The Riigikogu concluded the second reading of the Bill on the coming year’s state budget and sent it to the third reading. The deadline for submission of motions to amend is 27 November.
Under the State Budget for 2020 Bill (82 SE), initiated by the Government, the expenditure of the coming year’s state budget will amount to 11.6 billion euro and the revenue will amount to 11.8 billion. Compared to this year, the expenditure will grow by approximately 240 million euro and the revenue by 760 million euro.
The coming year’s state budget 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.
Estonia’s tax burden will remain at 33.2 per cent of GDP over the coming two years and will 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.
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.
The members and factions of the Riigikogu had submitted 33 motions to amend for the second reading. The Finance Committee refused to incorporate the motions to amend that had been submitted because the solutions offered for covering the proposals were unsuitable, the Chairman of the Finance Committee Aivar Kokk justified.
They also failed to gain the necessary support at the vote on the motions to amend at today’s plenary sitting.
The members of the Riigikogu who took the floor in the debate presented their critical positions. Thirty members of the Riigikogu took the floor: Maris Lauri (Reform Party), Aivar Sõerd (Reform Party), Urmas Kruuse (Reform Party), Liina Kersna (Reform Party), Annely Akkermann (Reform Party), Jürgen Ligi (Reform Party), Urve Tiidus (Reform Party), Andres Sutt (Reform Party), Lauri Läänemets (Social Democratic Party), Ivari Padar (Social Democratic Party), Taavi Rõivas (Reform Party), Vilja Toomast (Reform Party), Mart Võrklaev (Reform Party), Helmen Kütt (Social Democratic Party), Hanno Pevkur (Reform Party), Heidy Purga (Reform Party), Riina Sikkut (Social Democratic Party), Kristen Michal (Social Democratic Party), Jaak Juske (Social Democratic Party), Kalvi Kõva (Social Democratic Party), Kaja Kallas (Reform Party), Madis Milling (Social Democratic Party), Kersti Sarapuu (Centre Party), Indrek Saar (Social Democratic Party), Keit Pentus-Rosimannus (Reform Party), Yoko Alender (Reform Party), Siim Pohlak (Estonian Conservative People’s Party), Katri Raik (Social Democratic Party), Aivar Kokk (Isamaa) and Peeter Ernits (Estonian Conservative People’s Party).
The Reform Party Faction and the Social Democratic Party Faction moved to suspend the second reading of the Bill. The Reform Party Faction moved to suspend the second reading. The result of voting: 44 votes in favour and 54 against. The motion was not supported. The second reading of the Bill was concluded.
The Riigikogu passed two Acts
The Act on Amendments to the Securities Market Act and Other Acts (28 SE), initiated by the Government, transposes into Estonian law the relevant European Union directive on shareholders’ rights which aims to promote communication between listed companies and shareholders. The directive concerns only companies whose shares are traded on a stock exchange.
The Act increases shareholders’ opportunities to shape the policy of remuneration of board members of listed companies. Material changes to the remuneration policy will have to be submitted to a vote by the general meeting at least every four years. In addition, the company will have to publish an annual report on the remuneration of directors including the data on the remuneration of individual directors on its website.
The amendments will improve the possibilities of listed companies to identify their shareholders, in particular larger shareholders who hold more than 0.5 per cent of the company’s shares and who hold their shares in nominee accounts. A nominee account is an account operated by an intermediary created for the purpose of holding shares on behalf of another person. For example, a bank may hold the shares of its client on a bank’s account.
When the amendments enter into force, management companies will also have to begin to disclose on their websites an engagement policy and, on an annual basis, how it has been implemented. An engagement policy describes how their investment strategy is consistent with the implementation of shareholders’ rights upon investment into companies. It will have to be pointed out how investee companies’ strategy, financial performance, risks, governance and other relevant matters are monitored. The Act also concerns the European Union’s prospectus regulation which regulates the requirements for the prospectus for an offer of securities to the public. On the basis of a prospectus, investors can decide whether to invest in the securities offered.
According to the Act, in the future, a prospectus can be drawn up according to the requirements set out in a regulation of the Minister of Finance if the offer of securities to the public remains below 8 million euro. At present, the threshold is five million euro. The prospectus of an offer exceeding the threshold will have to be drawn up according to the stricter requirements of the European Union’s prospectus regulation. In the case of an offer of securities to the public which remains below 2.5 million, the company will not have to draw up a prospectus.
The Act provides that if securities are offered in Estonia but the prospectus is not drawn up in Estonian, an Estonian translation of the prospectus is drawn up and published.
92 members of the Riigikogu supported the passage of the Act.
The Act on Amendments to the Maritime Safety Act and the Railways Act (47 SE), initiated by the Government, transposes into Estonian law the relevant EU directives which aim to update and harmonise the safety standards for passenger ships, to improve the safety of and rescue opportunities for passengers and crew members on passenger ships, and to ensure that search and rescue and the activities in the aftermath of a potential accident would be more effective, and that the competent authorities have operational information on persons on board. The mandatory inspections of ro-ro passenger ships and high-speed passenger craft are harmonised and duplicate procedures for inspections are reduced.
The Act concerns the passenger ship owners and operators whose vessels engage in regular service and call at Estonian ports, and the work of the officials and inspectors of the supervision department of the Maritime Administration. The Act concerns all undertakings whose passenger ships are engaged in regular services both within Estonia and to other European Union and foreign ports. The Act provides for an obligation to communicate the number of persons on board a passenger ship to the Electronic Maritime Document Exchange. Passenger ships that make regular voyages of over 20 nautical miles and that are not exempt from the relevant obligation under the Maritime Safety Act also forward the list of persons on board the passenger ship to the Electronic Maritime Document Exchange.
A provision concerning extension of the exemptions established for rail passengers’ rights and obligations was included in the Railways Act.
Jüri Jaanson (Reform Party) and Helmen Kütt (Social Democratic Party) took the floor during the debate.
55 members of the Riigikogu supported the passage of the Act and 41 were against.
Two other Bills passed the second reading
Under 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 Bill reflects 56 amendments in total.
The Bill on Amendments to § 61 of the State Pension Insurance Act (79 SE), initiated by the Government, concerns the increasing of the base amount of pensions by seven euro on 1 April 2020 after the indexation of pensions.
The explanatory memorandum notes that the extraordinary increase of the base amount of pension as the solidarity component will increase the pensions of all old-age pensioners (including persons receiving pensions under the Old-Age Pensions under Favourable Conditions Act and the Superannuated Pensions Act), persons receiving pension for incapacity for work and persons receiving a survivor’s pension. The increasing of the solidarity component will help relatively more the non-working pensioners who receive a lower pension. In 2020, the increasing of the base amount of pension will concern around 330,000 persons, and it will reduce the relative poverty rate among pensioners by 0.6 percentage points.
During the debate, Heljo Pikhof (Social Democratic Party) and Taavi Rõivas (Reform Party) took the floor.
Six Bills and draft Resolutions passed the first reading
The Draft Resolution of the Riigikogu “Approval of “The Fundamentals of Criminal Policy until 2030”” (52 OE), submitted by the Government, is a strategic development document specified in § 20 of the State Budget Act which is passed by the Riigikogu. It is a long-term development document carrying national values which serves as the basis for policy documents of lower level.
The priorities of criminal policy until 2030 are to increase the efficiency of the criminal justice system and to prevent offences by young people and juvenile delinquency, in particular, offences committed by people who have fallen into addiction or suffer from mental health disorders. The aim is also to enhance the penal policy.
The aim of criminal policy is to increase security in society and to make the criminal justice system more citizen-centred. Criminal policy includes the prevention of offences, and treating offenders so that the security of society and the rights and needs of victims would be ensured, and on the other hand the rehabilitation of offenders would also be supported.
During the debate, Hanno Pevkur (Reform Party), Jaanus Karilaid (Centre Party) and Peeter Ernits (Estonian Conservative People’s Party) took the floor.
Under the Draft Resolution of the Riigikogu “Approval of “The Fundamentals of Legislative Drafting Policy until 2030”” (53 OE), submitted by the Government, the long-term vision of the Estonian legislative drafting policy and the principles of good legislative drafting will be agreed upon. They serve as the basis in proceedings on Bills, the development of legal language, and the organisation of cooperation and development.
Compared to the Development Objectives of Legal Policy until 2018, the current document will not significantly alter the course that has already been taken. Achievement of inclusive and evidence-based legislative drafting continues to be central. The principle under which legislative drafting is not the first but the last resort in resolving problems has been emphasised more clearly. The new fundamentals also set the aim of reducing the volume of legislative drafting, differently from earlier ones. However, where legal measures are preferred, legislators are directed to consider options by using innovative methods, among other things. The fundamentals also emphasise that legislative drafting must keep up with the development of e-government.
The legislative intent is the first stage of legislative drafting and exceptions to it are permissible only on the argument of public interest which is controlled by the Riigikogu. The aim of the fundamentals is to involve the Riigikogu more in the early stage of legislative drafting. An innovation is that, in the future, the Riigikogu will be notified of submission of a legislative intent for public discussion. The Riigikogu in turn will decide thereafter whether it wishes to discuss the planned amendments with representatives of the Government.
During the debate, Heljo Pikhof (Social Democratic Party) and Toomas Kivimägi (Reform Party) took the floor.
The Bill on Amendments to the Tax Information Exchange Act (89 SE), initiated by the Government, addresses the exchange of information in relation to arrangements that have an impact on taxation, the exchange of financial account information or the identification of beneficial ownership.
The main interest of tax authorities is to obtain information on aggressive tax-planning schemes that abuse loopholes between national tax laws. Aggressive tax-planning cannot be defined by standard hallmarks that would be constant in time, thus the Minister of Finance will establish by a Regulation a list of hallmarks that the relevant arrangements will have to meet when they are reported to tax authorities. A test that may present an indication of aggressive tax-planning or activities through which assets can be concealed will be provided for.
In particular, providers of tax advice operating in Estonia who have developed a scheme will have to file information. The taxpayer will file information concerning schemes commissioned from third countries or developed in-house. The taxpayer will also have to report arrangements in the cases when the lawyer or auditor who developed the arrangement does not file the information due to the obligation to maintain professional secrecy arising from law if the client does not exempt them from the obligation.
An arrangement will have to be reported to the tax authority within 30 calendar days, beginning on the day after the arrangement is transferred, or is ready for implementation, or when the first step in its implementation has been made, whichever occurs first. Tax authorities communicate the information collected to a central directory maintained by the European Commission.
The Draft Resolution of the Riigikogu “Approval of the Consolidated Report of 2018 of the State” (77 OE), submitted by the Government, provides for the approval of the audited consolidated report of 2018 of the state, which consists of the management report, the financial statement, and information concerning local authorities and public sector and government sector. The report also includes the audit report of the National Audit Office.
The Bill on Amendments to the Law of Ship Flag and Registers of Ships Act and Amendments to the Income Tax Act and Other Associated Acts, and the Income Tax Act (100 SE), initiated by the Government, will specify the special income tax regime for companies in the shipping sector and bring it into conformity with European Union state aid rules.
The special income tax regime was established by an Act passed by the Riigikogu on 13 February this year, the entry into force of which depends on permission to grant state aid, obtained from the European Commission. The Act established an alternative taxation procedure for shipping companies regarding revenue from international carriage of goods or passengers by sea, depending on the tonnage of the ship and not on dividends. It also established specifications upon the taxation of the remuneration paid to crew members.
The Bill will not amend the basic conditions of the special tax regime, only particular conditions will be specified. It provides unambiguously the eligible core activities, ancillary activities and other activities of international carriage by sea, in the case of which it is permitted to use a more favourable income tax regime based on tonnage in regard to the revenue from the activities. In the case of income from ancillary activities, the tonnage-based income tax regime can be used only on the condition that the income received does not exceed 50 per cent of the income from the international carriage of goods or passengers. For example, granting use of a cabin for a charge is a core activity, but leasing premises in a ship to a seller of goods or a service provider is an ancillary activity.
In the future, a natural person whose income is subject to taxation based on a fixed tax base will not be able to use any options for deduction from income that are permitted by the law under the ordinary regime.
Under the Act that was in force earlier, crew members could deduct for example the amounts paid for the acquisition of units of pension funds. The restriction will apply only to income earned as a crew member.
The Bill on Amendments to the Consumer Protection Act and Amendments to Other Associated Acts (103 SE), initiated by the Government on 4 November, will strengthen the protection of consumers’ rights in e-commerce and improve the cooperation between authorities in detecting and resolving cross-border infringements.
The Bill will make amendments that are necessary to implement the new directly applicable EU Regulation on the enforcement of consumer protection laws and cooperation between authorities (‘the CPC Regulation’). In addition, the procedural rules of the Consumer Disputes Committee will be made more flexible.
The CPC Regulation directs Member States to ensure supervisory authorities sufficient powers which allow for effective monitoring in the digital environment. Therefore the Consumer Protection and Technical Regulatory Authority will be given additional rights in the monitoring in the digital environment – the right to obtain information from all persons (including from credit institutions) when identifying the person responsible in a transaction. The Consumer Protection and Technical Regulatory Authority will also be given the right to prevent access to web interfaces (e.g. e-shop, mobile application) to ensure consumers’ rights. The exercise of the rights will have to be justified and proportionate in view of the nature and the overall potential harm of the infringement. With a view to implementing the Regulation, sanctions will be amended and harmonised in the areas covered by the CPC Regulation.
Amendments will be made to the procedure of the Consumer Disputes Committee in order to enhance and simplify the alternative dispute resolution for consumer disputes. For example, it will be possible to resolve disputes in a single-member committee, and by way of written proceedings without a sitting with the consent of the complainant.
The Auditor General Janar Holm gave an overview of the use and preservation of state assets in 2018–2019.
The Auditor General focused on observations relating to e-government. Holm referred to the fact that, in Estonia, nearly all records management and communication with the state depended on information technology. There is an expectation in society for e-services to make life increasingly simple and for our information systems and databases to be increasingly better. Already in an audit on e-government sent to the Riigikogu nearly 15 years ago, the National Audit Office was concerned that Estonia was prospectively in a danger of falling behind irrevocably in the IT-sector.
In the opinion of the National Audit Office, there is no good or comprehensive overview in Estonia of our information systems, or what the maintenance and development costs are. Although the obligation to register databases has been in place for years already, it is still not clear how many information systems and databases there are in the country. More than 2000 information systems have been entered in the register so far. They offer various e-services to people and officials but also private sector, but the data in them is not complete or up-to-date. At the same time, there should be an overview of the data collected, and the data should be stored prudently and securely in accordance with standards. “The issues relating to the single information systems register will have to be fixed, among other things also because if a database is registered there, that should ensure that the state does not collect similar data in several places, and those who need them can re-use the data or the software solutions necessary for the processing thereof if necessary. There needs to be a possibility to cross-use the data in different registers, mostly through X-Road data exchange layer. This would also reveal if data that no one needs are collected anywhere,” the overview emphasises.
The National Audit Office observes that although Estonia is beginning to rank among the average in terms of several e-government indicators, Estonia still has a good reputation in information technology thanks to its earlier achievements. X-Road data exchange layer that has been acknowledged as good practice internationally has been highlighted in several places. Estonia stands out in cyber-security, the high rate of the use of e-services, etc. The e-government services of our country are at the top of UN and European Union e-government development indexes. In analysts’ opinion, lack of both skilled human resource and up-to-date infrastructure may become an obstacle to development, due to which Estonia can make little use of newer and more expensive innovation.
Peeter Ernits (Estonian Conservative People’s Party Faction) took the floor during the debate.
The sitting ended on Thursday, 14 November at 00.41 a.m.
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