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The Riigikogu concluded the first reading of the State Budget for 2022 Bill. The deadline for submission of motions to amend is 3 November.

According to the State Budget for 2022 Bill (464 SE), initiated by the Government, the volume of the revenue of the state budget for 2022 is 13.13 billion, the volume of expenditure is 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 of GDP.

Minister of Finance Keit Pentus-Rosimannus said that, despite all the hardships of the coronavirus crisis, Estonia had collected itself quickly in terms of economy, and the economy was on its way to recovery after the steep fall of 2020.

In the words of Minister of Finance, the Bill on next year’s state budget will ease the consequences of the crisis that are still playing out. “However, the state budget for 2022 focuses above all on Estonia’s long-term interests. There is still a lot of uncertainty in the economic environment surrounding us. Growth predictions are based on the expectations that vaccination will kickstart and that no blanket restrictions restraining people and economy will have to be endured anymore,” Pentus-Rosimannus said.

She compared the economic growth in various countries and explained that, in the EU, the Estonian economy was one of the quickest to have recovered. “In the second quarter of this year, our GDP exceeded the pre-crisis level by as much as 6.7 per cent.”

The Minister of Finance explained that salary growth had slowed down significantly during the emergency situation last year, but incomes were growing strongly again. The private sector is driving the salary growth, and the salary growth will reach 7 per cent this year and will remain at over five per cent annually in the next four years. With better receipt of social tax, the average old-age pension will increase by about eight per cent next year, and so pension will amount to 590 euro in the coming year.

The Ministry of Finance forecasts the growth of Estonian GDP to be four per cent in 2022. The total volume of economy will amount to 32.4 billion euro next year. “People’s incomes will grow, tax receipts will improve, and the most sensitive sectors that are crucial for the future will get ample support. Public finances will also improve. The growth of expenditure is under control, deficit will decrease, and we are on our way to striking a balance between revenue and expenditure,” the minister said.

“Estonia’s long-term interest is that the average income, the average salary in Estonia would rank at the top in the European Union, and the average pension would one day be equal to at least 40 per cent of the average salary. Next year, teachers’ salaries will rise by 7.3 per cent, the salaries of doctors and nurses will rise by 8 per cent, the minimum salary rate for cultural professionals with higher education by 7.5 per cent, the minimum salary rate for rescue workers by 12 per cent, the minimum salary rate for frontline police officers by 5 per cent and, as I said, for pension-age people, pensions will rise by about 8 per cent,” Pentus-Rosimannus explained.

Estonia’s long-term interest is also to be among winners in international economic competition, to be an actor creating high value in the new international division of labour. A green and digital technology revolution is taking place in the global economy. “In view of a more secure future of our people, next year we will invest 190 million euro into the green and digital transition from the European aid for the next period. However, looking beyond one year only, in the coming years, the green and digital transition in Estonia will be financed by 2.2 billion euro from European funds. I will take this opportunity to thank the previous Government who started this programme,” the minister said.

“Keeping expenditure under control will in any case require choices from politicians and will require efforts as well. Particularly under the conditions of a growing economy, by the way. We have kept this in mind with the Government when drawing up the budget for 2022. The state budget revenue will increase by 17 per cent next year, and the expenditure will grow by 3 per cent next year. While as recently as a year ago, the structural deficit was projected at 4.9 per cent by 2022, we will achieve a 2.6 per cent deficit with the next year’s budget. This is a position that is better by 739 million,” the Minister of Finance said. In her words, there is still a long way to go before we can make revenues and expenditure match in Estonia. “With your help, however, we will be taking a long step towards sound public finances, which is in Estonia’s long-term interests.”

“A short-term concern for Estonia, as for the whole world at the moment, is the health crisis. With a view to overcoming the crisis and repairing the damages caused by the crisis, we will contribute directly over 150 million euro next year. Among other things, this money will go towards bridging the learning gaps caused by the intermittent school closures due to COVID-19 – 12 million euro. Over 38 million euro will go towards the organisation of vaccination, and over 19 million euro towards testing. And for the first time, we are also dedicating 3 million euro from the state budget to systematically pay attention to mental health issues,” the Minister of Finance explained.

Chairman of the Finance Committee Erki Savisaar gave an overview of the sectoral discussions the Committee had held with ministers. Besides them, Chair of the Fiscal Council Raul Eamets had participated in the meeting of the committee and presented the Fiscal Council’s opinion of the economic forecast, which also serves as a basis for the budget.

During the debate, representatives of factions Kersti Sarapuu (Centre Party), Riina Sikkut (Social Democratic Party), Mart Helme (Estonian Conservative People’s Party), Mart Võrklaev (Reform Party) and Aivar Kokk (Isamaa) took the floor and presented their positions and opinions on the next year’s state budget Bill.

 The Riigikogu passed an Act

79 members of the Riigikogu voted in favour of passing the Act on the Ratification of the Agreement on Termination of the Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Estonia for the Promotion and Protection of Investments (401 SE), initiated by the Government.

In 2018, the Court of Justice made a decision that put an end to the years-long dispute about whether, under bilateral agreements on the promotion and protection of investments, EU Member States can have recourse to arbitral tribunals for identification of violation. The Court found that that was not in compliance with EU law. After that, Member States, including the United Kingdom, declared that all investment protection treaties within the EU would be terminated jointly by a multilateral agreement or under bilateral agreements. The Agreement for the Termination of Bilateral Investment Treaties between the EU Member States was signed on 5 May 2020 and it entered into force on 29 August 2020. Before that, Estonia had terminated the bilateral agreements on the promotion and reciprocal protection of investments with Italy, Czechia, Denmark and Poland.

The United Kingdom decided not to join the EU joint agreement, and decided to terminate the bilateral investment treaties with EU countries bilaterally. Austria, Sweden and Finland did the same. Estonia has ratified bilateral agreements with Sweden and Finland, and the agreement with Austria is waiting to be signed.

The need to terminate the treaties arises from EU legislation according to which all investors from EU Member States must be treated equally. The agreements for the promotion and protection of investments concern areas that are regulated by EU law – in particular the freedom of establishment and the free movement of capital and payments. Thus, the protection of investments and equal treatment of investors is regulated by EU law, and there is no need for bilateral agreements between member states.

Since the United Kingdom is no longer a member of the EU, equal treatment of investors from the EU and the United Kingdom is now regulated by the Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part.

The Riigikogu concluded the first reading of seven other Bills

The Bill on Amendments to the Police and Border Guard Act (408 SE), initiated by the Government.

The Bill is intended to protect information from becoming available to people who could use the information for criminal purposes. With this in view, in the Police and Border Guard Act, the information on the manner of the processing of the data of the police database and the technological solutions and security measures of the database will be subject to a restriction on access for a period longer than that provided for in the current regulation of the Public Information Act. Under the Public Information Act, the term for restriction on access is up to five years and it may be extended by up to five years, but the Bill provides for the opportunity to extend the term for restriction on access for a total of 30 years.

Kert Kingo (Estonian Conservative People’s Party) took the floor during the debate.

The Bill on Amendments to the Code of Misdemeanour Procedure, the Traffic Act and the Taxation Act (457 SE), initiated by the Government.

The purpose of the amendments is to increase road safety by granting local governments an opportunity to install automated traffic supervision systems in their administrative territories in cooperation with the state. 50 per cent of the proceeds from fines received for the violations detected with such systems will be transferred to local government budgets. With the money allocated, local governments will be able to cover for example the costs of the procurement and management of automated traffic supervision systems or to procure new equipment, or to use the proceeds from the fines in other ways to improve local road safety.

According to the Bill, the amount used to calculate the amount of a fine for exceeding the speed limit in written caution proceedings and in alternative proceedings will increase from the current three euro to five euro. On the basis of this amendment, the rate for the maximum cautionary fine, that is, the fine imposed with the automated traffic supervision system, will be increased from 190 euro to 300 euro and the maximum rate for the deterrent fine from 80 euro 100 euro in the Code of Misdemeanour Procedure. In addition, the Bill provides for amendments to the Code of Misdemeanour Procedure and the Taxation Act, in order to create more effective opportunities for the Tax and Customs Board to collect the deterrent fines imposed in the course of the alternative proceedings applied from 1 January 2019. The amendment will allow the deterrent fines imposed by the Tax and Customs Board to be collected without an enforcement agent.

During the debate, Tarmo Kruusimäe (Isamaa) and Henn Põlluaas (Estonian Conservative People’s Party) took the floor.

Faction Isamaa moved to reject the Bill at the first reading. The result of voting: 19 votes in favour and 49 against. The motion was not supported. The first reading of the Bill was concluded.

The Bill on Amendments to the State Budget Act (436 SE), initiated by the Government.

The Bill 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. The activity-based detail will increase by six times. 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 planning 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 of 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, 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”.

Aivar Kokk (Isamaa) took the floor during the debate.

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 will no longer be set out as funding sources in the Act. In the future, the gambling tax revenue will be received in the overall national revenue and the ministries will have the flexibility to decide on the spheres as to what will 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.

According to the decisions made within the framework of the national budget strategy for 2022–2025, the funds allocated to ministries under the state budget in 2022–2025 will remain at the level fixed in the spring forecast of 2021 and will not change automatically with an increase or decrease in tax receipt.

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, Heiki Hepner (Isamaa) and Eduard Odinets (Social Democratic Party) took the floor.

The Faction Isamaa and the Social Democratic Party Faction moved to reject the Bill at the first reading. The result of voting: 21 votes in favour and 45 against. The motion was not supported. The first reading of the Bill was concluded.

The Bill on Amendments to the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act (458 SE), initiated by the Government, will transpose EU directives on excise duties.

The main amendments arising from the directive regulating the general arrangement for the payment of excise duty are connected with the establishment of the requirement of electronic delivery note for excise goods across the EU. The Bill provides that, upon transport of goods subject to excise duty to other Member States, an electronic delivery note will have to be filled in the Excise Movement and Control System (EMCS).

EMCS is an EU-wide electronic system for delivery notes that is used to formalise delivery notes for excise goods on which excise duty has not been paid upon transport between Member States. The EU is also extending this system to formalise delivery notes for excise goods that are subject to excise duty in the place of dispatch and that are transported to other Member States. Today, Estonian businesses are using the national electronic system for delivery notes SADHES. In the future, delivery notes will have to be processed on EMCS.

For seamless export, in the future, it will also be possible to use the external transit procedure in addition to the export customs procedure. Under the current law, excise goods are deemed to have been exported as of the moment when they are taken out of the EU excise territory. According to an amendment, goods can also be deemed to have been exported from the moment of the application of the external transit procedure, that is, already before the goods are physically taken out of the EU excise territory. Such an amendment will allow economic operators to save resources on account of excise guarantees. Upon application of the external transit procedure, taxes will be ensured under customs rules that also cover the excise duty.

On the basis of the amendments to the directive regulating specific issues relating to alcohol, the Bill will update the codes of the combined nomenclature used to describe alcohol products, specify the principles for exemption upon the use of alcohol for cleaning manufacturing equipment, and set out the principles how economic operators will prove their status as small undertakings to public authorities of other countries.

The costs of the implementation of the Act will be connected with IT-development activities which will cost around 200 000 euro. The IT development costs will be covered from the budget of the Tax and Customs Board for 2022, and the annual maintenance costs of 20 000 euro will be applied for within the framework of the state budget strategy for the year preceding the costs.

The Bill on Amendments to the Value Added Tax Act (460 SE), initiated by the Government.

The Bill will provide for an exemption from VAT from 1 January where goods imported and goods and services purchased by the European Commission or by an agency or body established under Union law are used in response to the ongoing COVID-19 pandemic. EU agencies and bodies are international organisations to which the Protocol on the Privileges and Immunities of the European Union applies. The exemption is granted for example in situations where goods and services are purchased by Union bodies in order to respond to the emergency situation posed by the COVID-19 pandemic, and such purchases are made available for free to Member States or third parties.

From 1 July, a VAT exemption similar to the exemption provided for the defence efforts of the armed forces of any State party to the North Atlantic Treaty will be provided for defence efforts of the European Union. NATO defence efforts have been covered by the VAT Directive since 1977. Up until now, however, the directive has included no tax relief for the transfer and import of goods and the supply of services related to EU defence efforts.

It will also be provided that, from 1 July, tax exemption will no longer apply to commemorative coins, including investment coins, except for investment gold. In the future, the price of commemorative coins will be higher by VAT for natural persons who acquire commemorative coins.

An amendment to be enforced from 1 July will also set out that the supply of the transport service for the export or import of goods and for the transport of non-Union goods, and the services related to such transport will be subject to a zero per cent VAT rate only when the service is provided directly to the consignor or consignee.

The principle for the creation of tax liability under the special arrangement for cash basis VAT accounting will also be amended from 1 July. If, for reasons independent of the taxable person that uses special arrangement, goods transferred or services provided are not paid for within the two calendar months following the date on which the goods were dispatched or made available or the services were provided, then, differently from the current procedure, the person will not have to declare or pay VAT on such supply. At the same time, a taxable person who fails to pay for goods or a service to a taxable person that uses special arrangement will not be entitled to deduct input VAT on such a transaction until the invoice is paid. Thus, transfer of goods and provision of services will create no tax obligation for a person that uses the special arrangement if the goods or services have not been paid for.

The Bill on Amendments to the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act and the Fiscal Marking of Liquid Fuel Act (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 of the crisis due to the spread of the COVID-19 virus 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.

During the debate, Aivar Kokk (Isamaa) and Aivar Sõerd (Reform Party) took the floor.

The sitting ended at 8.55 p.m.

Verbatim record of the sitting (in Estonian)

Video recordings of the sittings of the Riigikogu can be viewed at

(Please note that the recording will be uploaded with a delay.)

Riigikogu Press Service
Gunnar Paal,
6316351, 51902837