Prime Minister Kristen Michal said that reducing VAT on food products requires money. This money must come from either significant cuts or new taxes.
Michal added that the Estonian state is short on money because defense costs have increased. All tax revenue goes towards defending Estonia's freedom. However, there is a budget deficit and the state must borrow.
Over 50,000 people have signed a petition to reduce VAT on food products to 10%. The leader of the Social Democratic Party, Lauri Läänemets, supported this petition.
The reduction of VAT on food products has previously been demanded by EKRE and the Center Party. Now the Social Democratic Party also supports it. Lauri Läänemets says that the reduction will help people and support agriculture.
Michal said that the Social Democrats' plan was to create new jobs and taxes. He criticized that the Social Democrats are now supporting the steps of the Center Party and EKRE.
Michal added that prices have risen faster than taxes. The current price increase is due to the rapid rise in wages and raw material prices worldwide. The increase in inflation was also contributed to by the dismantling of the pension system and the war.
He said that price growth will slow down next year. However, there is no quick solution. For example, in Hungary and Latvia, food prices have also risen after VAT changes.
Michal said that the government is doing its best to alleviate the effects of price increases. The car tax will be reduced for families with children and the tax-free minimum will increase to 700 euros. The state will collect 500 million less in taxes, which will stay with the people.
The Prime Minister added that the state will reduce requirements and control in the public sector. This is done to reduce the pressure of price increases. The state will also cut public sector spending.