Ansip proposes to lower unemployment insurance tax rate

TALLINN - Estonian Prime Minister Andrus Ansip said that he submitted at the government coalition council meeting on Tuesday a proposal to lower the unemployment insurance tax rate starting 2013, Eesti Paevaleht writes.

According to the plan submitted by Ansip, the tax rate that is currently at the maximum or 4.2percent level, should be reduced to 3percent next year. This means a rather significant easing of tax burden for all employees and also entrepreneurs.

"Unemployment insurance tax rate has to be reduced. We have agreed upon that when forming the coalition. Based on the Unemployment Insurance Fund reserves volume and the forecast cash flows of the Unemployment Insurance Fund, it is reasonable to reduce the combined tax rate from 4.2percent to 3percent starting Jan. 1, 2012," Ansip told Postimees Online, adding that trade unions had demanded the cut from the start of this year, which is impossible, and certainly not retroactively either.

Eesti Paevaleht wrote that the proposal is four times bigger than the presumed tax rate reduction according to the government's official plans so far; for example in the finance ministry's latest economic forecast from summer 2011, only a 0.3 percentage points cut of the rate was presumed from 2013.

The prime minister did not say directly that the plan of cutting unemployment insurance tax rate in a major way is connected to the demands of strikes of teachers and trade unions this week, but used the opportunity to respond to them, Eesti Paevaleht says.