Estonia's planned 'war tax' unprecedented, defense minister says

Tallinn's planned security tax is "unprecedented," but "everybody in Estonia understands that we have to do more," Estonian Defense Minister Hanno Pevkur said on Oct. 1.

Speaking at a panel discussion at the Warsaw Security Forum attended by the Kyiv Independent, Pevkur explained that "everybody in the society will contribute a bit more" as Estonia ramps up defense spending and aid to Ukraine.

"It's unprecedented that in Estonia, we will introduce a security tax, or war tax, however you call it."

The Estonian parliament is currently considering a security tax bill proposed in reaction to Russia's full-scale war in Ukraine.

The legislation would apply a 2% security tax on individual and business profits starting Jan. 1, 2026, and increase the value-added tax (VAT) from 22% to 24% from July 2025. The measure would be in force until the end of 2028.

Between 2022 and 2024, Estonia has devoted around 520 million euros ($575 million) in support to Ukraine. This represents some 1.4% of the country's gross domestic product (GDP), one of the highest percentages of all Kyiv's partners.

Tallinn has also allocated 0.25% of its yearly GDP to support Ukraine's military needs in the coming years, calling on other partners to do the same.

"We are investing 3.4% (of GDP) into defense, we will go to 3.7% in 2026. Of this money, we are investing around 52-54% only in capabilities and capabilities development," Pevkur said.

"There will be a couple of years when we will invest 25% of our defense budget only to ammunition."

Among NATO members, Estonia devoted the second-greatest share of its GDP to the defense budget in 2024, with only Poland investing more, at 4.12%. The U.S. is projected to come third, with 3.38%, followed by Estonia's neighbor Latvia.

While the number of countries that meet the 2% GDP benchmark jumped to 23 this year, Pevkur believes that this threshold is no longer sufficient.

"We have to go to 2.5%, maybe 3%, because this gap that we have from the last 30 years is just too big."

The minister noted that in the "last 25 years, European Union countries increased their defense spending by 43%. At the same time, Russia increased its defense spending by 592%."