In July 2024, the Riigikogu passed new amendments to the income tax law. These amendments redirect part of the income tax from wealthier municipalities to those with smaller revenues. This has put pressure on wealthier municipalities to raise the land tax.
Andres Laisk, the mayor of Saue, said that the state has officially told local governments: don't complain, raise the land tax. He added that increasing the autonomy of the land tax is the right step. Because the financial autonomy of local governments in Estonia is very low, and there are few opportunities to increase it.
Laisk spoke about the long-discussed idea of bringing income tax to the local level, as in Scandinavia. If this has not yet been done, the land tax is the only autonomous tax. But if the state tells local governments to raise the land tax, it is no longer autonomy. It is a dictate, and it reduces the use of the land tax as a local tool.
From the new year, the new land tax law will come into force. It gives local governments the right to grant land tax exemptions. Previously, this was regulated nationwide.
Laisk explained that they used the land tax to shape local life. For example, in the Tallinn area, there is a problem that people register in Tallinn but use the services of other municipalities. Therefore, Saue municipality raised the land tax but provided a land tax exemption for all who are residents of the municipality at the beginning of the year. Those who are not residents of the municipality must pay a high land tax.