Priit Toobal, member of the Centre Party, says that the prime minister Andrus Ansip is opposing the proposal to introduce progressive taxation because he is still blinded by Estonia's success story, is enjoying the economic crisis and is not even trying to find a way out.
According to Toobal, Ansip is like a sadomasochist since he enjoys how 150,000 people are jobless, how one in every five residents live in poverty, how young mothers are forced to raise their children alone since fathers are working in Finland or in UK, etc.
The politician said that the progressive tax initiative proposed by the Centre Party acts as the counterweight to the plans of the ruling coalition to impose further budget cuts. "In addition, it is also an alternative to discount sale of state assets which Ansip's cabinet ministers are also actively pursuing. Progressive income tax is a lifeline," he said.
"But, frankly, I could not care less whether Ansip likes the idea of progressive taxation or not since it is the Estonian people who need it and not our stubborn prime minister. It was clear a long time ago that if the public likes it, it is not liked by Ansip and vice versa," said Toobal.
BBN reported on July 15 that the Estonian government had rejected another proposal made by the opposition Centre Party to introduce progressive taxation in Estonia starting from January 2011.
Centre Party's had modified its initial proposal to start taxing personal annual income in excess of 300,000 kroons with a tax rate of 33% and has, instead, proposed a three-tier system.
PM Andrus Ansip said at a government press conference today that his government would never discuss proposals to introduce progressive taxation. "We will not support it even if they propose it another five or even fifteen times," said Ansip.
Under the system proposed by the Centre Party, Estonia would have three individual income tax rates 18, 26 and 33% and keep the current non-taxable income level intact. At present all private persons pay income tax at a flat rate of 21%.
According to the Centre Party, 18% tax rate would have applied on income that is less or equal to 70,000 kroons a year, i.e. up to 5,833 kroons a month.
Income between 70,001 and 250,000 kroons a year (5,833 to 20,833 kroons a month) would have been taxed at 26% and income starting from 250,001 kroons a year (20,833 kroons a month) would have been taxed at 33%.
By the proposed formula, the non-taxable amount would have been deducted from the taxpayer's income and the first 70,000 kroons in income would have been taxed at 18%. If taxable income exceeds 70,000 kroons a year, the following tax rates would have applied.
The new system would benefit especially people who earn less than 12,000 kroons a month.
The level between the 1st and 2nd tax rate would have been at around 11,000 kroons and from the 2nd to 3rd tax rate at around 25,000 kroons a month in income.
The Centre Party has calculated that the new system would increase income tax receipts to about 3.5 billion kroons.
The bill is likely to be tabled to MPs only in the autumn since the spring session is about to end.
The ruling coalition has rejected similar proposals also in October 2009 and in May 2010, saying that the introduction of progressive taxation would breach the coalition agreement.