period. In addition, the parking cards of vehicles servicing people with a mobility disability or blind people issued by a competent authority of the UK will also continue to be valid in Estonia after Brexit.
Persons will have to exchange their driving licences for Estonian driving licences within one year at the latest, in order to maintain their right to drive.
The potential target group of the Act are the 1,397 citizens of the UK who hold a valid ID-card (data of the Police and Border Guard Board as at 1 August).
The Act will come into force on the day following the UK’s withdrawal from the European Union.
82 members of the Riigikogu voted in favour of the Act.
The Act on Amendments to the Taxation Act, the Courts Act and the Liquid Fuel Act (29 SE), initiated by the Government, transposes the directive regulating the resolution of disputes arising in the application of international agreements eliminating double taxation of income and capital concluded between Member States.
Compared to the existing options for resolving cross-border tax disputes on the basis of agreements for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, and the Convention on the elimination of double taxation in connection with the adjustments of profits of associated enterprises, the directive provides for more detailed and effective procedural rules, provides a more certain time frame for resolving disputes, and strengthens the rights of the taxpayers in the process. A final decision to resolve a tax dispute is binding on tax authorities and it is enforced if the taxpayer accepts it.
The amendments to the Courts Act enable judges to participate as independent recognised persons in the work of an advisory commission or an alternative dispute resolution commission in the resolution of such disputes. The publishing of the personal identification codes of candidates for lay judges are also regulated.
Under the Act, it is possible for the Tax and Customs Board to disclose data subject to tax secrecy to the implementers of national support programmes so that they can check compliance with the conditions for granting supports and with targeted use of the support, as well as to the Environment Agency so that it can check compliance with specific requirements of the Liquid Fuel Act and the Atmospheric Air Protection Act.
80 members of the Riigikogu voted in favour of the Act.
The Act on the Ratification of the Rider Modifying the Agreement between the Government of the Republic of Estonia and the European Space Agency concerning the Accession of Estonia to the Convention for the Establishment of a European Space Agency and Related Terms and Conditions (49 SE), initiated by the Government, provides for acceptance of the rider modifying the accession agreement in order to extend the integration period of Estonia’s membership of the European Space Agency (ESA) and to enable ESA to allocate a larger amount to projects targeted to Estonia.
Estonia became a full member of ESA on 1 September 2015. Under the Agreement between the Government of the Republic of Estonia and the European Space Agency concerning the Accession of Estonia to the Convention for the Establishment of a European Space Agency and Related Terms and Conditions, Estonia as a new member of ESA is entitled to six years of new member state status, and to participation in the Industry Incentive Scheme, targeted only at Estonia, in the amount of 500,000 euro a year. In 2018, the ESA reached the conclusion that the new member state status should last for nine years instead of six, and the minimum amount of a targeted allocation should be 750,000 euro a year in ESA’s opinion. The amount of this allocation has been determined in the ESA’s measure for new member states, which means that it does not affect Estonia’s contribution to the ESA or involve additional obligations. For the next six years, Estonia will enjoy better conditions than those initially agreed.
75 members of the Riigikogu voted in favour of the Act.
A Bill passed the second reading in the Riigikogu:
The Bill on Amendments to the Energy Sector Organisation Act (48 SE), initiated by the Government, will eliminate the unjustified specification due to which the Energy Sector Organisation Act that is in force in Estonia is not in conformity with the relevant European Union’s Energy Efficiency Directive.
The provision of the current Act under which distribution system operators who are large undertakings, and transmission system operators do not have to prepare regular energy audits is in conflict with the directive. When the specification is eliminated, Elektrilevi OÜ and Port of Tallinn Ltd will also have to carry out energy audits in the future.
Another Bill passed the first reading in the Riigikogu:
The Bill on Amendments to the State Budget for 2019 Act (81 SE), initiated by the Government.
According to the State Budget Act, 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 2019 was prepared last autumn and some of the funding needs have changed, the necessary amendments will be made to the budget.
The sitting ended at 6.49 p.m.
Verbatim record of the sitting (in Estonian) http://stenogrammid.riigikogu.ee/en/201910231400.
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.)
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