The Riigikogu passed the Act on the mandatory funded pension reform which makes amendments to the regulation of the second pension pillar. With the entry into force of the pension reform, joining the second pillar pension scheme and leaving it will become voluntary for everybody. The Government declared the passage of the Act a matter of confidence.
56 members of the Riigikogu voted in favour of the Act on Amendments to the Funded Pensions Act and Other Associated Acts (mandatory funded pension reform) (108 SE), initiated by the Government. 45 were against.
The Minister of Finance Martin Helme gave explanations on the proceedings on the Bill. He noted that, at the Government’s meeting on 24 January, the Government had decided to declare the passage of the Act a matter of confidence, and according to the Riigikogu Rules of Procedure and Internal Rules Act, there is no third reading of the Bill in such a case. With this decision, the obligations of the Finance Committee as the lead committee terminated, and the Government took over the preparation of the Bill for the second reading and then approved the new amended text of the Bill. The motions to amend the Bill that had been submitted during the proceedings in the Riigikogu were also reviewed. Helme pointed out several motions to amend that had been made on the proposal of the Finance Committee after stakeholders had been consulted.
The explanatory memorandum notes that both the original Bill submitted to the Riigikogu by the Government and the new consolidated text of the Act amended by the Government were based on the overall aim of giving people greater freedom of choice. It is, first and foremost, about the freedom to decide whether to contribute to the second pillar pension fund or not. People are also given additional possibilities in investing their pension funds and in using the funds both before and after their retirement. The proposed amendments to the mandatory funded pension system are not essentially retroactive. These amendments neither impose obligations on people retroactively nor withdraw rights acquired in the past. On the contrary, the reform reduces people’s obligations because the obligation to contribute towards the second pillar pension is eliminated, and introduces more rights under which everybody can join and have additional opportunities to use their money.
“Although there are also doubts about this reform that all its components may not be in conformity with the Constitution, I for one disagree with that. While working on the reform over the past six months, we have suggested a balanced solution that makes the current rigid system significantly more flexible for people, but at the same time preserves the necessary restrictions in view of social objectives. In my opinion, these restrictions are proportional and necessary, also in view of the Constitution,” Helme said.
The Act determines the dates for the entry into force and implementation of the amendments, the cycle for the applications to withdraw the money and to make contributions or to be released from contributions, the rules for the payment of the money at the time of contributing to the pension fund, the raising of the limit for taking loans at the expense of a pension fund, and the exclusion of the second pillar payments from the calculation of the basic exemption. It also specifies the regulation concerning the pension investment account and the procedure for the submission of applications relating to the pension investment account.
The Act is planned to enter into force pursuant to general procedure, but the reform will be implemented for the most part on 1 January 2021. Applications to pay contributions or to be released from payment, and applications to withdraw money will be accepted from 1 January 2021, and in some cases also at later dates in connection with the implementation of the pension investment account. The explanatory memorandum notes that the year 2020 will be for making preparations and IT-developments for all parties to the system.
Over several hours, the Minister of Finance answered questions from members of the Riigikogu who asked for explanations, an assessment and an impact analysis on the proposed amendments.
During the debate, 46 members of the Riigikogu took the floor and presented their arguments and positions on the mandatory funded pension reform.
First, representatives of the factions expressed their positions. Kaja Kallas (Reform Party) noted that the pension reform Bill was the worst Bill of that Riigikogu and it would destroy our pension system. She said that our children and following generations would pay for that decision. Siim Pohlak (Estonian Conservative People’s Party) emphasised that the pension reform was necessary so that people were able to decide on the use of their money themselves. According to Aivar Kokk (Isamaa), it is important that people get an opportunity to invest their money themselves. At the same time, it is important that pension funds continue to invest in the Estonian economy and, through these investments, earn annual profit for people who join pension funds. In his opinion, the allegations of unequal treatment are unjustified. Indrek Saar (Social Democratic Party) noted that the reform was a consolation for the short-sighted who thought they could best invest their money and make smart decisions. He referred to an assessment of experts that warned against destroying the pension system. He also suggested to think about the people who would withdraw their money and lose their savings because of thoughtless investment decisions in the light of great promises. He called on not to support the passage of the Bill. Jaanus Karilaid (Centre Party) referred to the current low real return of the pension funds. He said that the Centre Party had already earlier opposed the current funded pension system that made a generous gift to banks. Therefore he supported the funded pension reform that had been made with his coalition partners.
Jürgen Ligi (Reform Party), Aivar Sõerd (Reform Party), Kai Rimmel (Estonian Conservative People’s Party), Kristina Šmigun-Vähi (Reform Party), Toomas Kivimägi (Reform Party), Hanno Pevkur (Reform Party), Urmas Kruuse (Reform Party), Riina Sikkut (Social Democratic Party), Vilja Toomast (Reform Party), Signe Kivi (Reform Party), Annely Akkermann (Reform Party), Mart Võrklaev (Reform Party), Lauri Läänemets (Social Democratic Party), Urmas Espenberg (Estonian Conservative People’s Party), Valdo Randpere (Reform Party), Oudekki Loone (Centre Party), Urve Tiidus (Reform Party), Katri Raik (Social Democratic Party), Jaak Juske (Social Democratic Party), Siim Kallas (Reform Party), Helmen Kütt (Social Democratic Party), Kalle Grünthal (Estonian Conservative People’s Party), Peeter Ernits (Estonian Conservative People’s Party), Erkki Keldo (Reform Party), Taavi Rõivas (Reform Party), Heiki Hepner (Isamaa), Heljo Pikhof (Social Democratic Party), Mihhail Lotman (Isamaa), Yoko Alender (Reform Party), Marika Tuus-Laul (Centre Party), Raimond Kaljulaid, Jüri Jaanson (Reform Party), Signe Riisalo (Reform Party), Maris Lauri (Reform Party), Jevgeni Ossinovski (Social Democratic Party), Henn Põlluaas (Estonian Conservative People’s Party), Helir-Valdor Seeder (Isamaa), Kalvi Kõva (Social Democratic Party), Keit Pentus-Rosimannus (Reform Party), Andres Sutt (Reform Party) and Sven Sester (Isamaa) also took the floor and presented their positions.
Under the Riigikogu Rules of Procedure and Internal Rules Act, the 957 motions to amend the Bill were not subject to voting.
The beginning of the discussion on the Bill at today’s plenary sitting was delayed for more than 45 minutes because the members of the opposition who opposed the reform had brought placards against the pension reform to the session hall.
Minister of Culture Tõnis Lukas gave an overview of the implementation of “The Fundamentals of the Cultural Policy until 2020”.
In his overview of the report on the implementation of “The Fundamentals of the Cultural Policy until 2020”, Lukas discussed the activities, achievements and major developments in 2019, and presented the major follow-up activities for 2020. The report focused on the anniversary year of the Estonian dance and song that had provided a framework for analysing the viability of the tradition of the song and dance celebration movement. It also discussed the developments in all subsectors of culture. The report consolidated the information related to the objectives of the Fundamentals of the Cultural Policy until 2020, obtained from all ministries.
Lukas said that the vision document “Culture 2020” formulated the aim of the cultural policy: to build a society which values creativity, maintaining and promoting the Estonian national identity, studying, storing and carrying on cultural memory, and creating favourable conditions for the development of a viable, open and diverse cultural space and participation in culture.
“Although, as can be seen in the title, the planning period provided for by this baseline document ends with this year, this does not mean that all cultural policy goals have been definitively achieved with it. In a year’s time from now, the final report summarising the period from 2014 to 2020 will be presented here in this hall, but already now the Ministry of Culture is also busy in the process of renewing the fundamentals of cultural policy,” Lukas said. He explained that a large number of meetings with sectoral organisations, representatives of the ministries concerned, and other stakeholders had been organised for that purpose over 2019. A total of more than 500 people had been involved. Also, discussion days had been held in all counties. According to the plan, the draft of the new baseline document is planned to be submitted to the Government for approval in the first half of 2020.
During the debate, Aadu Must (Centre Party), Jaak Valge (Estonian Conservative People’s Party) and Indrek Saar (Social Democratic Party) took the floor.
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 Other Acts (100 SE), initiated by the Government, passed the second reading. It 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 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 Liquid Fuel Act (126 SE), initiated by the Government, passed the first reading. As of 2020, the obligation to add biocomponents to fossil fuels will be made more flexible, and the transparency and efficiency of the trade in the statistics on the biocomponent and renewable electricity will be increased.
From 2020, the obligation to add biofuel to every litre will be replaced with a semester-based obligation. According to the Bill, the supplier will decide how to most efficiently meet the biofuel obligation over the semester. As another amendment, an electronic database for trade in statistics will be implemented. It will provide a transparent opportunity for suppliers to sell to suppliers who need statistics the statistics in excess of the minimum share of the obligation to add biofuel.
The sitting ended on Thursday, 30 January at 1.01 a.m.
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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