The Riigikogu concluded the first reading of the State Budget for 2019 Bill (700 SE), initiated by the Government, and set the deadline for submission of motions to amend on 31 October at 5.15 p.m.
At the sitting of the Riigikogu, the Minister of Finance Toomas Tõniste gave an overview of the budget. The budget is based on an economic growth of three percent.
“The risk management committee consisting of specialists of the Ministry of Finance and the Bank of Estonia is of the opinion that we have enough reserves and financial buffers to face potential crises. The good state of the public finances is also confirmed by the international rating agency Fitch, who recently upgraded the rating of our country from earlier A+; outlook stable to AA-; outlook stable,” the Minister of Finance said. He referred to the assessment of the Agency that the increase in the rating had been aided by Estonia’s improved ability to withstand potential negative impacts of the external environment, the good state of our public finances, and a strong economy policy framework. The agency also stressed that our loan burden was one of the lowest among countries with an AA- rating and the lowest in the whole European Union. Low loan burden is definitely an important part of Estonia’s readiness for potential crises. “In the opinion of the Fiscal Council, too, the summer economic forecast of the Ministry of Finance describes the future development of the Estonian economy with sufficient reliability,” Tõniste said.
The expenditure and investments volume of the state budget totals 11.31 billion and the revenue volume 11.06 billion. The budget has a nominal surplus of 133 million euro, and is structurally balanced. The tax burden will remain at the current level in the following years. The government sector debt burden will decrease from the current 8.2% to 7.4% in 2019, and will drop to 5.4% by 2022, according to forecasts.
According to the Bill, the Police and Border Guard Board is set to get around 13 million and the Rescue Board 8 million to stock up their salary funds. On the back of additional funding from the state budget, the average pay of teachers at general education schools will hit €1,500 a month for the first time next year. The incomes of nursery school teachers, social care workers, and specialists in culture and other fields will also increase.
The budget of the Health Insurance Fund will receive €180 million in additional money next year. The financing of special welfare services will increase to approximately €37 million, while the funding of social rehabilitation will grow to €12.7 million. The child benefit budget will grow to 299 million euro. The benefit for the first and second child of the family will be 60 euro as of next year. In the Prime Minister’s words, the average old-age pension will increase by 7.6 per cent from 447 euro to 481 euro in the coming year.
The next year’s defence budget will be around 2.2 per cent of GDP according to current estimates. The salaries of active-service military personnel will increase. Nearly 40 per cent of the total defence budget of Estonia have been planned for various defence procurements.
The incomes of Estonia’s municipalities are budgeted to increase by 5% to almost €2.2 billion next year.
Direct support payments in agriculture will be continued. Direct support payments are budgeted to total €143.9 million in 2019.
Investments in important transport and infrastructure projects, rural development and projects in culture and sports are budgeted to total over €360 million.
The Chairman of the Finance Committee Mihhail Stalnuhhin gave an overview of the discussions on the Bill that had been held in the last five meetings of the Committee.
At the debate on the Bill (700 SE), representatives of factions took the floor and drew attention to various aspects of the Bill on the coming year’s state budget.
Jürgen Ligi (Reform Party) was critical of the budget in connection with the excise duty policy. He disapproved of excessive spending and considered it necessary to build reserves in good times for economically less favourable times. Enn Meri (Estonian Free Party) said that the budget was not easily understandable, the Chancellor of Justice also having had referred to that. He drew attention to the fact that Estonia’s economy was overheated especially in the construction sector. We should economise in the administrative sector. In Mihhail Stalnuhhin’s (Centre Party) opinion we should be happy with the budget. He highlighted the positive economic forecast. The revenue base of local governments has increased and a number of significant salary rises are planned. Additional funds are planned to be allocated to the Estonian Health Insurance Fund. Sven Sester (Isamaa) said that the budget was responsible and sustainable. In his opinion, tax peace and balance are important keywords of the budget. The investment volume has also increased. Kalvi Kõva (Social Democratic Party) also pointed out the structural balance of the budget. He stressed the social orientation of the budget. Enn Põlluaas (Estonian Conservative People’s Party) thought that there was no reason for optimism, inflation would increase and the economy was on a downward trend. He disapproved of the inactivity with regard to excise duties. The Estonian Conservative People’s Party is not happy with this budget.
The Riigikogu passed three Acts
The Act on Amendments to the Family Benefits Act and Amendments to Other Associated Acts (652 SE), initiated by the Government, was passed with 88 votes in favour. It allows for a more flexible use of parental benefit. The aim of the Act is to harmonise the parental leave system and to create more opportunities for reconciling work and family life in the parental benefit scheme. The Act merges pregnancy and maternity leave and maternity benefit into the parental leave and benefit system. There will be a possibility to collect parental benefit on a day-by-day basis until the child attains three years of age, and a possibility for parents to be on parental leave together to the extent of two months. The employer will have to be notified 30 days in advance of taking parental leave or interrupting it. According to the Act, child leave of ten working days for each child until the child attains fourteen years of age is provided for both parents. A parent will also be allowed to use child leave intended for a dead parent or the father whose data have not been entered into the population register, that is, 20 working days per child in total. A parent of several children can take up to 30 days of child leave in a year. For child leave, a parent will be paid a benefit to the extent of 50 per cent per of the parental benefit of one calendar day, which will be calculated on the basis of 12 calendar months preceding the last three months. In the case of children born before 1 April 2019, child leave will be granted under the current system. In the case of children born after 1 April 2019, the current system will apply until the end of March 2022, and the new system will apply as of 1 April 2022. In the case of children born after 1 April 2022, child leave will be granted under the new system. The Act also extends the entitlement to adoptive parent leave and adoption benefit.
During the debate, Marika Tuus-Laul (Centre Party), Marko Pomerants (Isamaa) and Helmen Kütt (Social Democratic Party) took the floor.
The Act on Amendments to the Gambling Tax Act and the Cultural Endowment of Estonia Act (632 SE), initiated by the Government, was approved with 53 votes in favour (25 against, three abstentions). It amends the distribution of the gambling tax received into the state budget between the Cultural Endowment of Estonia and the areas of government of the ministries. The aim of the amendment of the Act is more transparent and purposeful distribution of state budget funds. As ministries plan how the revenue planned from gambling tax is used for supports, the supports are no longer distributed through the Gambling Tax Council and it is eliminated. The Act provides for the funding of the Estonian Red Cross through the budget of the Ministry of Social Affairs in the future.
The Act on the Accession to the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization to the Convention on Biological Diversity (644 SE), initiated by the Government, was approved with 70 votes in favour (3 against).
With the accession to the Nagoya Protocol, Estonia will contribute above all to the protection of the world’s biological diversity and the fair sharing of benefits arising from its utilisation. Most of the world’s biodiversity is located in developing countries.
National provisions for the implementation of the Protocol have been put in place. It is necessary to adopt the Act on the accession because the Protocol supplements the Convention on Biological Diversity which Estonia has ratified. In connection with becoming a Party to the Nagoya Protocol, it will be mandatory for Estonia to make milestone payments into the main budget of the Convention, and to participate in the meetings of the Parties to the Protocol. These costs will be met from the budget of the Ministry of the Environment. There are 105 Parties to the Protocol today. The European Union approved the Protocol in 2014. Estonia transposed the relevant provisions by the Nature Conservation Act which entered into force in 2017.
Three Bills passed the second reading in the Riigikogu
The Bill on Amendments to the Consumer Protection Act (661 SE), initiated by the Government, will amend the Consumer Protection Act by adding provisions that will ensure compliance with the relevant EU Regulation. It will not permit discriminating between customers on the basis of their nationality, place of residence or place of establishment when selling goods or providing services.
The aim of the Regulation is that customers would not be discriminated with regard to prices or conditions of sale or payment on the European Union internal market when they wish to purchase products or services from another Member State. The Regulation discusses retail sale of goods on the web as well as traditionally, and electronic services (for example cloud services, data warehousing services, website hosting, search engines and internet directories). The Regulation prohibits for example automatic redirection without the customer’s prior consent to an online interface (e.g. webshop) for reasons related to the customer’s nationality, place of residence or place of establishment, as well as application of different general conditions of access to goods or services. At the same time the Geo-Blocking Regulation does not establish an obligation to deliver goods everywhere in the EU. The Regulation does not apply to media services the main feature of which is the provision of access to copyright protected works or other subject matter. The Regulation also provides for specifications for small undertakings.
The Bill will designate the Consumer Protection Board as the operational and supervisory authority for the Geo-Blocking Regulation in Estonia.
The Bill on Amendments to the Riigi Teataja Act (659 SE), initiated by the Government, will release ministries from the obligation to draw up consolidated texts of the Regulations of ministers published in the Riigi Teataja.
The function will be transferred to the publisher of the Riigi Teataja, that is, the Riigi Teataja Division of the Ministry of Justice. The amendment will allow to optimise the organisation of work of ministries. The publisher of the Riigi Teataja has the competence and technical possibilities to draw up and submit consolidated texts for publication. An additional post is planned to be established at the Ministry of Justice. The necessary resource will be covered from the funds of the Ministry of Justice and other ministries
At present, the publisher of the Riigi Teataja preserves on paper all original texts of acts submitted for publication, except for regulations of local authorities. According to the Bill, the preservation of the paper print-outs of the original texts published in the Riigi Teataja will be abandoned. This will not be applied in the case of Acts as the most important legal acts. All original texts submitted for publication will be digitally preserved in the Riigi Teataja information system.
The Bill on Amendments to the Public Information Act (671 SE), initiated by the Government, will transpose into national law the EU directive on the accessibility of the websites and mobile applications of public sector bodies. The directive aims to make the websites, e-services and mobile applications of public sector bodies better perceivable, operable, and robust for people, including persons with disabilities.
In the future, the websites and mobile applications of state and local government agencies, legal persons in public law, legal persons in private law and natural persons who are holders of information will have to meet technical accessibility requirements that allow persons with special needs to conveniently consume the content of websites. As an exception, the accessibility requirements will not apply to holders of information providing a media service (e.g. the Estonian Public Broadcasting), as well as schools and pre-school child care institutions, except in the case of publication of general information, including information on acceptance, location and contact details.
Five other Bills passed the first reading in the Riigikogu
The Bill on Amendments to the Income Tax Act (705 SE), initiated by the Government, will establish additional rules to prevent tax avoidance.
The Bill will transpose a general anti-abuse rule, exit taxation and controlled foreign company rules, and regulate the taxation of exceeding borrowing costs.
According to the general anti-abuse provision, for the purposes of calculating the tax liability, an arrangement or a series of arrangements which, having been put into place for the purpose of obtaining a tax advantage that defeats the applicable tax law, are not genuine having regard to all relevant facts and circumstances, will be ignored.
Exit of assets from Estonia will be taxed with income tax, but Estonia will no longer have the right to tax the transferred assets. Compared to the current law, according to the Bill, exit of assets from an Estonian head office to a permanent establishment abroad will also be subject to taxation.
The Bill will set a limitation to the deductibility of interest in order that international groups of companies could not reduce their tax liability through excessive interest payments.
The profit of a controlled foreign company is taxable with income tax in Estonia if the profit is gained from non-genuine arrangements which have been put in place for the essential purpose of obtaining a tax advantage. Foreign company is a permanent establishment abroad of an Estonian company, and a subsidiary abroad of an Estonian company.
The aim of the Bill on Amendments to the Investment Funds Act and Amendments to Other Associated Acts (717 SE), initiated by the Government, is to increase the performance of the second pillar pension funds by reducing the fees of mandatory pension funds, and to extend the investment options of the pension funds. The relevant EU directive concerning occupational pension fund will be transposed into Estonian law.
The Bill provides for reduction of the maximum rate of the management fee of the second pillar pension funds from the current 2 per cent to 1.2 per cent of the value of the assets of the pension fund. The management fee of a conservative pension fund is 1.2 per cent at present. According to the Bill, in the case of good investment results, a success fee may be charged as a part of the management fee. For that, the performance of the pension fund will have to exceed the growth of the pension insurance part of social tax. It will not be permitted to charge a success fee on the management of a conservative pension fund. A success fee can be charged for the investment results of 2020 and 2019.
The Bill will reduce the investment restrictions of the pension funds. In the future, funds investing in shares to the extent of 100 per cent will be allowed. The concept of conservative pension fund will be preserved, but the Bill will allow them to invest in shares to the extent of up to 10 per cent. Under the current law, these funds must not invest in shares.
In addition, the second pillar pension funds will be allowed to make real estate investments to a larger extent which might also support investing in Estonia. According to the Bill, ten per cent of the assets of a pension fund may be invested in an immovable, instead of the current five per cent. Besides, the restriction that allowed to invest up to ten per cent of the assets of a pension fund in immovables will be eliminated.
The Bill will transpose the EU directive on the activities and supervision of institutions for occupational retirement provision. The directive amends the governance requirements applicable to occupational pension funds, and the information of members of pension schemes. A mandatory pension statement will be established for information of members of pension schemes. A pension statement will give information on the amount of money that has been accrued in the occupational pension scheme, and the amount that the employee can expect from the scheme until he or she retires. There are no such funds in Estonia as discussed in the directive, and therefore the amendments will have no practical effect. The transposition of the directive will not concern employer’s contributions to the third pillar.
The Bill on Amendments to the Vocational Educational Institutions Act and Amendments to Other Associated Acts (704 SE), initiated by the Government, will link vocational education better with the needs of the labour market, update the principles of funding vocational education, allow better access to vocational education and enhance the process of assessment of the quality of vocational education. The proposed amendments proceed from the objectives set in the Estonian Lifelong Learning Strategy 2020 and the vocational education programme 2018–2021 drawn up to implement it.
According to the Bill, the school council will approve the number of student training places for a calendar year which is coordinated with the advisory body of the school beforehand. This means that the state in cooperation with partners will negotiate the training volumes of every school. The amendment will allow to respond more immediately to the needs of learners and the labour market in cooperation with local undertakings.
According to the Bill, activity support and, if necessary, targeted support will be allocated to schools from the state budget. Performance funding will account for up to 20 per cent of the base funding volume and will depend on the academic results of the school. Base funding gives the school security that its operating expenses are covered, and performance funding increases motivation and autonomy.
The Bill will also extend the target group of the school lunch allowance, according to which the school lunch allowance will be allocated to schools for pupils who have not completed secondary education and who study in full-time study according to initial training curricula, regardless of their age. Under the current procedure, the school lunch allowance is given until the end of the current academic year to pupils who have attained 20 years of age and who have not completed secondary education.
The Bill will amend the conditions for receiving the beginner’s allowance for vocational teachers, and in the future teachers who take up teaching at vocational schools in Tallinn or Tartu will also be able to apply for the beginner’s allowance. According to the amendments, the beginner’s allowance will be paid as a lump sum as of 1 September 2020. At present it is paid in three instalments. The beginner’s allowance will also be provided for for support specialists who take up employment at vocational educational institutions for the first time. The beginner’s allowance for support specialists and teachers is approximately 12 700 euro.
With a view to broadening opportunities for access to formal education, the Bill will provide for the possibility to provide general education instruction in the form of non-stationary study in vocational educational institutions. At present, local authorities also ensure acquisition of basic education in non-stationary study for persons of 17 years of age or older, and there is also the possibility to provide the relevant study at state upper secondary schools.
The Bill is intended to change the current organisation of accreditation of vocational education which will be replaced with quality assessment. In the quality assessment process, a school that has the right to provide instruction in a curriculum group without a term will receive substantive feedback on the study process as well as on how to improve the organisation of study at least once every six years.
Toomas Jürgenstein (Social Democratic Party) took the floor during the debate.
The Bill on Amendments to the Health Services Organisation Act and Amendments to Other Associated Acts (698 SE), initiated by the Government, provides that the obligation to pay a fee for emergency care, and for health services related to the protection of public health as specified in a Regulation of the Minister of Health and Labour, provided to persons not covered by health insurance will be transferred to the Estonian Health Insurance Fund.
The Bill will provide that the obligation to pay for health services will be transferred to the Estonian Health Insurance Fund which arises from the health care funding decisions made in 2017 and the legislative amendments adopted in the Riigikogu in December 2017. The transfer has already been taken into account in the calculation of the state budget allocation to be received in the budget of the Estonian Health Insurance Fund.
The changing of the financing procedure will also require amendment of the Procurement, Handling and Transplantation of Cells, Tissues and Organs Act, the Mental Health Act and the Establishment of Cause of Death Act in regard to the health services that are also compensated to uninsured persons from the state budget under the contract between the Ministry of Social Affairs and the Estonian Health Insurance Fund under the current procedure.
The Bill on Amendments to the Medicinal Products Act (706 SE), initiated by the Government, will amend the requirements for safety features which need to be brought into conformity with a European Commission Regulation. With the implementation of the European Commission Regulation, the safety features of medicinal products will be adopted in the whole Europe and a system will be established that will allow authentication of medicinal products at any point of the supply chain in the future. In the future, the Bill will obligate medicinal product manufacturers to place safety features on the packaging of medicinal products subject to prescription. Wholesalers and pharmacists will have the additional obligation to check the safety features of medicinal products.
The sitting ended at 8.49 p.m.
Video recordings of the sittings of the Riigikogu can be viewed at https://www.youtube.com/riigikogu
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