Entrepreneurs Urge PM: Finance Defense with Loans, Not Taxes

A coalition of prominent Estonian entrepreneurs has addressed a letter to Prime Minister Kristen Michal and Minister of Finance Jürgen Ligi, advocating for a shift in how the country finances its defense expenditures. The letter, signed by notable figures such as Markus Villig, Erkki Raasuke, and Taavet Hinrikus, proposes abandoning additional taxes on inputs like capital, assets, energy, and labor, which they argue threaten Estonia’s competitiveness. Instead, they suggest financing defense expenditures through loans.

The entrepreneurs emphasize the importance of strengthening defense capabilities, a cause they have supported in the past and wish to continue supporting. They acknowledge the state’s difficult financial situation but stress the need to focus on the future to avoid harming Estonia’s long-term prospects.

Their proposals include:

1. Distinguishing between defense capabilities and public finance stabilization: They suggest using external loans to finance the sharp increase in defense spending, spreading the repayment over generations, while avoiding using loans for current expenses that exceed revenues.
2. Slowing down or halting the indexed growth of the state budget: They advocate for reviewing and reducing expenses to ensure near-term stabilization and future growth.
3. Retaining only the most valuable and critically necessary state sectors: They call for preserving the core sectors that define the state, as determined by elected politicians.
4. Increasing taxes on income for a limited period: They propose taxing income such as profits, capital gains, and dividends, which would affect the wealthier segments of society the least painfully while providing the government with a foundation for decision-making.
5. Taxing outputs, not inputs: They argue that taxing inputs like capital, production assets, materials, energy, and labor negatively impacts all companies and leads to inflation. Instead, they suggest basing any tax burden increases on the current tax base.
6. Abandoning balance sheet- or equity-based taxation: They warn that such taxes would harm Estonia’s competitiveness and drive away capital-intensive ventures, missing out on critical future industries.

Impact on E-Residents

E-residents, while not physically present in Estonia, are integral to the country’s economic landscape. Here are steps they might consider in response to these proposed changes:

1. Stay Informed: Keep up-to-date with developments regarding the proposed changes in taxation and defense financing.
2. Engage with the Community: Join discussions within the e-residency community to share insights and gather opinions.
3. Advocate for Interests: Collectively voice concerns or support through formal channels if the changes significantly impact their businesses.
4. Consult with Experts: Seek advice from tax professionals or legal experts to navigate any new regulations effectively.
5. Adapt Business Strategies: Be prepared to adjust business strategies in response to new tax policies.
6. Leverage Advisory Offers: Take advantage of the advisory body proposed by the entrepreneurs for valuable guidance.