The Right slam government's decision to raise taxes

TALLINN - The Right, a party with no seats in the Estonian parliament, have declared their resolute opposition to the VAT increase set to take effect on July 1, arguing that Estonian residents are already struggling financially and that it is high time to cut central government spending instead.

"In a European comparison, the purchasing power of Estonian residents ranks second to last -- only Hungarians are worse off. Our people can afford less with their wages than almost anywhere else in Europe," said Andrus Kaarelson, a board member of The Right.

This uncomfortable truth, according to Kaarelson, is revealed in a recent survey comparing residents' purchasing power.

"If a liter of milk costs the same in Estonia as in Germany, but our wages are several times lower, then poverty is not just a statistical illusion -- it's a daily reality at the dinner table," he said in a press release.

Kaarelson argued that consumption taxes like VAT are especially harmful, as the increase to 24 percent will hit low-income individuals the hardest. It is a regressive tax -- placing a proportionally greater burden on those who already earn less. In addition to VAT, the excise duty on gasoline will also rise by 5 percent on July 1, which will increase the price of gasoline by 6.1 cents per liter. This fuel price hike, as a key input cost, will drive up the prices of all other goods and services. According to The Right, this is a new and highly damaging driver of inflation in Estonia, which already has the highest inflation rate in Europe.

"The Reform Party's tax policy is making the poor poorer still, while the state itself does nothing to cut its own spending. This is the wrong path," said Kaarelson.

The Right propose a policy that gives people more freedom and boosts the economy.

"VAT should be reduced to 20 percent, and personal income tax to 18 percent. The car tax, excise hikes, and other consumption tax increases must be reversed," the party suggests.

In their view, the necessary funding should come from cutting the state's bloated expenditures. The Ministry of Social Affairs' area of governance already accounts for 41 percent of the state budget. In 2025 alone, automatic indexation will increase spending by nearly 500 million euros -- half of that due to automatic pension increases, and the rest from the growth of various benefits.

They estimate that the government could find another half a billion euros by delaying its own costly promise to abolish the so-called income tax hump. Abolishing it would reduce the budget deficit by more than 550 million euros per year from 2026 and create room for tax relief across society.

"Abolishing the income tax hump may be the right step in the long run, but not at a time when the Estonian economy is stagnating and competitiveness is declining," Kaarelson said.