Tax Foundation, a US think tank, has rated Estonia’s tax system the most competitive amongst the OECD countries1. It is the eighth consecutive year Estonia bags this honour.
The Organization for Economic Cooperation and Development (OECD)2 has developed nations such as the US, Australia, the UK, France, Germany, Canada, Israel, Japan, Korea and even some of the coveted Scandinavian countries in its hold.
The Tax Foundation’s International Tax Competitiveness Index (ITCI) measures the degree to which the 38 OECD countries’ tax systems promote competitiveness through low tax burdens on business investment and neutrality through a well-structured tax code. The ITCI considers more than 40 variables across five categories: Corporate Taxes, Individual Taxes, Consumption Taxes, Property Taxes, and International Tax Rules.
The ITCI attempts to display which countries provide the best tax environment for investment and the best tax environment for workers and businesses.
Estonia’s corporate income tax system only taxes distributed earnings, allowing companies to reinvest their profits tax-free. The VAT applies to a broad base and has a low compliance burden. Property taxes only apply to the value of the land.
Estonia is the world’s fastest-growing nation brand as of 20213, recording a 38% brand value growth from 2020 and outpacing modest increases across the ranking. According to the report prepared by the consulting firm ‘Brand Finance,’ Estonia’s success is down to the successful functioning of the digital society during the coronavirus pandemic. The report also highlights the e-residency program as one of the most significant contributors to the strength and ascent of the national brand.
E-residency is an Estonian state program enabling entrepreneurs everywhere to possess access to Estonia’s secure and convenient digital services so that they can create and manage a European Union company virtually. Estonia was the first country in the world to offer e-residency to people living abroad. Lithuania, Latvia, Dubai, Azerbaijan, Portugal, Ukraine, and others have launched similar initiatives following Estonia’s example.
The Estonian e-residency program launched in December 2014 provides foreign nationals with safe access to e-services offered within the Estonian e-governance ecosystem. Since its launch, Estonia has welcomed almost 85,000 e-residents who have established more than 18,000 companies in Estonia. In addition to indirect economic impact, resulting primarily from growth among and investments into Estonian companies offering services to e-residents, the e-residency program has generated direct revenue for the Estonian economy in an amount exceeding 70 million euros.
Andres Sutt, Minister of Entrepreneurship and Information Technology, said that a robust and competitive tax system helps Estonia keep its business environment favourable for local entrepreneurs and attract foreign entrepreneurs4.
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