TALLINN — After trading barbs on Estonia’s electricity market reform, the country’s ruling coalition is now at odds over taxes and mortgage relief.

The Pro Patria and Res Publica Union came out with a proposal this weekend to ban sales tax in Tallinn and continue provide home loan interest relief, the latter of which its coalition partner the Reform Party is looking to drop.

Mart Laar, the IRL leader declared at the party’s congress Sunday that the country’s recent tax hikes are a serious threat to its competitiveness, highlighting the party’s opposition to increased taxes.

Laar harshly criticized the recently-established sales tax Tallinn’s municipal government, arguing that the parliament should ban municipalities from being able to do this and promising to put forward the issue in the Riigikogu in two weeks.

“To look at how this tax in Tallinn was applied, it is easier to ban such a possibility in the parliament,” Laar said in this speech to party members.

In a repeat of last month’s debate on electricity reform, Laar also struck at the Reform Party’s plan to end the home loan interest relief program, pointing out that it would increase the mortgage payments of 160,000 families.

“This is the worst time for this suggestion. It would raise the expenses of 160,000 families, which is half of Estonia’s homeowners,” said Laar.

Threat to euro adaption?

The Reform Party members didn’t take the criticism silently. Minister of Finance Jürgen Ligi told Äripäev that it what Laar said passed it would flush the country’s euro adaption in 2011. Ligi also said that IRL is seeking to maintain the tax relief for the wealthy, which is surprising given the tough fiscal choices the country needs to make.

Eurozone accession has been a long-standing goal of the Estonian government. The budget deficit was reduced to less than 3 percent of gross domestic product, fulfilling the Maastricht criteria to switch to the euro currency in January 2011 with increased fuel and electricity taxes.