Estonia combines elements of both the old and new economy; while the success of the technology sector created a blossoming startup scene, the country is also moving up in the value chain in sectors such as forestry and green energy.
With its low red tape, high economic freedom and transparency, the most competitive tax system in OECD and a highly skilled workforce, doing business in Estonia is easy. One of the most important advantages is 0% corporation income tax on retained and reinvested profits. Estonia is ranked first in tax competitiveness in OECD countries for the seventh year in a row! A first-rate tax code is also one that keeps marginal tax rates low.
Just as importantly, taxes can be filed online and 98% of all tax declarations in Estonia are filed electronically, including forms for income tax, social tax, unemployment insurance and contributions to the mandatory pension fund, requests excise duty returns and customs declarations. A company can also be established fully online in just a few hours and from almost anywhere in the world. (Read more here why tax declaration is a favourite sport for Estonians and how much time would your company save on tax compliance if it paid taxes in Estonia.)
Economic freedom and transparency have made e-Estonia one of the most advanced e-societies in the world. Through continuous experimentation, learning and iteration, Estonia considers the natural next step in the evolution of the e-state will involve moving basic services into a fully digital mode. This means that citizens and companies can be served in efficient, rapid and automated ways, with many basic functions occurring seamlessly in the background.
But nothing happens without people who make the decisions and always want to move forward. Estonia has highly skilled workforce, and 86% of adults speaking at least one foreign language! Building a company here is made easy with simple and straightforward labour legislation, easy hiring processes and low unionisation. IT skills are taught extensively in primary school and our students rank in the top 10 globally in science, mathematics and reading at the secondary school level.
Estonia’s solution for maintaining a modern state is X-Road, which saves Estonians 844 years of working time every year. The backbone of e-Estonia, X-Road is a software-based programme allowing the nation’s various public and private sector e-service information systems to link up and function in harmony. As it is designed with growth in mind, it can be scaled up as new e-services and new platforms come online. It can also be exported and today is used in Finland, Kyrgyzstan, Faroe Islands, Iceland, Japan and other countries.
Doing business and living our daily lives both in the physical and virtual world is normal in Estonia. But it is the result of years of work. Information and communications technology (ICT) has taken centre stage in reshaping the global socio-economic order during the past couple of decades. But the spread of ICT technologies in Estonia has been rapid.
A glimpse of history – Estonia had the “late-comer advantage” in the 1990’s, which meant that Estonians could employ the latest systems and solutions necessary for addressing the challenges facing Estonian society without having to replace legacy systems. In the years since, the public sector has been outstanding in the role of initiator and promoter for a variety of e-services initiatives. Estonia’s central government is positioned to continue in this role.
The Estonian Association of Information Technology and Telecommunications (ITL) has been representing the people in the ICT sector to make it easier for ICT companies to operate. “We are a cooperation network in the field of ICT which speaks for the innovation of digital society – our vision is a smart Estonia. We are improving cooperation between the private and public sectors,” says Doris Põld, the ICT Cluster Manager. “The Estonian ICT sector is quite significant for Estonia – we have more than 4800 ICT companies, those companies are generating more than 4 billion euros in annual revenue. Estonian companies’ solutions can be found in more than 140 countries all over the world. And Estonian ICT cluster partners are key players behind most of the Estonian e-governance solutions. Estonian IT companies operate on a one-stop shop logic, offering strategy consulting, change management, and IT development for creating working e-solutions. Seamlessly working digital services increase the potential for economic growth and a higher quality of life.”
Põld promises that all the “big players“ are represented at EXPO, because Estonia’s main storyline in the World Exhibition is the story of digital society.
Pandemic called for digital skills
The past year clearly demonstrated the significance of the digital skills of businesses and organisations. Fortunately, Estonian government was ready to provide its services in a digital way with only some adaptation needed. “Our experience and our learning points from our digital path are worth sharing because we all see that ICT helps to cope in the crisis.”
Doris Põld is especially proud of the fact that during the crisis, public-private partnership remained strong. Many new solutions were created as a response to the crisis almost overnight as a result of several hackathons which were held in cooperation of the Estonian private and public sector players or just by enthusiastic IT companies.
“Estonia gained a lot from this, as did several other countries: new solutions, such as registering your sick leave online, were created within 48 hours. Also, at the same time when a lot of major events around the world were cancelled in 2020, it was possible to hold the WRC Rally Estonia thanks to the creation of a data warehouse solution, which shared critical data between different parties during the event and included also checking the participants’ virus tests.”
Big names in creating e-Estonia
But let’s also take a closer look at the track records of some of the big IT-companies. One of the most important names in the field of creating public e-solutions is Nortal. Approximately 30-40% of the Estonian e-state has been built with their participation.
“In the last fifteen years, we have exported the accumulated experience of the Estonian e-state and e-health services to Germany, Oman, the United Arab Emirates, Finland and many other countries. Today over 80% of Nortal’s turnover is foreign markets and over 150 million end users regularly use solutions created by Nortal,” says Marek Helm, Head to Nortal’s operations in the Middle East. He hastens to add that the development of e-services in Estonia is ongoing.
Just recently, Nortal launched a proactive service for the customers of the Social Insurance Board – a unique innovation not only in Estonia but worldwide. This means that parents of a newborn no longer need to apply for benefits, but receive a proactive proposal from the government for the benefits they are entitled to, which they simply have to confirm.
During Covid lockdowns, Nortal swiftly helped to rearrange the daily work of large hospitals via their IT systems, with the aim to direct all possible resources to dealing with the pandemic. In 2021, the company has helped to develop Estonia’s first vaccine passport as well as a digital Estonian certificate which complies with European standards and can be used all over Europe starting from 1 July.
“As an example of Estonian e-state export, we helped to create a VAT administration solution in Oman, which brought a new tax and reshaped the country’s existing fiscal policy. Hundreds of thousands of entrepreneurs in Oman use the Invest Easy entrepreneur portal created by us.” Marek Helm says that in exporting e-state digital solutions it is important to take into account that every country is different with its challenges, existing infrastructure, background and customs. It is not possible to transfer a solution one-to-one, but the digitalisation journey in each country involves similar steps and it is possible to take advantage of existing experiences and know-how in order to create a specific solution for each country.
“There are some common denominators, similar to what we have seen in Estonia – you need to have the political will, the champions that are able to make decisions, the legal setup, the infrastructure, the IT literacy and incentives for people to move forward. There are many building blocks that are the same in each major digital transformation case, but the Lego that is built – the end result – looks different every time.”
Another IT-company, Net Group, has been a key player in empowering the Estonian digital transformation. Active since 1999, the company develops back-office solutions for investment banks and works on e-governance technologies in order to take public services closer to citizens via machine learning and artificial intelligence [the so-called government-in-your-pocket solution]. For example, just recently Net Group developed the cornerstone for the Estonian governmental chatbot network.
For Tallinn City government they created an automated system called Teele [based on Effocracy – a digital tool for drafting legislation]. Legislation moves faster in the system, and the whole process is more transparent. In the beginning of the COVID-19 pandemic, they also integrated the voting system to Teele. Now the system is even more convenient and user-friendly and, if necessary, city council meetings can be held remotely in the future as well.
As mentioned above, the possibility for holding a big sporting event like Rally Estonia (which reached over 100 million TV viewers!) during the pandemic, became a reality thanks to the cooperation between Synlab and Net Group and their innovative data warehouse platform which helped to move critical data in real time between separate units and enabled fast notification of the stakeholders.
Priit Kongo, CEO of Net Group, says that their value proposition – now also at EXPO – always includes two components. “There is the consultation and sharing of experience. In other words, we explain how to digitalise services and, secondly, there are the solutions themselves – the databases, registers and applications. It is our unique strength that we offer the so-called ‘key in hand’ solution – the consultation together with the technical solution and implementation.”
Wish to do business in Estonia? Send us a request for e-Consulting to get further information and your personal consultation from one of our investment advisors. And join us at Expo 2020 in Dubai!