Under the State Budget for 2020 Act (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 euro. Compared to this year, the expenditure will grow by approximately 240 million euro and the revenue by 760 million euro.
In the course of the third reading, the factions and members of the Riigikogu made motions to support third sector and civil society projects in a total amount of 4.3 million euro within the framework of regional investments. Additional funds were allocated to local communities, nurseries, schools, children’s hobby activities, women’s associations, parishes and other voluntary organisations. The biggest amendment is connected with the increase in the top-up subsidy to farmers which will rise by five million euro. The total volume of the subsidy will be 10.3 million euro.
Next year, the government sector budget will be nominally balanced and will be 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 of GDP and the budget will achieve a nominal surplus.
During the debate, Kersti Sarapuu (Centre Party), Maris Lauri (Reform Party), Indrek Saar (Social Democratic Party), Helir-Valdor Seeder (Isamaa) and Siim Pohlak (Estonian Conservative People’s Party) took the floor and presented the positions and assessments of their factions on the coming year’s state budget.
Sarapuu commended the state budget and emphasised that we were moving towards a more cohesive state. The Centre Party Faction supports the passage of the state budget. Lauri said that the coming year’s state budget lacked vision and had no outlook on the future. The Reform Party Faction does not support the passage of such a budget. Saar noted that it was a budget of disappointments that had no perspective plan. According to him, farmers have been let down and the promise made this spring to pay ‘top-up’ to the full extent, that is, in the amount of 15.3 million euro, also in the new year has not been kept. The amount falls short by a good one-third. He also disapproved of charging income tax on average pension. The Social Democratic Party Faction does not support the passage of the budget. According to Seeder, the coalition and the opposition giving different assessments when discussing the state budget was a predictable discussion where the parties spoke from their positions. He touched upon the system of drafting the state budget and the principles for ensuring better transparency of the budget in the future. Pohlak said that it was a good budget – as good as it had been possible to make under the current circumstances. He acknowledged the Ministry of Finance, minister Martin Helme and other members of the Government, and the Finance Committee for driving the budget process and called on the MP-s to endorse the coming year’s budget.
55 members of the Riigikogu voted in favour of the passage of the Act, and 44 were against.
The Riigikogu passed five other Acts
The Act on Amendments to the European Parliament Election Act, the Municipal Council Election Act, the Riigikogu Election Act, the Referendum Act and the Penal Code (elimination of the restriction on election campaigning and the prohibition on political outdoor advertising on election day) (51 SE), initiated by the Government, repeals the restriction on election campaigning on election day and the prohibition on political outdoor advertising. Polling places must remain free of advertising.
The Act enters into force pursuant to general procedure, that is, on the tenth day following the date of publication in the Riigi Teataja. The entry into force of the Act was planned keeping in mind the need to schedule it for as early as possible because amendments to Acts concerning elections must be adopted well in advance of elections. Agreements for commissioning election advertising are concluded a long time ahead and therefore the amendment needs to be adopted with a sufficient time allowance. The municipal council elections due in 2021 will be the next elections.
Raimond Kaljulaid took the floor during the debate.
62 members of the Riigikogu voted in favour of the passage of the Act, and 23 were against.
With the Act on Amendments to the State Fees Act, the Identity Documents Act and the Consular Act (78 SE), initiated by the Government, the state fees for applying for documents in foreign missions become higher by around 30 euro than the state fees charged for the same acts in Estonia.
For example, the state fee for identity document is 25 euro in Estonia and 55 euro in foreign missions, the state fee for temporary residence permit is 64 euro in Estonia and 95 euro in foreign missions, and the state fee for biometric travel document is 40 euro in Estonia and 70 euro in foreign missions.
The purpose of the amendment is to cover the costs related to accepting applications for documents, issuing documents and using the postal service. A state fee for issuing documents in Estonian foreign missions and through honorary consuls is also established. This service has so far been free of charge.
The Act enters into force on 6 January 2020. 85 members of the Riigikogu voted for the passage of the Act.
The Act on Amendments to the Money Laundering and Terrorist Financing Prevention Act and the State Fees Act (8 SE), initiated by the Government, amends the requirements for the licensing of providers of exchange services between virtual currencies and fiat currencies, in order to reduce the risks of money laundering and terrorist financing and the commission of other crimes associated with such services.
Under the Act, when processing an authorisation relating to virtual currency, the Financial Intelligence Unit checks the background and suitability of the members of the management board of the company, including whether they have an impeccable reputation. The registered office, the location of the management board, and the place of business of the company must also be located in Estonia. Foreign companies must open a branch in Estonia to apply for authorisation.
The Act raises the state fee for an authorisation relating to virtual currency from 345 euro to 3,300 euro. Virtual currency means a value represented in the digital form (e.g. bitcoin), which is digitally transferable, preservable or tradable and which traders mutually accept as a payment instrument, but that is not the legal tender of any country.
Companies that already hold an authorisation have time until 1 July 2020 year to bring their activities into conformity with the requirements of the Act and to submit additional data to the Financial Intelligence Unit.
85 members of the Riigikogu voted for the passage of the Act.
The Act on Amendments to the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act and the Act on Amendments to the Income Tax Act, the Social Tax Act and Other Acts (80 SE), initiated by the Government, amends the excise duty on cigarettes and smoking tobacco, the reduced excise for small brewers, and issues relating to the definition of heated tobacco product. In addition, the principles for the revenue stamping of excise goods are specified in the interests of legal clarity.
The Act raises the production volume limit for beer subject to a reduced excise duty from 0.6 million litres to 1.5 million litres a year for small producers, in order that undertakings could make longer-term investment plans. The planned rise in the excise duty on cigarettes in 2020 is lowered from 10 per cent to 5 per cent to reduce the impact of border-trade with Latvia arising from the price difference, and 5-per cent excise duty rises are established for 2021–2023. The rise in the excise duty on smoking tobacco for 2020, provided for in the Act concerning excise duties, is not changed, and the excise duty is increased by around 8.3 per cent in 2021, so that it would comprise 2/3 of the minimum amount of excise duty on cigarettes in 2021. With that, smoking tobacco is deemed to be subject to tax equivalently to cigarettes. In addition, 5-per cent rises in the excise duty on smoking tobacco for 2022 and 2023 are provided for.
The Finance Committee made an amendment to the Act to allow for the reduced excise duty of gas-intensive companies to also be applied to companies who do not engage in electricity, gas, steam and air conditioning supply as a principal activity but who produce electricity and thermal energy for the production of the products in their principal activity.
Aivar Kokk (Isamaa) took the floor during the debate.
83 members of the Riigikogu voted for the passage of the Act.
The Act on Amendments to the Income Tax Act and Amendments to Other Associated Acts (106 SE), initiated by the Government, solves several mismatches that have arisen in taxation. In particular, the amendments concern maternity benefit and redundancy payment, benefits for families with many children, and the increased basic exemption starting from the third child. The Act also resolves the mismatches in taxation involving third countries.
The persons who receive maternity benefit or redundancy payment in the fourth quarter have the option of postponing part of their benefit to the following year for taxation purposes, so that they can use their basic exemption at the current level. When the benefit is partially transferred to the following year, the situation achieved in terms of taxation is similar to the situation where the maternity benefit or redundancy payment is paid monthly. The supports to improve the living conditions of a family with many children and to increase the energy efficiency of a small residential building paid from the state budget are exempt from income tax. According to the Act, the increased basic exemption for a child does not decrease when the child receives survivor’s pension or national pension in the event of loss of a provider. The increased basic exemption for a child increases by 100 euro per month starting from the third child.
The Act also transposes the European Union directive on mismatches in taxation involving third countries. The aim is to avoid double taxation resulting from differences in the characterisation of financial instruments, payments and entities in different jurisdictions, or from the allocation of payments between the head office and permanent establishment or between two or more permanent establishments of the same entity. Since such mismatches in taxation could lead to a double deduction or to a deduction without inclusion, the Act provides for provisions under which, depending on the situation, tax is charged on payment, expenses or losses that can be deducted in another country or that are exempt from income tax in another country, or alternatively it is not allowed to apply income tax exemption on income that has been deducted or is exempt from income tax in another country.
In light of the objective of the directive to avoid double taxation and to ensure taxation of profit of companies, in the future, dividends received from abroad are exempt from income tax in Estonia only in the case when income tax on the dividend has been withheld or income tax has been paid on the share of profit which is the basis therefor. In addition, it is ensured that, if a resident natural person receives income, including pension, from abroad, deductions from taxable income is equivalent to deductions from income received in Estonia. The same is provided for for residents of the Contracting States of the European Economic Area who receive income in Estonia. At present, deductions from income taxable in Estonia are restricted in proportion to the share of the income taxable in Estonia in the total taxable income received in the period of taxation. As a result of an amendment, it is possible to make all deductions to the full extent regardless of how large an amount of the income is earned in Estonia.
The deadline for submitting income tax returns is extended to 30 April and the deadline for the payment and refund of income tax is extended to 1 October for natural persons, non-residents, management companies of common investment funds, and public limited funds. Also, the limit for making advance payments is increased from 64 euro to 300 for sole proprietors.
During the debate, Riina Sikkut (Social Democratic Party) and Aivar Kokk (Isamaa) took the floor.
87 members of the Riigikogu voted for the passage of the Act.
Four Bills passed the second reading in the Riigikogu
The Bill to Implement Regulation (EU) 2019/788 of the European Parliament and of the Council on the European Citizens’ Initiative (74 SE), initiated by the Government, will lower the minimum age for signing a statement of support for a citizens’ initiative from the current age of 18 to 16. The Ministry of the Interior will be designated as the national contact point to assist groups of organisers of citizens’ initiatives if they need help in national issues.
Compared to the current Act, there will be no changes concerning the national governmental authorities who perform the obligations arising from the Regulation in relation to the verification of the signatures of support and the certification of the conformity of the individual online collection systems.
The European citizens’ initiative is an instrument of participatory democracy that allows to make proposals on legal amendments in all fields where the European Commission has the competence to present legislative proposals (e.g. environment, agriculture, energy, transport and trade).
A citizens’ initiative must receive the support of one million citizens from at least seven Member States. Initiatives allow citizens of different Member States to influence the policy-making of the EU. The new Regulation was established to increase the possibilities of EU citizens to participate in the democratic life and to make the European citizens’ initiative less burdensome and more user-friendly for organisers and supporters and thereby to bring the EU closer to citizens.
During the debate, Lauri Läänemets (Social Democratic Party) and Tarmo Kruusimäe (Isamaa) took the floor.
The Bill on Amendments to the Consumer Protection Act and Amendments to Other Associated Acts (103 SE), initiated by the Government, 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 Bill on Amendments to the Act on Narcotic Drugs and Psychotropic Substances and Precursors thereof and the Health Services Organisation Act (99 SE), initiated by the Government on 21 October, will create opportunities to interlink the data of the Estonian Drug Treatment Database operating at the National Institute for Health Development. The aim is to interlink registries (the population register, the Tuberculosis Registry, the Communicable Disease Information System and the Causes of Death Registry). The amendments will provide an opportunity to ensure the accuracy of data and an opportunity to interlink them through personalisation. This in turn will ensure more effective treatment and quicker communication between doctors and patients. Organised and interlinked registry data will also enable to obtain a whole picture of the spread of a disease in Estonia and to obtain adequate statistics when forecasting service volumes.
The explanatory memorandum notes that, at present, data are entered in the Estonian Drug Treatment Database in such a manner that it is impossible to identify patients. For that, at the start and end of drug treatment, the personal identification code of the patient is encoded with a unique code in the Estonian Drug Treatment Database, and this code is linked with the data of the specific treatment case (i.e. data are not personalised in the database). For the service provider, already now, the patient is always personalised at the beginning of a treatment case, but the data are not reflected in the Estonian Drug Treatment Database.
In the future, data will be entered in the Estonian Drug Treatment Database in personalised form for every drug treatment case. This is already being done now in the case of other registries. For example, patients’ data are entered in the Tuberculosis Registry in personalised form. Due to the amendments proposed by the Bill, a higher security class will be assigned to the Estonian Drug Treatment Database, and cases when data can be issued to other persons will be provided for.
The amendment does not concern the service providers offering drug treatment. Since additional data fields that will contain personal data will be added to the notifications from the Estonian Drug Treatment Database, only the working arrangements of the employees of the National Institute for Health Development may change.
Tarmo Kruusimäe (Isamaa) took the floor during the debate.
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 will communicate the information collected to a central directory maintained by the European Commission.
The sitting ended at 5.40 p.m.
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