Estonian President Toomas Hendrik Ilves blocked on 18th of December 2013 an amendment to the Estonian Value-added tax act – which would require all transactions greater than 1,000 euros to be declared – on the grounds that it is unconstitutional. Opponents of the amendment, including the Estonian Association of SMEs, say it threatens business secrets, increases red tape, and does little to further its goal – combating tax fraud.

Ilves said there is no evidence that the proposed restriction on business freedom would signficantly crack down on tax evasion, and that there are other ways to diminish the hole in VAT collecting. He also called on Parliament to improve inclusion of businesses, municipalities and citizen groups in the policy-making process.

The value-added tax and accounting acts’ amendment act was passed on 11th of December 2013 in the Estonian Parliament.

The act imposes an additional turnover declaration, which will require entrepreneurs to declare one by one all transactions of at least 1000 Euros between each other. 48 MPs voted for and 23 against the Government bill, 28 did not participate.

The first reading of the draft bill took place on October 23rd. The main aim is to reduce tax fraud, for which two types of changes were planned in the bill.

Different interest groups, such as the Estonian Taxpayers’ Association, Estonian Association of Small and Medium Enterprises and the Estonian Traders’ Association approached the finance commission with regard to the bill. Their main concern is that the bill was drafted in a hurry and without including the interest groups.

The act was supposed to come in force on July 1st 2014.