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How to do taxes better – getting rid of the tax authority

The Estonian Tax Board is leading the global tax revolution by enabling businesses to pay taxes without any actual contact with the Tax Board themselves: just categorize an online bank transfer as salary and the rest will be taken care of.

Nobody likes paying taxes, and for many the procedure is just as uncomfortable as visiting the dentist. However, if a dentist can make things painless then transforming the payment of taxes into a simple, swift and enjoyable experience should be the aim of every tax office, Marek Helm, Head of Public Finance Advisory and Change Management at Nortal writes in Nortal’s blog.

Estonia is well-known for its e-solutions. It has been developing e-services for citizens and businesses for more than 15 years and Estonians are used to a life where contact with the public sector is virtual. Estonians can declare their taxes on a smartphone, establish a company in minutes, receive their medication from any pharmacy using an e-prescription without even visiting the family doctor, or register vehicles, and renew driver’s licenses over the internet.

ICT has made life a lot easier for citizens and businesses, helping save time and money. As a tiny nation starting out 25 years ago with little wealth or prosperity, Estonia had no other choice. The country was entrusted to young leaders who understood that to make it, you have to be innovative.

Today, the Tax and Customs Board in Estonia is again pioneering innovative e-services. As tax revenue has outpaced the economic growth expectations of recent years and the tax behavior of Estonian companies sets an example for other countries with a similar background, the Tax Board team has understood that its actual task is not the collection of taxes.

Sounds weird? It should. Otherwise, it would not be novel or new. As the Tax Board developed, it began to understand that it is in fact merely the recipient of the money that taxpayers grant to the state on a largely voluntary basis. The standing definition of tax collection is yesterday’s news.

But there’s more. What if the Tax Board’s task was to earn money? Not by engaging in business, but by extending the state’s support to businesses. Companies are not created to pay taxes. The purpose of any business is to make money and if the entrepreneur has no revenue, there clearly isn’t any hope to levy taxes on it.

As a result, the Tax Board is now seeking to help businesses earn revenue. The easiest path to revenue is to cut the red tape – eliminating the bureaucracy that hinders the added value of any business. Reporting to the state should be eliminated if it serves no obvious purpose for the entrepreneur, and this also applies to tax declarations and accounting.

Read more in Nortal’s blog.

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