The bill exempting homeowners, as opposed to property investors, from the land tax, was finally passed in Parliament after its second reading had dragged on for three sessions.
The amendment to Land Tax Act - exempting 0.15 hectares of land in settled areas and 2 hectares in the open countryside from the tax - was passed 54 to 39, with the divide running more or less along the power distribution line between the governing Reform-IRL coalition and the opposition.
Attempting to filibuster the second reading at all costs, the opposition disagreed with what it saw to be a political move to drain local governments of their revenue. Although the coalition made a pledge to compensate for the loss of local revenue ensuing from the exemption, the mechanism was not included in the draft act itself.
The land tax has been the only nationwide tax that does not create revenue for the national budget but for municipalities alone. Prime Minister Andrus Ansip has proposed making up the lost revenue, an estimated 10 to 14 million euros per year, by increasing the share of income tax allotted to the local governments, which was, despite much criticism from the opposition, cut down during the recession years. Currently, 11.4 percent of the income tax goes to the local governments.
The Centre Party-run city of Tallinn, whose land tax rates were considered to be abusively high and were allegedly the main cause prompting IRL and the Reform Party to come up with the exemption bill, is bound to enforce a similar exemption a year before the national law comes into force in 2013, having submitted a corresponding motion to the City Council last week.