Prime Minister Kristen Mihal said that Estonians will have to adjust to higher taxes and cuts in government spending. This is necessary so that the country can better protect itself from potential threats from russia. This was reported by UNN with reference to Bloomberg.
Details
russia's full-scale invasion of Ukraine has prompted some of russia's neighbors to increase military spending to counter Moscow. The Estonian government, which is facing the longest recession in Europe, has introduced a defense tax and made the largest budget cuts since the global financial crisis.
These measures have resulted in Estonia, with a population of 1.3 million, becoming one of the NATO countries with the highest defense spending relative to economic output among the 32 members of the alliance.
Some people don't like cuts, some people don't like taxes - it's all very logical. It would be great if there was another way, but we need more ammunition, and these decisions need to be made
The new Estonian government has drawn up an ambitious list of projects that need funding, including allocating 1.1 billion euros ($1.2 billion) to purchase ammunition, build fortifications, and deploy a "drone wall" along the border with russia. Kristen Mihal, himself a reserve officer in the Estonian Defense Forces, is leading these initiatives.
The Ministry of Defense has reassessed that we need to hit targets that are further away and with greater accuracy. We will invest an additional 4 billion euros in defense spending over five years
The tax hikes will include a 2% increase in income tax, corporate tax, value added tax, and excise duties.
I'm not saying it's good for the economy - the CPT will certainly hurt business, but it's not the end of the world. The value-added tax is structurally harmless for the economy, although it adds stress to domestic consumption
Recall
The new Estonian government will continue to fully support Ukraine, in particular on its path to EU and NATO membership. This was discussed during an online conversation between Prime Minister of Ukraine Denys Shmyhal and the newly appointed Prime Minister of Estonia Kristen Mihal.
Президент Естонії закликає збільшити витрати на оборону НАТО до 2,5-3% ВВП08.07.24, 02:52