Estonia Considers Security Tax to Boost Defense Spending to 5% of GDP

Estonia's Finance Minister, Mart Vorklaev, has announced that the country is considering implementing a new security tax to increase defence spending to 5% of its gross domestic product (GDP).

The proposal comes as Estonia seeks to strengthen its military capabilities in response to the changing security environment and the perceived threat from Russia.

Vorklaev stated that growing defence costs leave Estonia with no other option but to introduce the security tax, which would not be implemented until 2026. The initiative aims to enable Estonia to purchase €1.5 billion worth of ammunition to deter or destroy Russia's infrastructure in the event of an attack. "The growing defence costs would leave the country with no other option but to introduce a security tax in the coming years," Vorklaev said.

Estonia, a NATO member, has already agreed to increase its defence budget to 3% of GDP between 2024 and 2027, up from 2.85% last year. However, Estonian Defence Forces' chief General Martin Herem proposed further increasing the defence spending to 5% of GDP to strengthen the country's military readiness.

Why this matters: Estonia's consideration of a security tax to boost defence spending highlights the ongoing tensions and security concerns in the Baltic region. As a frontline state in the West's confrontation with Russia since the beginning of the Ukraine conflict in 2022, Estonia's move emphasizes the heightened sense of urgency among NATO allies to strengthen their military capabilities and deter potential aggression.

The proposal has faced criticism, with Vadim Belobrovtsev, a member of the Center Party parliamentary faction, questioning where the funds for the additional ammunition would come from, given that Estonia's GDP decreased by 3% last year. Belobrovtsev argued that the authorities should focus on the national economy rather than introducing new taxes.

Despite the challenges, Vorklaev emphasized that difficult decisions on defence spending cannot be made by governments that are deemed untrustworthy by their people. He suggested that Estonia could potentially borrow from its citizens to fund the increased defence spending rather than following guidelines from abroad.

Estonia, along with its Baltic neighbours Latvia and Lithuania, has been at the forefront of the West's confrontation with Russia since the outbreak of the Ukraine conflict in 2022. The proposed security tax and the ongoing efforts to bolster defence spending reflect Estonia's determination to enhance its military capabilities and contribute to regional security as a committed NATO ally.

Key Takeaways

• Estonia is considering a new security tax to boost defence spending to 5% of GDP.
• The tax aims to enable Estonia to purchase €1.5 billion worth of ammunition to deter Russia.
• Estonia already agreed to increase defense budget to 3% of GDP by 2027, up from 2.85%.
• The proposal faces criticism, with concerns over funding and impact on the national economy.
• Estonia's move reflects heightened security concerns in the Baltic region amid tensions with Russia.