Estonia’s Kaja Kallas defended her tax hikes as a “national defense levy”
Estonian Prime Minister Kaja Kallas has claimed that recently announced tax hikes are necessary to offset increased military spending. Her liberal Reform Party scored a decisive victory in last month’s elections, after she swore not to increase taxes.
Kallas held the first meeting of her coalition government in Tallinn on Thursday, as opposition leaders and protesters picketed outside government buildings. In a press conference after the meeting, Kallas admitted that raising taxes was an unpopular move, but urged critics to think of the higher rates as a “national defense levy.”
Kallas’ party claimed 31% of the vote in last month’s elections, leaving the right-wing EKRE party a distant second with 16%. The prime minister, a staunch supporter of Ukraine and NATO, now leads a coalition government made up of her own Reform Party, the center-left Social Democrats, and the liberal Eesti 200 faction. Kallas previously led an alternate coalition government from 2021.
“Read my lips: taxes will not rise. Period,” Kallas told parliament in October, paraphrasing a 1988 campaign pledge by US President George HW Bush, which he would go on to break two years later.
Shortly after her win, Kallas’ government announced that it would remove tax exemptions and increase value added tax, income tax, and corporate tax rates. The government also announced a new car tax, and granted local authorities more power to set new levies of their own.
Estonia’s finances have been stretched by Kallas’ efforts to increase military spending. The country’s defense budget was hiked by 42% last year, bringing it to 2.8% of GDP. This increase is just the beginning for Kallas, who vowed in December to push military expenditure beyond 3% of GDP in 2024.
Within a month of the start of Russia’s military operation in Ukraine last year, Estonia had committed around 0.8% of its entire GDP to Kiev in military aid. Defense Minister Hanno Pevkur announced in January that this figure will rise to more than 1% this year.
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