(Bloomberg) -- Estonia’s central bank chief slammed a government budget deal, saying that a plan to generate additional tax revenue from banks amounted to a boon for shareholders rather than the public.
In an unusually candid condemnation, Bank of Estonia Governor Madis Muller criticized Prime Minister Kaja Kallas’s budget plan, which includes an agreement with banks to increase dividend payments — and thereby taxes on dividends — rather than imposing a direct levy.
“Banks are in solidarity (with clients or the state budget?) by distributing an even greater share of their profits and capital in dividends to their shareholders,” the central bank governor, who sits on the European Central Bank Governing Council, said on X, formerly known as Twitter, late Tuesday.
Kallas secured the compromise agreement on Tuesday evening in Tallinn. With governments in the region turning to taxes on banks as a revenue-raising measure as ECB interest-rate increases boost profits, the Estonian prime minister said that banks agreed to contribute to state coffers “in solidarity.”
Kallas and her fiscally conservative Reform party resisted a windfall tax, which was supported by her Social Democrat coalition partner — a move they said would generate an additional €951 million ($1 billion) over three years. The bank-dividend plan would raise €120 million in two years. In Estonia, profits aren’t taxed until they are paid out.
Muller took a dim view of the arrangement, saying a dividend payout would fall before banks see their tax rate climb to 18% from 14% in 2025 — part of a budget deal made earlier this year.
“If I were a shareholder, I would pay bank executives a respectable bonus for such successful negotiations,” Muller said in a second X post.
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