TALLINN - The four parties in Estonia's coalition talks have reached an agreement on tax policy that largely preserves the current business-friendly tax regimen but that analysts have criticized as detrimental to the nation's already booming economy. According to reports, the four potential partners 's the Reform Party, the IRL union, the Social Democrats and the Greens 's agreed on a range of tax rates largely beneficial to Estonians.
Income tax will be reduced to 18 percent over the next four years, while the tax-free minimum will be raised to 3,000 kroons (192 euros). In addition, a tax exemption on a family's first child is to be introduced in the near future.
The parties also agreed to double pensions in four years.
As for taxes on reinvested profits, the four parties agreed that it should remain zero until 2009, when Estonia will phase in an EU directive.
Analysts criticized the agreement, saying it would spark further consumption in the Baltic state, which is already struggling with high inflation.
