Estonian MP: Last year's good tax receipts not only thanks to good work of govt

TALLINN – Aivar Soerd, member of the economic affairs committee of the Estonian parliament, said that the 111 percent receipt of tax revenue in last year's supplementary budget cannot be attributed simply to the good work of the government.

"Former finance minister Martin Helme has already started to boast that the right decisions of the previous government are behind the good tax receipts," Soerd wrote on social media. "This is an exaggeration, because there are many different factors behind good tax receipts. On Feb. 11, the European Commission published its winter economic forecast, according to which Estonia's GDP fell by an estimated 3 percent last year, which was indeed less than in most member states."

"In Estonia, private consumption and exports remained resilient to the crisis. Exports decreased by only one percent last year. Given the commodity groups on which export growth was based, justifying strong export performance with government crisis measures alone is clearly far-fetched," Soerd said.

"Secondly, compared to other member states, the restrictions imposed by Estonia were very lenient. The companies continued to operate, the sectors that mainly suffered were Horeca and tourism. Of the government's measures, wage support measures worked well. The government sector also did well, where jobs were not reduced and wages were not cut, as in some of the more affected private sectors," he added.

"Letting the budget go into the negative will rather support the economy when investments from the state budget increase during the crisis years. There are no data for the previous year yet, but since there was only a handful of additional investments in the supplementary budget of the previous year, the state budget investments likely remained more or less at the level of previous years last year," Soerd said. "Wage subsidies may indeed have boosted private consumption, but the better performance last year was mainly due to looser restrictions."

On Friday, the Ministry of Finance announced that the tax revenue forecast for the supplementary budget adopted in spring 2020 was fulfilled by 111 percent. According to Helme, this shows that putting the state budget in the red was the right decision, and those who claim in retrospect that the budget could have been handled more conservatively are not right, public broadcaster ERR reported.

"Saying in hindsight that it would not have been necessary to inflate the budget because everything went well is being guided by the wrong starting point. It went well because we made the right decisions with the budget. Through this alone, we put more than 200 million euros in people's pockets from the reserves of the Unemployment Insurance Fund through labor market measures. It was a big deficit for the budget balance, but it helped keep people in jobs, consumption and both labor tax and VAT receipts. And these are the numbers that kept the economy and tax revenue afloat," Helme told ERR.

"The momentum that we gave in the spring with the supplementary budget, the current government is also still moving along with this momentum," Helme added.