Synopsis
On March 24, Estonia's ruling coalition announced plans to enhance national defense by boosting military spending to five percent of GDP. The coalition, led by the Reform Party and Eesti 200, also seeks to remove a corporate income tax while increasing other taxes. Prime Minister Kristen Michal is set to present new cabinet members as part of the government reshuffle.Key Takeaways
- Estonia's defense budget to rise to five percent of GDP.
- Coalition led by Reform Party and Eesti 200.
- Corporate income tax to be abolished.
- New taxation measures introduced.
- Government reshuffle following coalition collapse.
Tallinn, March 24 (NationPress) The governing coalition of Estonia has made a commitment to enhance national security by increasing military funding and bolstering NATO's significance in the nation's defense strategy.
The new government's dedication was detailed in a coalition agreement signed on Monday. It also calls on Europe and its partners to elevate defense spending, as indicated by a government press release.
The coalition, led by the Reform Party and Eesti 200, aims to elevate Estonia's defense budget to five percent of GDP, equivalent to two billion euros (approximately 2.2 billion US dollars) annually.
Regarding taxation, the agreement proposes the removal of the two percent corporate income tax labeled as a 'security tax', while personal income tax and turnover tax will be increased by two percentage points.
Prime Minister Kristen Michal is scheduled to introduce the new cabinet members to the President, including several new ministers from both parties.
This government reshuffle follows the collapse of the three-party ruling coalition earlier this month, as the Reform Party and Eesti 200, which control 52 of the 101 seats in parliament, opted to continue as a two-party government without the Social Democrats.
Two phrases explained the collapse of the coalition: 'so that the Reform Party and Eesti 200 can implement right-wing policies,' remarked Social Democratic Party Chairman Lauri Laanemets after a coalition council meeting.
He pointed out the Reform Party's low approval ratings as another factor contributing to the coalition's breakdown.
The Social Democrat's leader described their exclusion from the government as 'a stab in the back.'
Prime Minister Michal (of the Reform Party) later stated at a press conference that the new coalition, consisting solely of the Reform Party and Eesti 200, plans to abolish the corporate income tax set to take effect on January 1, 2026.
'Our primary objective is to revoke various tax hikes, including the corporate income tax. We will draft legislation for this purpose,' Michal explained during the press briefing regarding the coalition's changes.
'Additionally, we aspire to lessen the tax burden on individuals. The income tax was set to be implemented on the first euro from next year, but that will not take place. Income tax will rise to 24 percent, but it will not be applied from the first euro,' Michal stated.
The Estonian government, formed by the ruling coalition consisting of the Reform Party, the Social Democratic Party, and Eesti 200, was officially inaugurated in July 2024.
