Riigikogu passed a bundle of tax amendments on Monday which were initiated by the new governing coalition and among other things will cancel a reduction in the social tax rate planned by the previous government, accelerate the hike in excise duties as well as introduce a new system of exemptions beginning in 2018.
The bill of amendments to the Income Tax Act and Social Tax Act passed with a 55-37 vote. There were no abstentions.
The newly-adopted bill cancels the 0.5-percent cut in the social tax rate planned for next year, as well as an increase from 9 to 14 percent in the VAT rate on accommodation services.
The general basic income tax exemption will increase from the present 170 euros to 500 euros a month as of 2018 and the exemption for personal income of 2,100 euros a month or higher will be abolished.
Tax exemptions related to children will be preserved in their present form and tax reimbursements for low income earners substituted with the higher basic exemption from 2018.
Excise duty rates on principal fuels will be cut and a hike in the diesel fuel duty planned for 2018 will be canceled. The duty rate on natural gas will increase 25 percent over 2018-2020.
The excise duty rates for low alcohol content beverages — beer, cider and wine — will be leveled off with the rates for strong alcohol. In addition, the excise duty hikes for alcohol scheduled for Jan. 1, 2017 and Jan. 1, 2018 will be postponed until February.
The deductible interest paid on a home loan will be capped at 300 euros and the tax exemption for deposit interests abolished.
The possibility for spouses to declare their income in a joint tax return will be preserved as far as home loan interests, training costs and the additional tax-free income per child are concerned.
