Summary

The issues concerning tax interests are currently topical all over the world, including in Estonia. Tax interests may become a significant burden to a taxpayer and an interest rate that does not take into consideration their actual economic situation and the impact of the tax interest may harm their situation up to complete insolvency. However, a uniform environment needs to be created, ensuring scheduled budgetary income and enabling the state to perform its most important functions.

Yet, the tax interest rate established in Estonia is significantly higher than in other states. Many legal disputes taking place in Estonia indicate that the tax interest is perceived to be excessive by the taxpayers. At the same time, the Supreme Court has found that the tax interest rate is constitutional. Hence, the highest court has expressed their position on the excessive tax interest rates. Although the court judgment gave a legal answer to the issue of excessive interest rates, it is nevertheless important to allow an ongoing discussion not only on what is the law, but also on what it should be.

This article addresses the nature of tax interest, its purposes and the valid rates both in Estonia and in other states, and discusses valid case law on the issue of excessive tax interest.