BONJOUR L'ESTONIE

Self-policing answer to public drinking problems

Starting July, amendments to the law enforcement law come into force in Estonia that allow people to consume alcohol in public places, but only if other people are not disturbed; the Justice Ministry said the changes are designed to reduce the amount of prohibitions and commands, and to shift more responsibility to the citizens themselves, reports Public Broadcasting.

Justice Ministry Public Law Service Adviser Sander Pollumae explained on national television that the law no longer contains the general and absolute ban on consuming alcohol anywhere.

"In the law, it is rather related to the overall ban on disturbances - no person can with their behavior endanger or disturb someone else. The use of alcohol is also looked at in this context," he said. Therefore, everyone must sense himself whether his actions disturb others or not. Also, it gives law enforcement representatives the chance of using more flexible methods, said Pollumae.

Critics believe such flexibility is not good, however, and the change is premature. "The police will be deprived of a lever with which to prevent public order violations," says Healthy Estonia CEO Hannes Lents. "The majority of public order offenses start just from people relaxing somewhere at a lawn and consuming alcohol."

Sander Pollumae says critics are talking about mostly these violations, which go under the general prohibition of disturbance. "When a person is drunk, disturbs someone, reeks of the odor of vodka, it is clear that such behavior is not acceptable," he explained.

Alcohol consumption in public places has still some restrictions. For example, alcohol cannot be drunk in public transport or in a public transport stop, near childcare institutions, youth camps or hospitals. Local governments can prohibit the consumption of alcohol.

Estonia to abolish fines for violation of language requirements

TALLINN – Estonia’s Language Inspectorate will stop fining people for an inadequate knowledge of the Estonian language, Minister of Education and Research Jevgeni Ossinovski said in parliament.

The minister said that amendments to that effect had been sent to parliament. “From January 1, violations of the Law on Language will not be punishable in terms of the penitentiary legislation. We will not fine people for the violation of language requirements,” Ossinovski said.

In 2013, the Language Inspectorate imposed EUR 10,700 of fines for these violations. The biggest sum total of these fines was recorded in 2007 and amounted to over EUR 22,000.

The Language Inspectorate is a government agency at the Estonian Ministry of Education and Research. It is responsible for enforcing language requirements in government agencies and among the local elected authorities, as well as in services, retail and healthcare.

The Council of Europe’s Advisory Committee on the Framework Convention for the Protection of National Minorities advised Estonia to stop imposing fines for the violation of language requirements and to consider abolishing the Language Inspectorate. In 2007, Amnesty International criticized the Estonian Language Inspectorate and termed it a “punitive agency.”

Two Estonian real estate developers to go into prison

In 2006, one of Estonia’s largest banks SEB lent almost 3 million euros to two Estonian real estate developers who promised to build an office building and parking lot in central Tallinn, but actually invested it in real estate in Spanish Costa del Sol, writes Äripäev.

The real estate businessmen in question were 42-year-old Kaido Kaljusaar and 41-year-old Andres Lauri. To be more believable for banks, they set up a company called Arco Kapital which sounded similar to the listed real estate developer Arco Vara.

The bank was paying out the loan in tranches according to expense reports which the two businessmen were forging because no construction works were going on in the property in Veerenni street.

Eight years later, the Supreme Court decided to reject the appeal of the two real estate businessmen which means they now will be serving a real three-month prison term as shock sentence. The developers themselves claim that they are innocent and are simply victims of unfavourable business climate.

Toomas Hõbemägi

http://news.postimees.ee/2803160/businessmen-pull-mega-wool-over-banker-eyes

President Ilves proclaims controversial VAT law amendments

Estonian President Toomas Hendrik Ilves yesterday promulgated the amendments to the Value-Added Tax Act. At the end of 2013 he refused to sign the amendments into law. The revised amendments were adopted by the parliament on May 7.

The law makes it mandatory for businesses to disclose in an annex to the VAT declaration the other party in all transactions exceeding 1,000 euros.

Businesses can apply for a transition period until June 20, 2015 for the switch to the new system was added to the bill.

A major change in the adopted law compared with the bill rejected by the president is that the data to which the obligation to maintain confidentiality of secrets applies do not have to be reported in the annex to the VAT declaration.

Toomas Höbemägi

Estonia’s tax system beginning to lag behind its neighbours

Latvia established a social tax ceiling from the beginning of this year, prompting a welcome debate on whether Estonia’s taxation system was also developing in a successful and sustainable direction.

Besides international tax planning, much of our daily work is focused on comparative analysis of Baltic legal and tax systems. We explain to our clients the benefits of choosing Estonia, Latvia or Lithuania for a given activity. Latvia’s new social tax ceiling is another ticked box in the list of reasons why foreign undertakings entering the Baltic markets should target their investments and activities to Latvia instead of Estonia.

Since the late 1990s, Estonia had a lead in tax comparisons for a number of reasons, such as a presumably simple and transparent system of taxation, zero corporate tax on reinvested profits, withholding obligations applicable to only a few types of payments. However, recent analyses are increasingly indicating that Estonia may no longer be the preferred tax environment for a rational entrepreneur. The scales are tipping towards Latvia.

Criminal police arrests head of Estonian mafia

In one of its largest operations against organized crime, the Estonian criminal police on Monday arrested several members of the Estonian mafia, including its head Assar Paulus, writes Postimees.

In the operation that was prepared for around six months, the criminal police arrested about twenty Estonians who are suspected being mobsters.

The court has authorized the public prosecutor to detain Paulus for a longer period under suspicion of organizing a criminal organization and violence.

Assar Paulus is considered the second most powerful criminal in Estonia, next to Nikolai Tarankov. He established himself in the criminal underworld after Kalev Kurg, head of the so-called Linnuvabrik mafia, was gunned down in 2005.

It is said that unlike Kurg, Paulus has always been open to cooperating with criminal gangs of other nationalities, including Chechens headed by Harun Dikajev. In 2006, Paulus was suspected of ordering an attack against Hans H. Luik, a media owner, but was not charged.

Estonia has issued less than 600 residence permits in January-November

By the end of November 2013, Estonian authorities had issued 565 residence permits in 2013 while the ceiling limit set for this year is 1,000, LETA/Public Broadcasting reports.

The government set the ceiling for the next year at 996 permits or 0.075% of Estonia's permanent population, at its Thursday session. According to the law, the ceiling cannot exceed 0.1% of Estonia's permanent population. The ceiling covers term residence permits for working, business and term residence permits based on foreign agreements.

The immigration ceiling is not applied to citizens of European Union member states, European Economic Area member states or Switzerland.

The ceiling isn’t applied either for persons coming to Estonia to live with their spouse, near relative, to study and do research in Estonia, for citizens of the USA and Japan.

Estonia charges men over match-fixing

The Public Prosecutor's office in Estonia said on Monday it had charged 11 men for match-fixing in 2011 and 2012.

The office said in a statement that the charges related to 12 domestic league games, three Europa League matches and a fixture in Lithuania.

The 11 men approached footballers in Estonia, Lithuania and Ukraine who were prepared to fix games for money, the statement read.

The accused are alleged to have pocketed €108 000 from the scam.

Last week two men were charged with conspiracy to defraud as part of an investigation into match-fixing in English lower-league soccer. Earlier this year an inquiry by European police forces, Europol and national prosecutors uncovered a global betting scam run from Singapore.

About 680 suspicious matches, including the Champions League and qualifying games for the World Cup and European Championships, were identified in the probe.

Estonian parliament set tougher punishments for crimes against minors

The Estonian Riigikogu approved on Thursday of a law that takes over the European Parliament's directive against sexual abuse of minors and toughens several punishments for crimes of that nature, reports LETA Riigikogu press service.

While so far, there was no minimum punishment level set for sexual crimes against minors and the maximum punishment was five years of imprisonment, in the future, the punishment will be 2-8 years of prison. In case of a repeated crime, 3-8 years of imprisonment.

The law also stipulates a clear ban on buying sex from a minor. The punishment will be up to 3 years of prison and in case the act was committed against a child younger than 14 years, 5 years of prison. It is the task of the person who wishes to buy services of that nature to ascertain the real age of the person.

The law also makes it a criminal office to knowingly observe child porn on the Internet.

The law expands the circle of people working with kids with whom the employer has to make sure in advance that the new employee wouldn’t have been punished for sexual crimes.

In order to take over the European Parliament and Council directive on sexual abuse and taking sexual advantage of children and fight against child porn, 12 Estonian laws had to be amended.

Estonia should tax oil shale at a higher rate : National Audit Office

Estonia should increase income earned for the use of the country’s main natural resource, oil shale, according to the National Audit Office.

In its yearbook published on Monday, the audit Office wrote that Estonia should follow the example of other countries that are making better use of their natural resources.

In order to adapt to demographic hanges and maintaining the budget balance, Estonian state has until now mainly focused on cutting spending. However, considering the fact that funds that will be allocated to Estonia by the EU will decrease rapidly in the future, the state should, in addition to keeping expenditure down, to seek additional possibilities to increase budget revenues.

One potential source of income that has not been used until now is to tax the nationally important natural resource, ie oil shale.

Estonia has not introduced any such tax that would be aimed primarily at earning income from oil shale.

The state has until now only charged environmental fees for mining and processing oilshale which are aimed at forcing entrepreneurs to use natural resources economically and to protect the environment.

Toomas Hõbemägi

Estonian Labour Inspection suspends work in dozens construction sites

The Estonian Labour Inspection (ELI) held a pan-Estonian inspection of construction sites on Tuesday and suspended work in dozens of sites due to dangerous violations, LETA/Public Broadcasting reports.

21 labour inspectors conducted 83 inspections and ascertained 181 violations of legal acts, 47 of which were so dangerous that work had to be suspended or use of dangerous tools banned.

In 34 cases, work connected to danger of falling from heights was suspended. The inspectors also ascertained lack of required restrooms or accommodation areas in 17 cases.

The ELI said that no violations were found in just 14 construction companies construction sites. Last year, 351 work-related accidents took place in the construction sphere in Estonia, of which 3 ended in death and 94 in serious health damage.

Court bars IRL from using mayor's name in attack website addresses

Ruling on a civil suit on Tuesday, Harju County Court banned the political party IRL from registering or using websites with domains similar to the name of Tallinn Mayor Edgar Savisaar.

The order comes shortly after an initial website, www.edgarsavisaar.ee, was shut down, but was replaced with another, www.edgarsavisaar.co, displaying political attack ads.

IRL was banned from using the words "edgarsavisaar," "savisaaredgar," "esavisaar" and other words related to "savisaar." However, other words which my draw a connection to the mayor but which were not specifically forbidden may still be used. The party can face penalties if it defies the ban.

With the October 20 elections drawing nearer, political mudslinging is heating up.

Last week, a remote-controlled drone carrying an IRL election campaign poster hovered in front of cameras during a live TV appearance by Savisaar. A few days before that, city authorities removed IRL-funded, anti-Savisaar political ads that had appeared in front of the Tallinn City Government building hours earlier. The posters read: "Savisaar's corruption takes 1,000 euros from your family each year. Let's bring that to an end."

Estonia’s government approves amendments to parental benefit law

The Estonian government reached an agreement on amendments to the parental leave benefits law that facilitates parents working part-time while on parental leave, LETA/Public Broadcasting reports.

According to the regulations valid now, if a parent works, while on a paid parental leave after having a baby, the parent's combined income of the parental benefit and salary can in certain cases be smaller than it would have been, if the parent had just received the benefit.

Now the law was changed to encourage people to work while receiving the parental benefit and it is guaranteed that their total income would always be bigger than the parental benefit when they work too.

According to current regulations, the parental benefit isn’t paid at all if the parent earns more than 1,450 euros a month as salary in addition to the parental benefit. The new law abolishes that limit, the principle stays in force that the parental benefit won't be reduced if the salary amounts to the benefit level.

The new regulation increases state budget spending by around 294,000 euros a year. The new law comes in force on January 1, 2014.

Estonia should abolish zero corporate tax system

Estonia should abolish its current zero-tax corporate tax on reinvested profits, says Indrek Kasela, fund manager of investment company Amber Trust. In an interview to Ärileht, Kasela said that Estonia could still successfully compete with neighbouring countries if its corporate tax rate would be lower than 13% as in Russia.

“The current system was good 10 or 15 years ago, but now it is past its due date and only serves the interests of large foreign corporations, banks and telecom giants”. He added that Estonians are forgetting that while the Estonian pension system collects tens of millions of euros every year, foreign-owned banks are siphoning this money away from Estonia instead of investing it in Estonia.

“We have about 640,000 people who have invested in second pillar pension fund. It is crazy and unsafe to invest these funds in some far market such as Bulgaria at the time when we are borrowing money from abroad.

Kasela said that if Estonia listed some of its larger state enterprises such as Eesti Energia, it could activate the local stock market and convince fund managers to re-invest the funds in Estonia.

Estonian Tax Board not satisfied with VAT collection in 2013

Estonian Tax and Customs Board head Marek Helm states that the situation with collection of VAT is sad in Estonia and the few companies that VAT collection depends on have to be treated with utmost respect, LETA/Public Broadcasting reports.

Fresh statistics of the Tax Board indicated that while there were 72,000 persons liable to VAT in Estonia last year, 5,690 companies paid altogether 2.08 billion euros of VAT that formed 90% of the collected VAT, Äripäev wrote on Monday.

Helm said in national radio that the whole so-called tax gap forms 450 million euros a year in Estonia and a half of it is unpaid VAT which is the second-biggest tax that after social tax that the state budget collects.

Helm said that the problems are not new. He explained that the VAT system is complicated as companies are entitled to reclaim it from the state too but in simplified terms, there were around 70,000 companies liable to VAT, two thirds paid more VAT to the state budget than they reclaimed and one third reclaimed more than they paid.

Helm said that possible incentives could be created for the 6,000 companies on whom VAT collection depends, for example faster VAT returns.

Postimees Online wrote that Estonian Chamber of Commerce Industry director general Mait Palts said that the Tax Board's statement surprise shim. "The majority of active companies are micro-companies and a large part of them are family companies with a few employees who have a small turnover and there isn’t much to pay on that," said Palts. "Yes, there are spheres where companies complain about the problem of hiding VAT but it cannot be said that this is a problem of all spheres of activities."

Work restrictions on foreign specialists to ease

TALLINN - The government approved on April 18 amendments to the Aliens Law and sent it to the Riigikogu; when the amendments come to force, it will be possible to hire a foreign specialist to work in Estonia after just a couple of days instead of the current regulations that make the wait last several months, reports Postimees. According to the agreement, a foreigner could stay in Estonia to permanently work in the country, and apply for a residence permit to do so while already being in Estonia.

To the proposal by the Foreign Ministry, an amendment to the Business Code was added, to enable foreign companies to open in Estonia branch offices that considerably facilitate the development of the Estonian economy. Currently it isn’t possible to register in the Business Registry a branch office that has one employee (manager) who doesn’t have a residence permit in Estonia.

Also, when a foreigner gets a short-term Estonian work visa, a visa with the same conditions is granted to his/her spouse and minor child and adult child if the latter isn’t capable coping independently due to health conditions or disability.

The easing concerns top level specialists who, according to the bill, are foreigners who have a professional preparation in any sphere. The bill also aims to change the part concerning foreign students to simplify starting doctoral, master’s degree or bachelor’s degrees studies in Estonia.
The draft law is supposed to come in force Sept. 1 next year if approved by parliament.

Riigikogu seeks solutions to citizenship law gap

TALLINN - The Estonian Parliament [Riigikogu] discussed on Tuesday the proposal of the Legal Chancellor to find a solution to the situation that children of people, who received Estonian citizenship via naturalization, don’t get automatically Estonian citizenship, Public Broadcasting reports.

The topic has been discussed at the parliament's constitutional committee and received its support. The problem is that if people who received Estonian citizenship via naturalization, don’t apply for a residence permit for their child, a situation emerges that the legal status of the child is undetermined when the child gets to be 15 years old.

Usually this happens when the parent misleadingly assumes that since they are Estonian citizen, the child is an Estonian citizen which is not the case. The Legal Chancellor thus made a proposal that such people could get Estonian citizenship automatically. There are around 500 such children in Estonia now, but not all of them could be interested in getting Estonian citizenship.

The government has so far taken a position that if a child has de facto lived in Estonia for 8 years, then he/she can get Estonian citizenship even if the child lacks a residence permit due to parents’ mistake. So far there have been 13 such cases that have found a positive solution. Legal Chancellor said that since he cannot make a proposal for through revision of citizenship rules, he continues making proposals case by case.

Court rules in favour of City of Tallinn in dispute over Blackheads House

The Administrative Court ruled yesterday in favour of the City of Tallinn in its dispute with the central government over the future ownership of the Blackheads House in Tallinn Old Town.

The court did not offer an opinion on whether the building should be returned to the Blackheads, but abolished the government resolution in which the government rejected the proposal of the Tallinn City Council not to return the building to the historic brotherhood. The court found that it was not clear whether the building would remain open to public once it is transferred to the brotherhood.

According to the court, the government has not properly interpreted the law in handling the return issue, but the court did not provide a justified opinion on whether the building should be returned to the organization. In principle, the court found that the building can be returned to its rightful owners only if there are guarantees that it will not make it more difficult for the local government to fulfil its public duties.

Estonian Supreme Court refuses to consider claim of VEB's holders

The Supreme Court of Estonia has turned down a complaint from 12 holders of VEB Fund certificate who were aiming to receive compensation from the state for their deposits lost in the Soviet-era Vneshekonombank (VEB) 20 years ago, the Estonian national broadcasting corporation ERR said in an article on Tuesday, November 20.

The companies wanted courts to strike down a decision made by Parliament in February to liquidate the VEB Fund, set up in 1993 to compensate depositors for money frozen in the bank, and pay creditors from the proceeds, writes LETA.

The Parliament and the central bank created the state-insured compensation plan after Russia froze Estonian accounts in the bank. Over the last two decades the government has not been able to unfreeze the accounts – it was reported in a separate story last month that much of the money in the Russian bank disappeared into a shady holding company in the 1990s.

The companies wanted their claims paid at face value, plus compensation for the period when their funds were unavailable to them.

However, the general chamber of the Supreme court said today that the companies in the suit had right of claim only against the VEB Fund itself. Other claims – against the state or the central bank, for example – could not be linked to Parliament's decision, the court said.

Tax authority and police discover large-scale VAT fraud

The tax authority and the police suspect Marko Kalev who is business partner of real estate developer Jürgen Järvik and supermodel Carmen Kass of large-scale VAT fraud, writes Äripäev.

The tax authority and the prosecutor’s office are suspecting that Kalev had masterminded a large-scale VAT fraud scheme through Soldina oil terminal in Northeast Estonia which is a bonded warehouse and sold fuel to companies that were controlled by Kalev and his business partners. They drew up fictious pledge contracts and purchase and sale contracts to avoid paying VAT.

All in all, the authorities are investigating 13 private persons and one legal person in connection with the fraud scheme.

Authorities estimated that in the first three months, the state lost EUR 1.3m in unearned VAT as a result of the fraud scheme. It means that the Soldino oil terminal had sold at least 6.5m worth of fuel and other oil products. However, it is believed that the actual extent of the fraud was much bigger.

A year ago Äripäev wrote that Kalev had set up a web of companies and acquired five small service stations. The central connection point was the Soldina oil terminal that is rented by Soldina Õlibaas and belongs to law firm Mullari ja Koch.

Kalev himself has been detained. He was arrested in September in connection with another VAT fraud where a company had issued fictious invoices. His lawyer refused to comment.

Toomas Hõbemägi