Estonia’s tax system most competitive in the world

For the eighth year in a row, Estonia is first in International Tax Competitiveness

or the eighth year in a row, Estonia has topped the rankings in the International Tax Competitiveness Report, focusing on countries belonging to the Organisation for Economic Co-operation and Development (OECD) and published by the Tax Foundation, a tax policy non-profit in the United States. Estonia’s top score is driven by a 20% percent tax rate on corporate income that is only applied to distributed profits and also by a property tax that only applies to the value of land, rather than to the value of real property or capital.

According to Andres Sutt, the Estonian Minister of Entrepreneurship and Information Technology, a strong and competitive tax system helps Estonia maintain a favourable business environment and attract foreign entrepreneurs. “In a globalised world, a transparent and fair tax system is one of the most important factors for companies thinking of international expansion or entering the European market.

“Estonia’s tax system constitutes a strong competitive advantage because it supports free entrepreneurship and minimal bureaucracy – allowing businesses to focus on the development of their products and services” explained Sutt.

The minister also pointed out that competition is ramping up among countries worldwide who are looking for ways to attract businesses to contribute to their economies. “The COVID-19 pandemic has underscored the possibilities and limitations of physical space for business. In the intensifying global competition for talent, Estonia boasts two major advantages – the digital solutions offered by Estonia provide convenient tools for responding to unexpected events, and a simple and uniform taxation regime at a competitive rate. As a result, Estonia’s tax system and public digital services are noticed by entrepreneurs around the world,” said Sutt.

This is confirmed by the latest Nation Brands report published by Brand Finance that deemed Digital Estonia as the world’s fastest-growing nation brand of 2021. Compared to last year, Estonia’s brand value increased by 38%. According to the report, Estonia’s world-class digital infrastructure has helped it succeed in the context of the COVID-19 pandemic. The report also highlights Estonia’s e-Residency Programme as one of the main contributors to the high value and rapid growth of the national brand, allowing anyone around the world to access the country’s public e-services, as well as set up and run an EU-based company online.

“At the outbreak of the COVID-19 pandemic, when many countries started looking into the digitalisation of services perhaps for the first time ever, 99 % of Estonian public services were already online. Estonia has been fearless in setting up its digital infrastructure, and high international rankings confirm that we are seen as an example,” commented Lauri Haav, Managing Director of e-Residency. He added that Estonia has reason to be proud of numerous innovative solutions, one of them being e-Residency. Back in 2014, Estonia was the first country in the world to offer the pioneering programme to foreign nationals. Today, similar initiatives have been or are in the process of being launched in Latvia, Lithuania, Dubai, Azerbaijan, Portugal, Ukraine and many other countries around the world.

“For host countries, e-Residency offers both direct and indirect economic benefits. For Estonia, it has proven to be an excellent image-making tool, enhancing the small state’s diplomatic power, while also boosting local entrepreneurship and the larger economy as well.

“Taken together, e-Residency and Estonia’s tax system have reinvigorated innovation not to mention that multiple successful business ventures by e-residents have delivered considerable tax revenue for the state,” commented Haav.

According to Haav, to date, a community of almost 90 000 e-residents are helping to promote Estonia’s national brand in more than 170 countries around the world, disseminating the digital society’s success story. “Thanks to our fast-growing fan community and the resulting diplomatic influence in the areas of business, culture and foreign policy, there is reason to believe that the value of Estonia’s nation brand will continue to make rapid progress in the future as well,” said Haav.

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