Estonia: Incoming coalition agrees on tax hikes, budget cuts

Estonia’s three-party coalition of the Estonian Reform Party, Social Democratic Party (SDE), and Estonia 200 has published its new coalition agreement, ERR reports. Under the agreement, the coalition pledges to cut the budget deficit to 3% of GDP in 2025 and 2026, and to reduce it further in 2027. The new government will raise most taxes and introduce a new temporary defence tax. At the same time, the coalition agreed to postpone the cancellation of the tax-free income threshold by one year until 2026. The government plans to cut costs in public administration and state subsidies. Defence spending will remain at a minimum of 3% of GDP. Incoming prime minister Kristen Michal said that the government would privatise various assets and state-owned companies.