The Riigikogu concluded the second reading of the State Budget for 2022 (464 SE), initiated by the Government, and set the deadline for submission of motions to amend for the third reading as 22 November.
According to the State Budget for 2022 Bill (464 SE), the volume of the revenue of the coming year’s state budget is 13.13 billion euro, the volume of expenditure 13.64 billion euro, and the volume of investments is 716 billion euro. The volume of expenditure will exceed the volume of revenue, but the structural position has improved compared to both last year and the state budget strategy for 2022–2025. Defence spending accounts for 2.3 per cent of GDP, and research and development expenditure for one per cent.
During the second reading, the Finance Committee drafted a motion to amend consisting of several parts proposing specifications within and between the areas of government of ministries. The committee also supported the proposal to allocate two million euro for the support measure for the remuneration of crews in order to prevent a major wave of redundancies among employees under seafarers’ employment agreement and to help ensure trade in goods in addition to tourism. The Committee had not accepted the motions to amend submitted by the remaining factions and members of the Riigikogu. On the deciding on those motions, the financial sources proposed to cover them had been unacceptable, as they would have changed the achievement of the objectives set out in the budget. There were 46 motions in total.
During the debate, Jaanus Karilaid (Centre Party), Aivar Sõerd (Reform Party), Urmas Reinsalu (Isamaa), Heiki Hepner (Isamaa), Tarmo Kruusimäe (Isamaa), Helir-Valdor Seeder (Isamaa), Peeter Ernits (Estonian Conservative People’s Party), Viktoria Ladõnskaja-Kubits (Isamaa), Rene Kokk (Estonian Conservative People’s Party), Priit Sibul (Isamaa), Riina Sikkut (Social Democratic Party), Eduard Odinets (Social Democratic Party), Helmen Kütt (Social Democratic Party), Hele Everaus (Reform Party), Leo Kunnas (Estonian Conservative People’s Party), Mihhail Lotman (Isamaa), Margit Sutrop (Reform Party), Andres Metsoja (Isamaa), Aivar Kokk (Isamaa), Mart Helme (Estonian Conservative People’s Party) and Kalvi Kõva (Social Democratic Party) took the floor.
The Faction Isamaa and the Social Democratic Party Faction moved to suspend the second reading of the Bill. The result of voting: 37 votes in favour, 58 against. The motion was not supported. The second reading of the Bill was concluded.
The Riigikogu passed four Acts
The Act on Amendments to the Covered Bonds Act and Other Acts (407 SE), initiated by the Government, transposes into the Covered Bonds Act an EU directive on the issue of covered bonds and covered bond public supervision and amending the requirements of related directives.
The Act creates a better opportunity for credit institutions to issue covered bonds the cover assets of which are located in different Member States. This concerns particularly the Baltic countries where largely the same banking groups operate. It is also hoped that the Act will help integrate the capital markets of the Baltic countries more. The direct target group of the Act are in particular credit institutions, in particular those who have issued covered bonds or are planning to do so. Indirectly, covered bond investors and debtors, that is, borrowers are also the target group of the Act.
The following claims can be converted into bonds: housing loans, loans to the Government, local governments and legal persons governed by public law, and loans to companies that are secured by commercial real estate.
The regulation of the performance of stress tests of covered bond portfolios, the requirements set for credit institutions on application for authorisation to issue covered bonds and the requirements for the valuation of the assets securing mortgage credit were specified in the course of the proceedings. The requirements were also simplified as to when a valuation of assets performed before the entry into force of the Covered Bonds Act can be deemed to be in conformity with the requirements of the Covered Bonds Act.
88 members of the Riigikogu were in favour of passing the Act.
The amendments proposed by the Act on Amendments to the Building Code (395 SE), initiated by the Government, arise from the transposition into Estonian law of an amendment to the EU directive on road infrastructure safety management. As the scope of regulation of the directive has been expanded, the road safety measures provided for by the directive will also have to be implemented on all primary roads as well as public-use roads constructed with EU funds, in addition to roads of the trans-European transport network (TEN-T), which has been the scope of application so far. On the basis of the directive, the competent authority, mostly the Transport Administration, will have to assess road safety impacts, carry out road safety audits, assess road safety on the road network, and undertake periodic checks on the safety of roads. When local governments construct roads with the involvement of EU funds in the future, they will also have to perform the obligations of the competent authority on the roads constructed by them with EU funds, in addition to the current TEN-T roads.
The obligation of the minister to establish more specific qualification requirements for the areas of activity relating to construction is eliminated. Considering that the qualification requirements have already been established in the professional standards, the minister can only confirm by a Regulation that the professional standards include very extensive requirements. If the qualification requirements are established by a Regulation of the minister, administrative burden will increase because, after the professional standards or the procedures for awarding professions are amended by various bodies that award professions, the Regulation of the minister also needs to be amended each time. It is also foreseeable that, in such a case, the legal situation would become unclear for both businesses and people with professions. If a new version of a professional standard or a procedure for awarding a profession has been established, but the amendments to the Regulation of the minister have not yet come into force (e.g. the amendments are still being processed), it is unclear whether the new requirements arising from the professional standard or the procedure for awarding a profession can be applied or not.
According to the general principle, businesses and competent persons can operate in construction by way of economic activity provided that their qualifications are proved by professional certificates and certificates of competence based on education and work experience. The qualification requirements are necessary on the designing and building of construction works subject to building permit requirement, the performance of owner supervision, the issuing of energy performance certificates, the performance of various audits, investigations and designs, etc.
67 members of the Riigikogu supported the passage of the Act and 15 were against.
The on Amendments to the Public Information Act (409 SE), initiated by the Government, provides for increase in the availability and re-usability of open data for promotion of innovation and economy, smoother functioning of the internal market and promotion of the information society.
The amendments enforce the requirements regarding the re-use of open data and public sector information arising from a relevant EU directive. The Act solves the practical shortcomings that have arisen upon the interpretation of the definition of open data and the principles relating to re-use provided for in the current Act.
During the debate, Urmas Reinsalu (Isamaa) and Mart Helme (Estonian Conservative People’s Party) took the floor.
57 members of the Riigikogu supported the passage of the Act, 18 were against, and there were nine abstentions.
The Act on Amendments to the Traffic Act (414 SE), initiated by the Government, provides for the requirements for the technology and equipment used by the electronic toll service providers and sets out the rights and obligations of both service providers and users.
The Act transposes into Estonian law the European Union directive that provides for making the payment of road fees within the European Union more convenient. At the same time, a regulation for cross-border information exchange for cases of failure to pay a road fee is established. There is no road fee in Estonia. A time-based road user charge has been established for heavy goods vehicles, which is not collected through automated identification, but the directive needs to be transposed to the minimum mandatory extent, that is, in respect of the provisions concerning the right of European Electronic Toll Service providers to register their activities in every EU Member State. Therefore, every Member State must provide, in accordance with the directive, for the requirements for the technology and equipment used, and set out the rights and obligations of both service providers and users.
64 members of the Riigikogu supported the passage of the Act, 17 were against, and there was one abstention.
The Riigikogu concluded the second reading of eight other Bills
Under the Bill on Amendments to the Land Reform Act and Other Acts (418 SE), initiated by the Government, the administration of the instalment agreements in respect of land entered into upon the privatisation and return of land, and the performance of the duties of the mortgagee on behalf of the state will be consolidated to the Land Board who is the organiser of the privatisation of land. It is also expedient that all terms and conditions of mortgage contracts and the related rights and obligations are provided for in the Act proposed by the Bill and are harmonised in terms of content.
In the land reform process, more than 7000 non-reformed plots of land that cannot be used independently have emerged between immovables. The Bill is intended to amend the Land Consolidation Act and the Land Reform Act so that, in the future, non-reformed land that cannot be used independently can be joined with the immovable bordering on it by a simple land consolidation act. In such cases, non-reformed plots of land will no longer be entered in a separate register part in the land register, but the boundaries of an existing immovable will be changed.
In the interests of more expedient and rapid implementation of the land reform, in the future, no contract will be entered into in the proceedings for the constitution of the right of superficies for the benefit of owners of construction works. It is expedient to constitute all rights of superficies under administrative acts. This way, entitled persons are burdened less and their rights as owners of construction works are protected to the same extent as when entering into a contract.
According to the Bill, the Land Board will also be able to submit digitally signed applications to extinguish mortgages established in the course of the land reform where the restricted real rights established for the benefit of the Land Board no longer have legal effect or their term has expired.
With the amendments to the Acquisition of Immovables in Public Interest Act, the proceedings for the establishment of compulsory possession will be simplified. The use of the procedure of simple land consolidation upon acquisition of immovables in public interest will be extended. The access problems that have originated from the land reform can be successfully resolved by establishing compulsory possession on private roads. The advantage is that a single administrative act can determine the whole area necessary for public use and this information is visible in the land cadastre to everyone. The Bill provides for a single rate for use fees in order to simplify the determination of road tolls in public interests.
During the debate, Heiki Hepner (Isamaa), Peeter Ernits (Estonian Conservative People’s Party), Tarmo Kruusimäe (Isamaa) and Tarmo Tamm (Centre Party) took the floor.
The National Family Mediation Service Bill (438 SE), initiated by the Government, will develop a regulation of national family mediation service. It will aim to enable to conclude agreements in view of the wellbeing of children in the issues concerning the organisation of the life of the child both out-of-court and at early stages during legal proceedings when the child’s parents separate.
The Bill will regulate the procedure for the provision of the family mediation service and the mediation procedure conducted in the course thereof, and the bases for referral to family mediation. In addition, the requirements for family mediators will be provided for, and the bases for national funding of the service will be created. The Bill will provide for specifications from the current Conciliation Act, which provides a general framework for conducting the conciliation procedure but does not provide for specifications of different types of conciliation procedures.
During the debate, Kalle Grünthal (Estonian Conservative People’s Party), Priit Sibul (Isamaa), Tarmo Kruusimäe (Isamaa) and Peeter Ernits (Estonian Conservative People’s Party) took the floor.
The Faction Isamaa moved to suspend the second reading of the Bill. The result of voting: 30 votes in favour, 56 against. The motion was not supported. The second reading of the Bill was concluded.
The Bill on Amendments to the State Fees Act, the Code of Civil Procedure and Other Acts (443 SE), initiated by the Government, will increase the state fees for acts relating to courts, the business register, the non-profit associations and foundations register and the commercial pledge register, the limit for simplified procedures and expedited procedures in the matters of payment order and the limits related to the right of appeal of parties to proceedings. In addition, the terms of delivery of procedural documents and the provisions on the expedited procedure in matters of payment orders will be amended.
With the Bill, the state fees paid when applying to the court or the registration department of Tartu County Court will be brought into conformity with the economic indicators that have changed over the recent years. The amendments will update the state fees relating to acts of the court so that the state fee rates established would partially cover the increased operational costs of the court and prevent malicious or clearly non-viable legal recourse applications, and would encourage parties to disputes to seek out-of-court settlements. It will also be necessary to increase the rates for the fees for acts of the registration department to update the state fees related to the acts and to make sure the state fees established would partially cover the increased operational costs of the registration department, which in turn would allow to provide better services and to ensure the legal certainty of the data in the register.
The number of businesses in the business register has increased over the years, which has also increased the information systems administration costs. Over the next years, the information systems of the business register are planned to be developed even further to make the system more user friendly and to automate the completion of different information fields.
Court officials have observed that recourse to the court is often no longer seen as a well-considered last resort; instead, applications are made to the court without previously negotiating with the other party or considering the viability of the proceedings because inflation and increased standard of living have reduced the price of the recourse to court compared to other services. In Estonia, setting up a business is very simple compared to the rest of the world, but petitions for entries are submitted in deficient form and the checking of the petitions and the elimination of deficiencies increases the work burden in the department.
In light of the changed economic indicators, a reasonable increase in the state fee rates will allow to ensure procedural economy without jeopardising the freedom to conduct a business or the fundamental right to have recourse to court.
During the debate, Kalle Grünthal (Estonian Conservative People’s Party) and Peeter Ernits (Estonian Conservative People’s Party) took the floor.
The Bill on Amendments to the Financial Supervision Authority Act and Other Acts (422 SE), initiated by the Government, will make amendments to the current financial sector legislation. They are related to the implementation and transposition of European Union legislation.
The Bill provides for the bases according to which crowdfunding service providers will be able to start to apply for authorisation from the Financial Supervision Authority, and the Financial Supervision Authority will be able to start to exercise supervision over them. The amendment will concern only crowdfunding platforms offering opportunities to invest in businesses, and they will be able to apply for authorisation from 21 November. In addition, the Bill provides for the bases under which crowdfunding service providers will start to pay a supervision fee to the Financial Supervision Authority.
The Financial Supervision Authority will be given the authority to exercise supervision over the information on environmental sustainability and on sustainability risks that banks and other financial market participants submit.
The Bill will also specify what information will have to be provided to foreign listed companies regarding their shareholders located in Estonia, and what information to share to the Estonian shareholders of such companies.
The amendments included in the Bill will establish, among other things, the basis for the Financial Supervision Authority to exercise supervision over crowdfunding service providers, regulate the relevant responsibility and increase the threshold for offers of securities of a total consideration between one and eight million euro. The conditions for drawing up prospectuses for offer of securities will be specified and the provisions concerning the obligation to provide information and liability will be amended.
The Bill on Amendments to the Gambling Tax Act and the State Budget Act (459 SE), initiated by the Government.
Under the current Act, 47.8 per cent of the gambling tax received goes to the Cultural Endowment of Estonia, and the remaining share goes to four ministries – the Ministry of Social Affairs, the Ministry of Culture, the Ministry of Education and Research, and the Ministry of Finance. According to the Bill, ministries or particular spheres of their areas of administration, or gambling tax would no longer be set out as funding sources in the Act. In the future, the gambling tax revenue would be received in the overall national revenue and the ministries would have the flexibility to decide on the spheres as to what would be financed and to what extent. The funding model of the Cultural Endowment of Estonia is not amended under the Bill and the current procedure will remain in place.
The Bill will also amend the State Budget Act, so that local authorities would continue to have an opportunity to apply the support programme for the implementation of the development strategies of counties that is at present partially financed form gambling tax.
During the debate, Eduard Odinets (Social Democratic Party), Jüri Jaanson (Reform Party), Tarmo Kruusimäe (Isamaa), Aivar Kokk (Isamaa) and Kalle Grünthal (Estonian Conservative People’s Party) took the floor.
The Social Democratic Party Faction and the Faction Isamaa moved to suspend the second reading of the Bill. The result of voting: 37 votes in favour and 47 against. The motion was not supported. The second reading of the Bill was concluded.
The Bill on Amendments to the Value-Added Tax Act, the Bank of Estonia (Eesti Pank) Act and the Act on Amendments to the Value-Added Tax Act and the Customs Act (460 SE), initiated by the Government, will transpose the amendments to the EU Value-Added Tax Act Directive that change the taxation of electronic commerce between Member States and eliminate the tax exemption for goods of negligible value, that is, up to 22 euro, imported from outside the European Union. Consignments of a value of up to 150 euro will be taxed either at the time of import or under a special scheme. If a transferor of goods who is a business chooses the implementation of a special scheme, upon the payment for the order of goods, the person who places the order will also pay the VAT due upon the importation of goods, and the seller of the goods will declare such VAT to the tax authority on a monthly basis.
Under the Bill, in the case of distance sales (sale of goods by a business to a final customer established in another Member State), 10,000 euro per calendar year will be the uniform threshold across the European Union at which a tax obligation will arise in the other country. This means that if the supply exceeds 10,000 euro, the business of the other Member State will have to pay VAT on distance sales in the country of the consignee. Under the current procedure, every Member State establishes a limit and the limits vary by country – it is 35,000 euro in the majority of countries, including Estonia.
In addition, the Bill will provide for the possibility to adjust the VAT obligation in the case of “hopeless loans”. Under current procedure, unpaid invoices (“hopeless loans”) do not affect the amount of the seller’s supply or VAT accounting. According to an amendment, a business will have the right, upon compliance with certain requirements, to reduce its tax obligation to the extent to which buyers fail to pay for goods or services totally or partially. This will ensure more equal treatment of businesses.
The purpose of the amendment of the Customs Act is to ensure legal clarity. The right of the customs to obtain data from state databases and businesses has been provided variably in the sections of the Customs Act, which may bring about problems in the interpretation of provisions. Therefore it is necessary to harmonise the wording.
The amendments included in the Bill will specify the calculation of the taxable value of supply upon the resale of second-hand goods. As regards the imposition of VAT on commemorative coins, it will be provided that Eesti Pank as the national central bank does not pay income tax, with the exception of income tax payable on fringe benefits.
Tarmo Kruusimäe (Isamaa) took the floor during the debate.
The Bill on Amendments to the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act and Other Acts (461 SE), initiated by the Government.
With an amendment to the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act, the excise duties for electricity and certain fuels were lowered from 1 May 2020 to 30 April 2022. The rates were lowered with the aim of mitigating the effects that the crisis due to the spread of the COVID-19 virus would have for fuel consumers, and facilitating economic subsistence. Although the economy has recovered rapidly, not all sectors have achieved the pre-crisis level, and under the conditions of rising inflation it is not advisable to stimulate a rise in prices. In connection with that, the effect of the lowered rates will be extended by a year so that the lowered excise duty rates will remain in place until 30 April 2022. In addition, a gradual four-year restoration of the excise duties for fuel and electricity to the pre-crisis level will be introduced starting from 1 May 2023. The latter will allow both the private sector and consumers time to adapt to the price increase in good time.
With the amendment to the Fiscal Marking of Liquid Fuel Act, the right of oil shale mining undertakings to use diesel fuel for specific purposes will be extended by one year, until 30 April 2023, instead of the earlier term of 30 April 2022. According to the Bill, it will be permitted to use diesel fuel for specific purposes on the territories of oil shale mines and open cast mines, in open cast mine technology and equipment, including in mining machinery, and the machinery used for transporting oil shale and ash. The extension will support the competitiveness of oil shale mining undertakings.
Amendments included in the Bill will amend the Atmospheric Air Protection Act by adding a provision that will allow to provide in the conditions of and procedure for the use of revenues generated from the auctioning of allowances that the local authority performs the tasks related to the proceedings relating to the application for supports and the organisation of the grant of supports.
The Bill on Amendments to the State Budget Act (436 SE), initiated by the Government, will increase the detail and transparency of the state budget, optimise the processes of drawing up the state budget and the state budget strategy, and lay the basis for the establishment of the long-term development strategy for the state. The Bill is linked to the state budget for 2022.
The Bill will amend the provisions concerning the division of the state budget, which will increase the detail of the activity-based view of the annual Act on the state budget. According to the motion, the level of detail will increase by two degrees, to the activities of the programmes. Instead of the 38 programmes in the budget strategy for 2022–2025, the activities of a total of 240 programmes would be specified in the budgets for areas of government for 2022. As regards investments, the items with a volume of 10 million or more in the specific year will be detailed out in the Act. Other economic content will continue to be described in the explanatory memorandum to the state budget.
The budget will adjust the flexibility rules of the state budget, which will enable to maintain a balance in the decision-making competence of the legislative and executive powers when the state budget becomes more detailed. Starting with the state budget for 2022, a textual section of the annual state budget will set out the extent to which the Riigikogu will give the minister an opportunity to amend the budget during use. The State Budget for 2022 Bill is planned to provide for the possibility to transfer funds to the extent of 25 per cent when the budget of the programme activity is up to four million euro. In the range from four million to 200 million, the growth of flexibility will be linear and it will increase from one million to five million, and will remain at that level. In the case of investments, it will be permitted to transfer up to 20 per cent of the relevant volume between the budget lines.
The resource cost of the process for the state budget and the budget strategy will also be cut by reducing the number of annual Government-level discussions on the content and details of the budget from two to one and transferring the preparation of the state budget strategy / state budget documents to autumn. The submission of a stability programme with budget policy directions (budget position, debt burden, and revenue and expenditure levels) to the European Commission in spring will continue.
The Bill will formulate the long-term national development strategy as a new strategic development document that will create a legal basis for the comprehensive strategy for policies “Estonia 2035”.
According to the Bill on Amendments to the Maritime Safety Act (470 SE), initiated by the Government, documents proving qualifications issued in EU Member States and third countries will begin to be recognised on vessels operating in Estonian inland waters. The Bill will transpose a relevant EU directive harmonising the requirements for the training and professional qualifications of crew members working on inland waterway vessels.
Diplomas and professional certificates valid nationally will continue to be issued pursuant to the current procedure as no transportation of goods is carried out on Estonian navigable inland waterways. Nor does Estonia have inland waterways that would allow cross-border transport or passenger transport with another EU Member State. The directive does not apply to the activities of leisure, sports, fishing, research and the performance of public administration functions.
The planned date of entry into force of the Act is 17 January 2022, simultaneously with the obligation to transpose the requirements of the directive into national law.
The sitting ended at 10.54 p.m.
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