OREANDA-NEWS. An agreement was reached during today’s cabinet meeting on the most significant objectives of the Government such as decreasing labour-related taxes, increasing child benefits and the covering sources for defence expenditure.

Today, the Government continued the discussion on the state budget strategy, establishing the financial framework for the next four years (2016–2019). The objective is to keep the structural budget position of the general government in surplus every year.

During the cabinet meeting, it was decided to implement the social tax rate change earlier to decrease labour-related taxes. The changes will be implemented in the beginning of 2017 in two stages – half in 2017 and one percent in 2018. This approach will decrease the tax burden at a faster pace and decrease the administrative burden of entrepreneurs.

In addition, the Government decided to allocate 20 million euros next year to construct the eastern border. The construction of the eastern border will begin from the mainland border by establishing a modern technical surveillance system and marking the border with border inspection posts, signs, fences and other essentials.

Regarding the fast-paced taxation of harmful consumption discussed at several cabinet meetings, the Government decided on increasing the alcohol excise duty by 5 percent in addition to the existing 10 percent in February 2016. The tobacco excise duty will be increased by 3 percent in 2016–2018 in addition to the existing 5 percent rate. Both alcohol and tobacco excise duty will be increases by 10 percent in 2019 and 2020. With these changes, the Government aims at reducing harmful consumption and improving the balance of the budget.

Increasing the alcohol and tobacco excise duty at a faster pace will allow cancelling the fuel excise duty increase in 2019. The fuel excise duty will increase from 2016 – diesel fuel by 14 percent and petrol by 10 percent. During the following two years (2017 and 2018), the fuel excise duty will increase by an additional 10 percent.

Upon discussing the abolition of value added tax incentives for accommodation establishments, the impact on the tourism sector was analysed and a final decision was made according to which, the value added tax for accommodation establishments shall be increased by 5 percent from 2017, totalling up to 14 percent. It was also decided to seek opportunities for promoting the tourism sector, especially rural tourism.

In addition, the Government decided to increase the daily rates for misdemeanour fines to 10 euros instead of the current 4 euros. The daily rates of fines were last changed 10 years ago.

The basis for the Government’s choices regarding covering sources is the principle of taxing harmful consumption instead of income taxing, primarily taxing activities in which people have a choice (increasing alcohol and tobacco excise duty and the fine level) and reducing tax incentives.

The Government’s objectives for the following four years are maintaining Estonian military defence expenses at at least 2 % of the GDP, increasing child benefits, decreasing labour-related taxes and increasing the efficiency of the state.