At the request of the Estonian Water Works Association, we analysed Bill No. 442 amending the Estonian Competiton Act. The bill will result in additional taxation for consumers of public utility services. The Parliament adopted the bill on 8 December 2021 without making any changes to the bill because the additional tax income has already been included in the 2022 state budget.

Financing of own supervision

At present, the Competition Authority is financed from taxes or state fees collected in the state budget. According to the new bill, the regulatory division of the Competition Authority will be financed by the companies, whose activities are supervised by the Competition Authority. The purpose of this fee, established to the companies, is to bring some extra revenue to the state budget. To justify this solution it has been argued, among others, that it is not fair to finance the supervision of the district heating sector, for example, from the revenue of persons who do not consume district heating.

Our specialists consider such a justification hypocritical, as tax revenue finances a large number of activities that are not necessarily in the interests of all taxpayers. In substance, it will be a new consumption tax on public utility services (including electricity network services) which consumers cannot avoid consuming.

The bill does not ensure proportional use of the collected revenue

The explanatory memorandum to the bill does not indicate how the budget of the Competition Authority is divided between different sectors for supervision. Even without seeing this division, it is clear that companies and consumers of their services will not pay only for their own supervision because the supervision fee is calculated as the same percentage of the company’s sales revenue. Since heat prices have recently significantly increased, the sums collected as supervision fees from heating companies will be significantly higher than the ones planned in the explanatory memorandum to the bill. The bill does not contain any mechanism for returning the surplus.

Our team

Bill No. 442 was analysed by partner Allar Jõks and counsel Piibe Lehtsaar.

For more information – ERR.