22nd May 2017

Embracing the Estonian e-economy

Estonia may only have formally re-emerged as an independent republic in August 1991, but the former Soviet state which joined NATO and the EU in 2004 has wasted little time in carving out a niche pre-eminent tech hub.

Much of this growth is rooted in a commitment to new and emerging technologies, not least a focus on becoming a truly digital society.

With internet access held to be a human right, there’s little surprise that Estonia is a nation which favours online. From filing tax returns to voting; getting a prescription or banking (some 99.8% of all bank transfers are digital) the preference to complete personal and commercial tasks on the internet is plain to see.

There are, of course a wealth of benefits to this ‘e-economy’. Time is not wasted with paper trails and the automation of bureaucratic processes speeds up activity, adding efficiency savings to the convenience of carrying out transactions from the home or office. But efficiency savings alone haven’t led to Estonia being dubbed the “Silicon Valley of Europe” – a simple, business friendly taxation system has also had real commercial benefits.

Estonia operates a unique system with a flat 20% income tax rate for entrepreneurs and corporations. Business taxes are only payable when profits are distributed to business owners and shareholders, not when they are made. Mirrored by the levies placed on individuals – personal income tax is also 20% – this system is designed to be simple and there’s little wonder that the process of filing a tax return, which for 95% of the population of course takes place online, is so straight forward it can take as little as three minutes. 

Regardless of views on rates or process of taxation, the key point here is that the system is simple and streamlined. It fosters an agile environment which has resulted in the Baltic state being able to boast more start-ups per capita than any other country in Europe, not least Estonia’s most famous technological advent – Skype.

In becoming a beacon of how a digital society can work, Estonia has grasped arguably the greatest benefit technology can bring – rationalising processes to allow entrepreneurs to push boundaries, explore new solutions and establish an innovative, vibrant businesses culture.

Spearheaded by leading technology lawyer, Paul Berwin, Berwins first trade mission to Estonia takes place in May 2017

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