Are Rural Businesses Facing a Tax Avalanche?

An Estonian's favorite dish really seems to be another Estonian!

Estonian businesses are currently grappling with a rising tax burden. The VAT on accommodation services is increasing from 9% to 13%, while the general VAT has already risen from 20% to 22% this year and is set to climb to 24% next year. These numbers may look small on paper, but their impact on our daily operations is enormous.

On October 31st, restaurants and cafes across Estonia protested against the tax hikes, but unfortunately, their efforts did not yield the desired results. Local businesses, especially in rural areas, feel unheard. What happens next?

Shall we Face the Truth for a Moment?

Businesses Fight to Stay Afloat and Keep Up with Costs

As a business operating in a rural area, managing the ever-growing costs is incredibly challenging. Labor costs are rising, raw material prices are climbing, and now we must also account for higher taxes. All of this is happening in an environment where the number of guests is decreasing due to both the declining purchasing power of Estonians and a drop in tourist numbers.

Rural businesses can’t simply raise prices to cover costs. In cities, this might be possible because customers have more options and deeper pockets. In rural areas, however, the rules are different—people are cautious about where they spend their money, often choosing cheaper alternatives or staying home altogether.

A Parallel Between Summer and Winter Outside Big Cities

For businesses operating in Lahemaa National Park, summer and winter are like night and day. During the summer months, our halls and forests are filled with laughter, conversations, and activity, while in winter, silence often prevails. This contrast has always brought its own challenges, but the recent tax increases make this seasonal gap even more painful.

Summer- A Time of Hope and Energy

Summer is the lifeblood of our businesses. During this season, we welcome both local and international guests who come to enjoy nature, good food, and authentic local experiences. Sunny days bring bustling dining rooms, lively terraces, and the gratifying feeling that our hard work is paying off.

However, even in summer, competition is fierce. A single customer can choose between dining at our restaurant, visiting a nearby tourist farm, or simply having a picnic. The tax increases force us to raise prices, which could easily steer customers toward cheaper alternatives.

Moreover, a successful summer no longer guarantees stability through the winter. If the income earned in summer must immediately cover taxes and rising costs, there’s little left to build a safety net for the off-season.

Winter- A Challenge and an Opportunity to Think Outside the Box

Winter has always been the biggest test for rural businesses. While the beauty of nature and active pursuits draw tourists and guests in summer, the winter months require extra effort to attract people. Cold weather and dark evenings keep many at home, but this has pushed us to come up with creative ways to spark interest.

Restaurants organize special themed dinners, live music evenings, and other unique experiences to make a winter outing worthwhile. These efforts have helped us reach new customers and bring fresh energy to our offerings. However, the tax hikes create an unavoidable challenge—services are becoming increasingly expensive for our guests.

In the end, people may decide it’s no longer worth traveling to the countryside for a getaway and instead opt for a trip to a warmer destination.

Does Anyone Even Care About Our Struggles?

We want to see more dialogue and understanding. Tax policies need to acknowledge that not all businesses are located in Tallinn or Tartu. The needs of rural businesses are different, and failing to address them could lead to the economic decline of entire regions.

We urge the government to take a broader perspective. Tax hikes won’t be beneficial if they destroy the very businesses that pay those taxes. We need a system that fosters growth and innovation, not one that stifles it.

Our job is to survive and adapt. But is it sustainable if every step forward feels like a step back?