 |  |  |
| Return to: Left History: a digital archive | Return to: Say no to imperialist wars! | Return to: NATO-Yugoslav War Internet Resources |
| | |
| Return to: Left History: a digital archive | Return to: Say no to imperialist wars! | Return to: NATO-Yugoslav War Internet Resources |
TALLINN, Nov 11 (AFP) -- The Estonian parliament this week opened debate on whether to lift corporate income tax on reinvested profits, with the government saying such a move would be a world first.
"As far as we know, the measure we are debating in parliament is unique in the world," said Daniel Vaarik, adviser at the Estonian Finance Ministry.
"Other countries, such as the USA, are closely following our steps, and if we are successful, they are likely to follow suit.
"We are the first to implement a new trend in world tax policy, which theoreticians the world over have been discussing for some time," he said.
The legislation is designed to increase the competitivness of a country which already considers itself one of the worlds freest economies.
It is to undergo three readings in parliament, and is expected to take effect as of January 2000. Under the bill, corporate income tax will be lifted from all re-invested profits.
"After we introduce the changes to the tax laws, our financial system will be one of the worlds most innovatory and favourable to business," Estonian Finance Minister Siim Kallas said.
"There is no doubt this major innovation will be noted in other countries, resulting in an influx of foreign investment," he said.
The government says the legislation is aimed at channelling money to promote production and economic activity. The money spent on creating new jobs, upgrading production and carrying out training will not be taxed. But taxation will apply to dividends and salaries.
The legislation was initiated by the Reform Party and endorsed by the three-party governing coalition, of which the market-oriented Reform Party is a member of.
The pledge to scrap the current 26 percent corporate income tax was the cornerstone of the Reform Party platform in the March parliamentary elections.
The move would create a budget shortfall of 900 million kroons (60 million dollars) in the state budget for 2000.
The government expects to offset the shortfall by raising value-added tax for certain products, introducing customs tariffs on non-EU countries and increasing state dues.
The opposition says the plan serves the narrow interests of the business community only, increasing the tax burden on inviduals.
Estonia already has a relatively rare personal income tax system, whereby all individuals are taxed with a flat rate of 26 percent.
Last year, Estonia had the highest rate of foreign direct investment per capita in central and eastern Europe, according to the World Investment Report.
The country is in the fast-track group of ex-communist states, negotiating entry to the European Union.
The finance ministry has said it is likely that some neighbouring states may start accusing Estonia of becoming a tax haven but this is not the case.
"After passing the measure, Estonia will not qualify as a tax haven, because there will be book-keeping and accountancy requirements as well as open registers, the bills explanatory letter says.
Politicians in the neighbouring Nordic countries of Finland and Sweden have expressed fears that the measure debated in Tallinn may lure away businesses from the highly taxed Nordic countries to Estonia.