Social Democrats are deceiving voters about bank tax

The editors of Äripäev in their editorial decided to praise the Social Democrats for the idea of ​​​​introducing a tax on bank profits. However, the editor seems to have lost sight of the fact that the Social Democrats are part of a coalition that collectively and decisively opposes taxation of bank windfalls. This year, the Center Party submitted three proposals to the Riigikogu to introduce a tax on bank profits.

The Social Democrats, despite their stated intentions, never supported these initiatives when voting. The third bill is still under consideration, and the Social Democrats have the opportunity to correct mistakes by doing, so to speak, according to their own words.

Government leaves hundreds of millions to banks

Estonia is a free country, and everyone can admire the Social Democrats. Their actions (or, rather, inaction) are also of political technological interest: is it possible to create the impression that you are sincerely fighting for justice and at the same time do nothing? The Social Democrats’ rhetoric presents the bank profit tax as an ideal that the entire party is working towards, but their actions suggest otherwise. Is this a cunning deserving of praise, or just another example of political opportunism?

Äripäev is right about one thing: the bank tax should have been introduced last year, when the Center Party started talking about it. Over the past year, banks in Estonia have earned a billion euros in profit. This is not an accident and not only (and not so much) the ability to run a business. The main reason for the profitability of banks is the high level of Euribor, thanks to which the profit margin of banks in recent years has exceeded the profit margin of casinos. But there is something more curious here: interest rates for loans in Estonia are higher than, for example, in Finland or Denmark. Despite the fact that the level of payment discipline among our citizens is almost impeccable, in Estonia banks earn more on loans than in Scandinavia, although there are no obvious reasons for this.

The bank tax would bring 400 million euros to the budget, but that’s not all. Banks take more money from Estonian residents, but pay less taxes here. If profits in Estonia are subject to lower taxes, it is not profitable for banks to create jobs here. It is much easier to withdraw money and hire employees, for example, in Lithuania or Sweden, where bank profit taxes are much higher. Due to government decisions, Estonia is losing highly qualified jobs that are being created in its neighbors. And this is in a situation where our economy already ranks first in terms of duration of recession in the European Union and second in the world.

It doesn’t take an economics guru to figure out that a bank tax could soften the economic downturn. From the point of view of the state budget, this is a very important step, but its significance goes beyond this 400 million per year. Introducing a bank tax could preserve health insurance for stay-at-home mothers, save pensions from taxes, or simply provide hope that the current government is trying to destroy with its decisions. We could talk at length about the three-year economic downturn that has put Estonia on par with civil war-torn Sudan, Yemen and Haiti, but that is a topic for another article.

Bank tax in Lithuania has paid off

In Lithuania, the bank tax has proven its effectiveness, and not a single bank has ceased operations because of it. After all, it doesn’t make much difference whether you earn 300 or 200 million euros in profit per year – both owners and shareholders will be satisfied. The Estonian state should first of all care about its citizens, and not about the well-being of banks. SEB Bank’s chief analyst in Lithuania, Tadas Povilauskas, confirmed in a recent interview that the bank tax had no direct impact on businesses, households, lending or interest rates. Meanwhile, the Lithuanian state treasury received an additional 250 million euros last year, and this year the amount will be approximately the same.

If you look at the policies of the Estonian government, a strange question arises: why banks? Why are their interests protected by all means, while all other promises are simply forgotten? There was no extraordinary increase in pensions, no four-lane highways were built, the salaries of teachers and doctors were not increased, fast Internet was not provided, and the number of officials was not reduced. But the promise made to the bankers has stood the test of time. I have no explanation for this stupidity, but perhaps Mr. Läänemets, whom Äripäev praises so much, can explain his motivation.