Estonian govt approves EUR 802.9 mln supplementary budget for 2022

  • 2022-04-26
  • BNS/TBT Staff

TALLINN - The Estonian government at a remote sitting on Tuesday approved this year's supplementary budget, the total volume of expenses, investments and financing activities in which amounts to 802.9 million euros.

The volume of decisions made by the government in the supplementary budget totals 732 million euros, which will be supplemented by changes in expenditures depending automatically on tax effects and revenues, as a result of which the total volume of expenses, investments and financing activities will be 802.9 million euros, spokespeople for the government said.

247.6 million euros will be allocated for strengthening broad-based security and resilience, 257.3 million euros for strengthening energy security and 242.7 million euros for covering the primary costs relating to war refugees.

Before the decision to draw up a supplementary budget, resources for strengthening crisis preparedness were allocated from the government's reserve. With the supplementary budget, the reserve will be replenished and the sums carried over from last year's budget will bring the reserve to 100 million euros.

The supplementary budget will account for almost 2.2 percent of the GDP estimated in the Finance Ministry's spring forecast for 2022. The impact of the supplementary budget on the fiscal position will be somewhat smaller because the use of support will partially bring the funds back to the state through tax revenue. Overall, the impact on the government sector's nominal position will be 627 million euros, or 1.9 percent of GDP.

The state will need to fund the measures from its liquidity reserve and additional debt instruments, such as short and long-term bond issues. The support measures and the resulting negative cash flow will not exceed the established 7.2-billion cap on outstanding sovereign debt.

The factors reducing revenues will include the lowering of VAT rate on media publications from 9 percent to 5 percent, which is necessary under the present circumstances of information war, and the lowering of excise duty on fiscally marked diesel to the minimum level allowed in the EU, which is important for ensuring food security.

The government has also approved and will submit to the parliament three bills linked to the supplementary budget.

Firstly, the government has approved and will send to the parliament a bill seeking to amend the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act whereby the excise duty on fiscally marked diesel would be lowered to the minimum level allowed in the EU, which is 21 euros per 1,000 liters. The current rate of excise duty is 100 euros per 1,000 liters.

Fiscally marked diesel can be used in agriculture, commercial fishing, and, until April 30, 2023, also in oil shale mining. The wholesale price of fiscally market diesel has grown close to 85 percent compared with April 2021. As a result of the amendment, the wholesale price could decline by up to 9.48 cents per liter, or up to 7 percent.

Secondly, the government has approved a bill aimed at amending the Value-Added Tax Act to reduce the VAT rate on media publications from 9 percent to 5 percent starting from Aug. 1. The amendment would support the availability of independent professional Estonian media amid the information war that has emerged as part of the war in Ukraine.

Thirdly, the government has approved a bill geared at amending the Social Welfare Act and Health Services Organization Act. The amendments would enable to add home loan repayments to the existing housing costs provided by the Social Welfare Act when calculating the subsistence benefit. The change is planned to take effect from July 1.

An option would also be created under the amendments to pay one-off support to a pensioner living alone if they live with a person who has been granted temporary protection.

The amendment would also provide a legal basis for the introduction of measures in case of an emergency regarding mass immigration of refugees or treatment of people who have been injured in the war.