The structure and the role of Estonian local government has remained unchanged since the major reforms in 1990-1995 after the collapse of the Soviet Union. The main revenue sources for local government are taxes, equalisation transfers and earmarked transfers from the central government, while the main areas of expenditure are education, social care, economic activities and public administration.
The local governments have the right to change the rates of some taxes or to add new taxes. This right was used during the crisis – several local governments increased the rate of the land tax, while the capital city Tallinn started to collect additional taxes, for exmaple boat and sales taxes. At the same time, local governments also tried to reduce expenditures – for example, compared to 2008, in 2009 the management expenses decreased by 18% and expenditure on investments decreased by 29%.
No specific new measures have been implemented yet to cope with the economic crisis. However, the national government has has initiated the preparation of the concept of contracting out local public services and the discussions about the need for administrative reform were brought back up. The local governments have not initiated or implemented any new or innovative measures, mainly because their fiscal autonomy is rather restricted.