Vox Populi

Mihhail Kõlvart

leader of the Estonian Center Party

I proposed taking out a loan for ammunition purchases at the start of this summer and, therefore, support the similar initiative from our entrepreneurs. However, in the meantime, the government reached an agreement to meet the need with new taxes. This means that it will be done at the expense of economic growth, and in the long run, this approach is unsustainable. The 1.6 billion euro need is short-term, while the defense crisis is long-term, and we must be ready to cover the costs continuously. Of course, coming up with 1.6 billion euros is not an easy task, but the fact is that ensuring our defense capability is crucial in the current geopolitical situation and serves as an important deterrent.
The key to overcoming crises is a strong economy, as handling them requires long-term resources. A security crisis is a long-term crisis that requires decisive action. The first step should be taking out a loan, part of which would go towards buying the necessary ammunition, and the other part into the economy to invest in infrastructure and support the business sector. It is also encouraging that entrepreneurs are willing to contribute more to the state. Unfortunately, the Reform Party-led government is taking action in the opposite direction, with an income tax reform favoring the wealthy set to take effect in 2026.

Aivar Kokk

member of parliament (Isamaa)

Isamaa has been emphasizing throughout the debate on security spending that money must be found now and without delay. The reality is that borrowing is the fastest way – and in our view, the best option would be issuing national defense bonds with a clear clause that the funds raised will be used ONLY for national defense, not for fulfilling election promises. Every day of delay in making decisions literally costs money, as the price of ammunition continues to rise – experts estimate that several hundred million euros have already been wasted over the past year.
However, the current proposal by entrepreneurs is misleading, as it reduces the debate to two options: tax hikes or borrowing. The focus should be on a third solution: cutting administrative costs. The government speaks eloquently of cutting one billion euros over the years, but is not ready to disclose the sources. Meanwhile, due to the decisions of Kaja Kallas' and Kristen Michal's government, double the amount of tax money is being collected from people and businesses. This is a fundamentally wrong approach because, as Postimees recently noted, the Estonian state is not fiscally restrained, and there are areas to cut if there is genuine political will.
Isamaa has made its own proposal on how to save one billion euros annually: this includes scrapping the Reform Party's income tax changes, temporarily suspending contributions to the second pillar pension fund, with payments going into the first pillar during that period, and decisively cutting state administrative costs.

Tanel Kiik

member of the finance committee of the parliament (SDE)

Estonia's security situation has changed dramatically since Russia's full-scale invasion of Ukraine in February 2022. The terrorist regime ruling Russia has shown that it is capable of starting a bloody and devastating war to achieve its foreign policy goals, and neither sanctions nor international pressure deter them. Both Estonia and other countries in our region have drawn the necessary conclusions and increased their defense spending.
To strengthen Estonia's defense capabilities, various funding options must be used, and the proposals made by entrepreneurs should be taken seriously. Measures like implementing a broad-based security tax, issuing government bonds, and cutting unnecessary activities all serve the same goal – accelerating critically important defense investments.
Last week, the leadership of the Social Democratic Party already made a statement supporting the increase in defense spending and investments in line with NATO plans and the assessments of the commander of the Estonian defense forces to ensure the security of the Estonian state. In our view, the additional funds for this should come from a greater contribution by the wealthiest class, not by cutting back on people's livelihoods or essential services (healthcare, social services, education, internal security).
Unfortunately, borrowing alone is not enough to strengthen national defense, as it does not help reduce the budget deficit. According to EU budgetary rules, the budget deficit must not exceed three percent of GDP. In my view, it would be reasonable to negotiate an exception at the EU level for defense spending, as we are living in an era of crises that require extraordinary measures.

Annely Akkermann

member of parliament (Reform Party)

For 20 years, Estonia's tax system has been simple, uniform, and effective. Corporate profits are taxed only when distributed as dividends. Estonian companies are well-capitalized, which has enabled them to handle consecutive crises.
Entrepreneurs' associations wrote to members of the Riigikogu and government that our tax system has been internationally recognized as the most competitive, and we have the highest number of startups per capita globally. This is undeniable. Reform Party members are proud that the corporate income tax exemption on reinvested profits, introduced by us, has greatly strengthened Estonia's economy and will continue to do so.
Unfortunately, a war has been raging 1,000 kilometers away from for three years. Our neighbor Russia remains aggressive for the foreseeable future, and we must significantly increase our defense investments and update our defense plans in cooperation with NATO allies. An old proverb says that those who do not want to feed their army will end up feeding someone else's. If peace cannot be maintained, money will lose its value quickly. Although companies do not feel hunger, cold, or pain, most will not be able to operate profitably or protect their assets during a war. The people behind these companies – employees and owners – could lose both their livelihoods and property in a conflict. There is no doubt that companies must also contribute to national defense to ensure that our competitive and peaceful business environment can thrive. Everyone must contribute.
Borrowing cannot replace revenue. Borrowing, including through defense bonds, can finance expenses before the corresponding revenue is collected. Tax revenue for defense spending must be raised regardless. The government plans to collect an additional two percentage points from consumption and another two percentage points from both individual and corporate incomes. This is achievable. If we can buy weapons and ammunition immediately, we can borrow to pay for them and later repay the loan with tax revenues, including interest.
The tax base is calculated based on the previous year's accounting profit, paid quarterly in advance and adjusted after the submission of the annual report, which allows businesses to spread their tax burden. If a company does not generate a profit, no tax obligation arises, ensuring that struggling businesses are not pushed into financial difficulties.
Corporate profit tax is temporary – once enough money has been collected for defense investments, the current tax exemption on reinvested profits will be restored. The corporate profit tax will be collected similarly to the advance income tax collected from banks (starting from January 1, 2025, at 18 percent), so no new methodology is needed for the temporary tax. I do not believe there is reason to fear that entrepreneurship and foreign investment will suffer due to a security tax. Income tax is common practice in other countries. The security tax is manageable and provides confidence that the state is determined to defend itself in the best possible way. Confidence for growth.

Kadri Kullman

member of the governing board of The Right

Defense spending is essential to ensure Estonia's security. These are targeted expenses with a clear beginning and, hopefully, a defined end. Loans should be taken for investments such as ammunition and defense technology. These are long-term investments that provide security not only now but also in the future. However, borrowing should be done wisely, for example, through the issuance of bonds aimed at Estonian citizens – this would be a great way to fund the country's critical needs and allow people to contribute. In that case, there must be a transparent mechanism to ensure that the borrowed money is directed specifically towards defense spending and not used to patch budget holes caused by poor governance.
At the same time, it is crucial to reduce the budget deficit quickly. This also creates stability and confidence. The current four-year cutback plan is insufficient – cuts must be made immediately and in the right areas, starting not with children or healthcare, but with government positions that add little value. Institutions like the National Institute for Health Development, the public conciliator's office, Business and Innovation Agency, and various foundations need thorough reviews to assess their real impact and necessity. Over the last 2.5 years, since The Right published its cutback plan, state spending has grown by four billion euros. This growth is unsustainable.
If we keep making superficial cuts and postponing decisions, we will only deepen the problems instead of solving them. The state apparatus needs immediate optimization to direct resources to truly essential services and to ensure security. These decisions may not be popular, but they are necessary for the long-term sustainable operation of the Estonian economy.

Evelyn Sepp

co-leader of the Estonian Greens

Firstly – these are wise people with experience in life and business. Their advice is always worth listening to.
Secondly – the government still lacks adequate risk awareness and, consequently, effective management capabilities. There is a need to distinguish between posturing in the face of a crisis and making real decisions and taking effective action.
The war in Ukraine has been ongoing for ten years. Estonia has not developed its own ammunition production or broader self-sufficiency capabilities.
For a period of ten years, a memorandum of understanding is practically a non-existent outcome!
Thirdly – the tax festival is a reflection of the double crisis, revealing an unwillingness and inability to address the root problems. This is not the result of the new government but the continuation of political inertia at all levels. It is incompetent and irresponsible.
The Greens view the entrepreneurs' letter as a pragmatic suggestion for crisis management. Considering that since the beginning of the war, instead of putting the state budget in order, we have been riding the wave, while lacking an overview of the billions in allocations, and defense and crisis readiness have been inadequate, it is clear that borrowing is a concrete and swift solution. It will not replace the work that should have been done, but we can at least plug one hole to buy time for the next steps, which should have been taken years ago.
The fact is that the government's «budget cuts» are still only on paper, deferred to someone else in the future, as far off as possible, to avoid taking responsibility now.
Borrowing, starting our own defense industry, and preferred procurements should have been done long ago! Then we would not be talking about a prolonged economic downturn either.