TALLINN - Prime Minister Juhan Parts last week confirmed that Res Publica might postpone a much anticipated income-tax cut, one of the key electoral promises slated in the coalition agreement of March 2003.
In an interview with the national Eesti Raadio station on Nov.12, Parts said that Res Publica had been discussing plans to delay the income-tax cut and instead increase the tax-free minimum. No concrete decisions regarding this topic, however, have yet been made.
"In the future we cannot remain within the coalition agreement framework approved two years ago. Both the further income-tax cut and the tax-free minimum increase are ideas worth carrying out," stressed Parts.
The gradual reduction of the income-tax rate from 26 percent to 20 percent between 2003 and 2006 was one of the coalition agreement's central platforms and had been actively promoted by the Reform Party. It was linked with Res Publica's gradual increase of the tax-free minimum in the three-party coalition agreement with the People's Union following last year's parliamentary election.
Previously the government agreed that the tax rate would be cut by 2 percent in 2005, following an ultimatum from the People's Union to carry out the first two-percent cut in 2004.
Vice chairman of the Reform Party and Minister of Economic Affairs and Communications Andrus Ansip admitted that news on Res Publica's possible back-out came as a surprise to him.
"No revision of the personal income-tax reduction plan is on the agenda," he told The Baltic Times. "The coalition agreement is valid, and no requests to amend it have been filed." (See page 18 for interview.)
Vilja Savisaar, chairwoman of the Center Party faction in Parliament and number two in the Center Party (after her spouse Edgar Savisaar), called Parts' comments on the possible tax-cut program reversal a "typical trick from Res Publica's arsenal used to put pressure on the Reform Party" and force the coalition partner to merge.
In January the heads of the Reform Party and Res Publica signed a secret memo on a possible merger of the two right-wing parties in order to forge a strong right-wing bloc for the 2007 general elections. However, ever since the memo became public two weeks ago, leading Reformist politicians have been skeptical about combining forces with Res Publica due to the latter's low rating.
Indeed, on the one hand the ruling coalition's grasp on power seemed increasingly tenuous. Last week the People's Union, the junior partner in the coalition, held a meeting with the Social Democratic Party and the Social Liberals Parliament group - all three are left-of-center forces - regarding possible cooperation at the 2005 local elections and a grand merger for the 2007 elections. The meeting was widely seen as a countermove to a merger of right-wing forces.
In a statement approved at the leftists' meeting in Parnu, the People's Party chairman Villu Reiljan called for "combining the forces of the social-thinking parties." Although leaders of both the Social Democratic Party and the Social Liberals parliamentary group said they were ready to cooperate with the People's Union, they dismissed the option of an early merger.
Political analysts noted that should right-wing and left-wing parties form alliances before the next elections, the political landscape would become much clearer for the average Estonian voter.
Savisaar, however, said it was too early to talk about a possible alliance between the left-center parties. "What I have seen so far is [Villu] Reiljan's address. I do not know whether it has reached or will reach anybody. I am now waiting for the actual moves of the parties concerned [in the address]," said Vilja Savisaar, who heads the largest opposition force in Parliament.
According to her, the decisions supported by the People's Union in Parliament have long ceased to resemble left-wing politics. For instance, the People's Union has backed the package-excise tax, the increase of the alcohol-excise tax and the income-tax cut.
"There are no clearly left-wing or social democratic parties in Estonia. What we see [in the platforms of the People's Union and the Social Democratic Party] is a slightly amended program of the Center Party," said Savisaar.
Agu Uudelepp, spokesman for the People's Union, said his party sees cooperation between the coalition parties as "smooth," and that there are no major problems.
"At the moment, the People's Party does not see any reason why the coalition should not stay intact until the end of its term," said Uudelepp, adding that news about the possible merger of Res Publica and the Reform Party did not irritate the People's Union. "Clarification of the party landscape is welcome, and we support the idea that people with the same ideology should work together."
The People's Party will stay calm until the income-tax rate reductions turn the SKP balance-budget negative, Uudelepp said.