Estonia’s Ministry of Finance has proposed postponing the introduction of a unified tax-free income threshold until 2026, ERR reports. The ministry said that the move would ensure that Estonia’s state budget deficit did not exceed 3% as required under EU law. Under the current system, gross income of EUR 1,200 per month is exempt from income tax up to EUR 654, and the tax-free threshold then falls in increments, reaching zero for those earning EUR 2,100 or more per month. Critics of the system argue that the “tax hump” or “bracket creep” pushes taxpayers into higher income tax brackets, which leads to a higher income tax without a substantial rise in real income. In 2023, the Estonian parliament, the Riigikogu, voted to simplify the current system by introducing a unified tax-free threshold of EUR 700 per month or EUR 8,400 per year as of 2025.
Read Less, Know More.