Interpellation regarding the abolition of the special VAT rate for accommodation establishments (No. 289)
Session: 15th Riigikogu, 3rd sitting, plenary sitting
Date: 2024-02-05 17:33
Participating Politicians:
Total Speeches: 45
Membership: 15
Agenda Duration: 1h 1m
AI Summaries: 45/45 Speeches (100.0%)
Analysis: Structured Analysis
Politicians Speaking Time
Politicians
Analysis
Summary
The Riigikogu (Estonian Parliament) debated an interpellation filed by MPs Anastassia Kovalenko-Kõlvart and Andrei Korobeinik concerning the removal of the preferential VAT rate for accommodation services. The MPs who filed the interpellation criticized the government's decision to raise the VAT on accommodation services from 9% to 13%, stressing that the timing was highly inappropriate given the tourism sector's prolonged losses (due to the COVID crisis, the war, and the energy crisis). The primary concern was that the tax hike was implemented without adequate impact analysis, threatening the competitiveness of the Estonian tourism sector compared to neighboring countries, especially Latvia and Lithuania, and raising the risk that major events and tourists would bypass Estonia.
Prime Minister Kaja Kallas defended the government’s decision, pointing out that a reduced rate of 13% was maintained for accommodation, instead of the initially planned full rate (22%), specifically in response to feedback from stakeholders. Kallas cited an analysis by the Ministry of Finance, which projected that the 13% rate would increase annual VAT revenue by 7 million euros. She countered the argument that the tax hike was the primary driver of price increases, noting that accommodation providers had already raised their prices by 15% in 2023, even as tourist numbers continued to rise. The debate also raised broader questions regarding the rationality of tax policy, the impact of regional policy, and the necessity of cutting state budget expenditures.
Decisions Made 1
The agenda item discussed was an interpellation, during which no new decisions were adopted. The government's decision regarding the increase of VAT on accommodation services to 13% had already been previously taken and entered into force.
Most Active Speaker
The most active politician was the representative of the interpellation, Anastassia Kovalenko-Kõlvart (Centre Party), who presented the initiative, asked supplementary questions, and delivered the closing speech. Her position was sharply critical of the government's tax policy, emphasizing that the tax hike is short-sighted and endangers the tourism sector and regional employment. She repeatedly asserted that the tax increases would force tourists and conferences to travel to Latvia and Lithuania, pointing out that accommodation costs make up only a small portion (20%) of a tourist's total expenditure. Consequently, the price increase in Estonia would also significantly reduce other revenue collected by the state.
Esimees Lauri Hussar
AI Summary
The first item on the agenda is the interpellation submitted by Riigikogu members Anastassia Kovalenko-Kõlvart and Andrei Korobeinik on May 13 of last year concerning the abolition of the VAT exception for accommodation establishments.
Anastassia Kovalenko-Kõlvart
Profiling Eesti Keskerakonna fraktsioonAI Summary
Anastassia Kovalenko-Kõlvart, in her interpellation, criticized the abolition of the VAT exemption for accommodation establishments and the absence of an impact analysis. She emphasized the regional consequences and the specific problems facing Ida-Virumaa, highlighting the risk of hotels closing and jobs being lost, as well as the potential reduction in state tax revenue. She concluded by calling on the Prime Minister to provide answers and initiate a debate.
Esimees Lauri Hussar
AI Summary
The Speaker called Prime Minister Kaja Kallas to the Riigikogu rostrum to answer the interpellation.
Peaminister Kaja Kallas
AI Summary
Prime Minister Kallas announced that the reduced 13% VAT rate for accommodation services will be maintained. This decision, adopted following feedback from interest groups, is expected to generate approximately 7 million euros in additional budget revenue between 2025 and 2027. Furthermore, she emphasized the principle of a unified budget, the recovery of the accommodation sector, and increasing tax revenue through the Platform Reporting Directive.
Esimees Lauri Hussar
AI Summary
The Chairman offers his thanks and announces that there are several questions, then requests Mart Maastik to respond.
Mart Maastik
Profiling Fraktsiooni mittekuuluvad Riigikogu liikmedAI Summary
Maastik stated that the VAT increase will not only raise the price of accommodation services by about 3.66%, but will also make ferry tickets and all other services more expensive. Furthermore, the planned car tax will add even more price hikes, making it difficult for the Estonian economy to gain momentum if families choose Turkey for a weekend getaway instead of visiting Saaremaa.
Peaminister Kaja Kallas
AI Summary
Prime Minister Kaja Kallas stated that taxes are not raised continuously, but that finding revenue requires considering taxation. Furthermore, in the context of the inquiry concerning the VAT for tourism establishments, she noted that no new taxes were introduced in 2023, yet prices in the accommodation sector grew by an average of 15% and the number of tourists rose by 18%, meaning the tax increase cannot be held responsible.
Esimees Lauri Hussar
AI Summary
The Chairman called on Andrei Korobeinik to speak.
Andrei Korobeinik
Profiling Eesti Keskerakonna fraktsioonAI Summary
Andrei Korobeinik concedes that prices have risen due to inflation and that hotels are not at fault for this, and he requests clarification on the exact location of the impact analysis and whether it has been appended to the draft bill as an annex to the state budget or as a standalone document.
Peaminister Kaja Kallas
AI Summary
The impact assessments were included in the explanatory memorandum accompanying the draft bill.
Esimees Lauri Hussar
AI Summary
Chairman Lauri Hussar asks Lauri Laats to take the floor.
Lauri Laats
Profiling Eesti Keskerakonna fraktsioonAI Summary
Lauri Laats asked why the 1.66% price increase associated with the two-percent hike in VAT does not reflect the actual inflation (around 5%), and whether an impact analysis has been compiled regarding the effects of the increases in fuel, natural gas, and electricity excise duties scheduled for May.
Peaminister Kaja Kallas
AI Summary
Prime Minister Kaja Kallas said that energy prices—the price of electricity and the price of fuel—have decreased compared to last year, but this drop is not being reflected in the final prices, and consumers should be more demanding, because stores might hike up prices under the guise of the VAT increase and blame the bad government.
Anastassia Kovalenko-Kõlvart
Profiling Eesti Keskerakonna fraktsioonAI Summary
Anastassia Kovalenko-Kõlvart asks whether raising the VAT on accommodation establishments was the right decision, considering high inflation, the decline in tourism compared to the post-COVID period, and three years of losses for the sector, which threatens the future tax revenue stream into the budget.
Esimees Lauri Hussar
AI Summary
Chairman Lauri Hussar invited Anastassia Kovalenko-Kõlvart to the stage.
Peaminister Kaja Kallas
AI Summary
Prime Minister Kaja Kallas stated that Estonia has one standard VAT rate and two reduced rates, and the tourism sector is able to offer services using those rates. However, this does not apply to providers in the catering, culture, or other service sectors. The COVID crisis directly impacted tourism, and the sector received substantial subsidies, but today, the crisis is no longer affecting this sector the most.
Esimees Lauri Hussar
AI Summary
Chairman Lauri Hussar noted that during inquiries, every Riigikogu member may ask only one oral question; a second question will not be granted, and the floor will next be given to colleague Varro Vooglaid.
Varro Vooglaid
Profiling Fraktsiooni mittekuuluvad Riigikogu liikmedAI Summary
Varro Vooglaid is asking why the previously applied logic—whereby half of accommodation service clients were domestic and half were foreign, leading to the VAT being split 50/50—no longer holds true, given that the general VAT rate has increased to 22% and the VAT for accommodation services is now 14% (not 11%). He requests an explanation regarding this new logic.
Peaminister Kaja Kallas
AI Summary
Prime Minister Kaja Kallas said that the reduced VAT rate for the tourism sector had risen to 13%, but after listening to the sector, it was lowered by four percentage points to 9% in order to remain competitive, and all the justifications for this are laid out in the explanatory memorandum of the bill.
Esimees Lauri Hussar
AI Summary
Chairman Lauri Hussar calls upon Andres Metsoja.
Andres Metsoja
Profiling Isamaa fraktsioonAI Summary
Entrepreneurs state that when input prices increase, they must either charge consumers more or face the risk of their customer base shrinking. And while the government managed to find money for teachers' wages, the question remains why the same funds cannot be allocated to tax reduction.
Peaminister Kaja Kallas
AI Summary
Prime Minister Kaja Kallas stressed that the budget has limits, and if there is a desire to fund something new, it must be shown exactly what existing expenditure will be dropped, because finding the money is not possible.
Esimees Lauri Hussar
AI Summary
Chairman Lauri Hussar calls upon Mart Helme.
Mart Helme
Profiling Eesti Konservatiivse Rahvaerakonna fraktsioonAI Summary
Mart Helme raises the concern that the accommodation and tourism sector is facing collapse due to the decline in Finnish tourists and rising taxes. He asks how, in a situation where both turnover and profit have vanished, an establishment like the Georg Ots Spa on Saaremaa could possibly manage to survive.
Peaminister Kaja Kallas
AI Summary
Prime Minister Kallas said that difficult times require decisions: the tax hump will be abolished, the tourism sector will have a special VAT rate, and the state will seek to attract tourists through culture, security, and cooperation with NATO and the European Union.
Esimees Lauri Hussar
AI Summary
The Chairman thanks the previous speaker and invites Kalle Grünthal to speak.
Kalle Grünthal
Profiling Fraktsiooni mittekuuluvad Riigikogu liikmedAI Summary
Grünthal asks why you exclusively use taxpayer money and make financial decisions that leave taxpayers dissatisfied, referencing the clip titled “Read My Lips: Taxes Will Not Rise,” and reminding them that tax increases were not promised to the taxpayer before the elections.
Peaminister Kaja Kallas
AI Summary
Prime Minister Kaja Kallas stated that the largest expenditures will be directed toward the field of national defense and security, because when it is necessary, there is no turning back, and difficult, painful decisions must be made that the taxpayer does not want, but we simply have no other choice.
Esimees Lauri Hussar
AI Summary
The Chairman thanks the Prime Minister and announces the start of the discussions, and the representative of the interpellators, Anastassia Kovalenko-Kõlvart, requests three minutes of additional time.
Anastassia Kovalenko-Kõlvart
Profiling Eesti Keskerakonna fraktsioonAI Summary
Anastassia Kovalenko-Kõlvart emphasized in her address that increasing the VAT on accommodation poses a threat to the Estonian economy and tourism. She argues that tourists' funds and expenditures will be redirected to Latvia, consequently damaging regional communities and employment opportunities. Given the lack of adequate impact analysis and dialogue with stakeholders, she believes the tax change should be scrapped entirely or, at minimum, subjected to a comprehensive review.
Esimees Lauri Hussar
AI Summary
Chairman Lauri Hussar expresses his thanks and then invites Mart Maastik to the Riigikogu rostrum as the next speaker.
Mart Maastik
Profiling Fraktsiooni mittekuuluvad Riigikogu liikmedAI Summary
Maastik argues that while an increase in the tourism tax is being discussed, maintaining the country's financial stability is more important, as tax hikes burden businesses and diminish domestic tourism. Therefore, the state must reduce its expenditures and increase revenue through economic growth, rather than imposing additional levies.
Esimees Lauri Hussar
AI Summary
Chairman Lauri Hussar asks for three extra minutes.
Mart Maastik
Profiling Fraktsiooni mittekuuluvad Riigikogu liikmedAI Summary
The situation highlighted that the growth of the shadow economy and excessive tax increases could deplete the state budget and drive away tourists and shoppers. Therefore, the economy must be managed sensibly, ensuring that businesses and peripheral regions are not harmed, and costs are kept under control.
Esimees Lauri Hussar
AI Summary
The Chairman thanks [the previous speaker] and invites Mart Helme to take the Riigikogu rostrum.
Mart Helme
Profiling Eesti Konservatiivse Rahvaerakonna fraktsioonAI Summary
Mart Helme claims that investments are shrinking and investors are pulling out because Estonia's economic environment has become hostile and the necessary steps aren't being taken in the energy sector, making Estonian businesses and investments unfavorable.
Esimees Lauri Hussar
AI Summary
Chairman Lauri Hussar requests three minutes of extra time.
Mart Helme
Profiling Eesti Konservatiivse Rahvaerakonna fraktsioonAI Summary
Mart Helme stated that while everything can technically be taxed, tourism and regional life are critically important for Estonia, and if they vanish, the state will collapse. He urged the government to stop adhering to dogmas and start finding more opportunities for people, rather than burdening them with taxation.
Esimees Lauri Hussar
AI Summary
He/She thanks her and presents a request to the Madam Prime Minister.
Peaminister Kaja Kallas
AI Summary
Prime Minister Kallas emphasized that resolving crises requires expenditures to be cut only in conjunction with finding new revenue, alongside increasing national defense investments and the understanding of our allies, in order to ensure peace and economic growth and prevent the war from expanding into NATO borders.
Esimees Lauri Hussar
AI Summary
The Chairman thanks the speaker, acknowledges that there is a right of reply, and invites Mart Maastik to take the floor.
Mart Maastik
Profiling Fraktsiooni mittekuuluvad Riigikogu liikmedAI Summary
Mart Maastik stated that he joined the Isamaa party in order to make the right decisions. Regarding the financing of national defense, he suggests taking out a targeted loan because inflation is eroding the value of the loan (up to 24% annually), and other smart countries are doing the same. The alternative, he noted, is not to borrow and instead burden the citizens, forcing everyone to take 3–4 jobs while we heavily tax them.
Esimees Lauri Hussar
AI Summary
Chairman Lauri Hussar asked Mart Helme if he wanted to exercise his right of reply or raise a point of order, and following Helme's response, he again offered Helme the floor for a right of reply, since his name had been mentioned.
Mart Helme
Profiling Eesti Konservatiivse Rahvaerakonna fraktsioonAI Summary
Mart Helme praises the defense expenditures but stresses that the claim that we only have two years is harmful, and he rejects the generalizations that he is a feudal landlord or owns vast estates.
Esimees Lauri Hussar
AI Summary
The Chairman declares the debate closed, as no further replies are possible, and the first item on the agenda has been fully exhausted and addressed.