Public Address: the Government’s Tax Policy Will Result in Price Increase for Goods

Below you will find the text of the address.

Imposing new taxes and significant increase of the existing ones brings along increased prices of goods, which will first and foremost influence the coping of persons with lower income.

We are observing with great concern the tax policy of the new government coalition, which foresees, in addition to the rise in fuel, electricity and gas excise duty, establishing a road use fee for heavy goods vehicles, increase in the fee for handling water and wastewater, and taxation of sweetened beverages as well as establishing a new packaging excise duty.

All these taxes are in addition to the value added tax that, in comparison to several European countries, is already one of the highest in terms of food products. All of the tax changes meant for businesses will in the end be expressed in consumer prices, which, if we look at them individually, might not show a significant effect, but in sum it means a significant increase in the prices of goods.

The aim of the planned packaging excise duty is to make environmental protection more efficient and find additional resources for the state budget. All companies that handle packaging must pay the packaging excise duty. However, due to the fact that the state supervision over the packaging is virtually non-existent, this means in reality that the companies that are honestly declaring their packaging are punished with the packaging excise duty and this will increase inequality between the market participants.

In reality, establishing the packaging excise duty will not help to fulfil fiscal policy or environmental goals and that is due to the following reasons:

First – imposing a new tax will mean unnecessary administrative and tax burden on companies, which will motivate companies to avoid observing the law and the planned revenue for the state budget will be lost. According to estimations, the current black market of packaging is at 30% and adding additional tax burden will increase it even further.

Secondly – the new packaging excise duty will not influence the quantity of packaging placed on the market. Already now, the producers are trying to decrease the volume of packaging material to minimum, because it is direct financial cost. However, we must take into account that a product has to preserve its form and appearance from production to the consumer’s table. But commerce has no real possibility to influence the quantity of packaging, because our import volumes are too small to influence international producers to decrease the packaging of the goods brought to Estonia.

Thirdly – the aim of the excise duty should be to have a positive impact on the environment or to motivate packaging operators to collect and recycle packaging waste brought to the market. The planned packaging excise duty fails to do so.

We are deeply concerned by the unreasonable imposing of the additional packaging excise duty, which is a great cost for entrepreneurs and which in the end will be paid for by the consumers.

The state cannot ensure sufficient transparency of the system or identify companies that bring packaging to the market and do not declare it at all or declare smaller quantities, already in the current situation. Implementing a new packaging excise duty puts honest packaging operators in a more unequal competitive position and increases significantly their tax and administrative burden as compared to those companies that do not operate according to the law.

Instead of imposing new taxes, the state should make the supervision over the existing system more efficient, the need for which has been highlighted by the State Audit Office in its audit from 2010. Furthermore, opportunities for sorting waste in municipalities should be increased – a recommendation, which was made also by the OECD.

In our opinion, it is misleading to allow for decreased tax burden on people with lower income, on one side in order to compensate for the loss of revenue for the state throygh increasing the tax burden on companies.