According to Prime Minister Kaja Kallas, the supplementary wartime budget supports the coping of the Estonian state and people with the effects of the Ukrainian war. “We are strengthening the security and population protection of Estonia in the broadest sense. In addition, thanks to the supplementary budget, we will be able to help the people of Estonia cope better with the setbacks caused by the combined effect of several crises. It is also important that the investments made from the supplementary budget help us to become independent of Russian gas. The supplementary budget means stronger security for Estonia in every sense.”
In accordance with the government decisions, the supplementary budget amounts to 732 million euros. Amendments concerning tax impact and expenses automatically dependent on tax revenues are added to this amount, resulting in a total volume of 802.9 million euros in expenses, investments, and financing transactions.
From the supplementary budget, 247.6 million euros will be allocated to strengthen comprehensive security and resilience, 257.3 million euros to strengthen energy security, and 242.7 million euros to cover the initial costs related to war refugees. Prior to the decision to create a supplementary budget, funds were allocated from the government reserve to strengthen preparedness for crises. These amounts will be restored to the reserve using the supplementary budget and with the amounts transferred from last year’s budget, the government reserve will increase to 100 million euros.
The supplementary budget amounts to almost 2.2 per cent of the GDP according to the forecast of the Ministry of Finance for spring 2022. The impact of the supplementary budget on the budget position is somewhat smaller, as the use of subsidies partially returns the tax money to the state. Taking both into account, the impact on the nominal government budget position this year is 627 million euros or 1.9 per cent of the GDP.
The state has to finance the measures using the liquidity reserve and additional debt instruments. Short-term and long-term bond issues can be used as instruments. The support measures of the supplementary budget and the associated negative cash flow do not increase the established maximum outstanding amount of state debt obligations of 7.2 billion euros.
The supplementary budget provides 173 million euros for strengthening comprehensive security and resilience, 249 million euros for energy security, and a total of 197 million euros for covering the basic needs of war refugees. Lowering the VAT rate from 9% to 5% for media outlets for the purposes of the ongoing information war and lowering the excise duty on diesel fuel carrying a fiscal marking to the European Union minimum, which is important for the agricultural sector responsible for food security, have a revenue-reducing effect.
Together with the supplementary budget, the government approved and will send to the Riigikogu three draft acts related to the supplementary budget.
First, the government approved and will send to the Riigikogu a draft act on amendments to the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act, which will reduce, until the end of this year, the excise duty on diesel fuel carrying a fiscal marking to the minimum level allowed in the European Union, which is 21 euros per 1,000 litres. The current rate of excise duty is 100 euros per 1000 litres.
Diesel fuel carrying a fiscal marking is permitted to be used in agriculture and, for a limited period, in oil shale mines until 30 April 2023. Diesel fuel carrying a fiscal marking can also be used for commercial fishing if it is exempted from excise duty under an excise duty exemption certificate. Compared to April 2021, the wholesale price of diesel fuel carrying a fiscal marking has increased by almost 85 per cent. Due to the change, the wholesale price could be reduced by up to 9.48 cents per litre or up to seven per cent.
Second, the government approved and will send to the Riigikogu a draft act on amendments to the Value-Added Tax Act, pursuant to which the VAT rate on media outlets will be reduced from 9% to 5% as of 1 August. The amendment supports the availability of independent, professional, and high-quality Estonian media outlets in the ongoing information war related to the war in Ukraine.
Third, the government approved and will send to the Riigikogu a draft act on amendments to the Social Welfare Act and the Health Services Organisation Act. The amendment to the act provides for the possibility to consider among the housing expenses already provided for in the Social Welfare Act loan repayments related to the purchase of housing, or the principal of the loan, interest, and the payment of compulsory home insurance upon the payment of subsistence benefit. The amendments are scheduled to enter into force on 1 July.
The amendment to the law also creates an opportunity to pay a one-time benefit to a pensioner living alone, even if the pensioner lives with a beneficiary of temporary protection. The current procedure allows the benefit to be paid to persons living with another person only in exceptional cases, such as in the case of a person under curatorship.
The amendment to the law provides a legal basis for the introduction of measures related to the emergency of the immigration of refugees or for the treatment of people wounded in war.
See also https://valitsus.ee/uudised/valitsus-kiitis-lisaeelarve-pohimotteliselt-heaks
