Estonia unhappy with EU plan to reduce reporting obligations

Estonia is not supporting the proposal made by the European Commission to ease reporting obligation of small enterprises, writes Äripäev.

According to the proposal, small and micro-enterprises would no longer be obliged to submit cash flow reports, equity change reports and fill out about half of the notes to the financial statements.

A representative of the Ministry of Finance Kurmet Ojamaa has asked the opinion of the Chamber of Commerce and Industry, Estonian Small Business Association, Auditors’ Board, Accounting Board, etc. and said that all of them are of the opinion that it would worsen the transparency of the business environment.

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Estonians develop taxation system for Finnish Tax Administration

The Finnish Tax Administration that plans to replace dozens of tax information systems with a single one has chosen a solution offered by Nortal group, an Estonian-Fnnish IT company, writes Äripäev.

At present the Finnish Tax Administration uses about seventy different tax applications. All they will be replaced by Gentax that is developed by Fast Enterprises, a US IT company, and implemented by Nortalwhich is one of the most frequently used taxation software products.

The competition was carried out in the form of a so-called negotiated procedure, where the needs of the Tax Administration were reviewed in detail with the three system providers selected in the open competition. In the final stage, IBM and the Fast-Nortal consortium submitted their offers.

IBM’s offer was rejected based on its abnormally low price. IBM has appealed the decision to the Finnish Market Court.

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Only 10 pct of companies pay VAT

According to statistics from the tax authority, only 10% of companies in Estonia that are registered to pay VAT to the state, ie they receive less VAT than they pay themselves, writes Äripäev.

Marek Helm, head of the tax authority and his deputy Egon Veermäe admit that they were shocked by such statistics.

A new report from the tax authority shows that out of 72,000 companies that are registered as VAT-payers, 5,690 companies paid any VAT last year in the total amount of EUR 2.08 billion.

The rest of the companies in the VAT register either pay very little VAT while a third of them receive VAT refunds from the state.

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Estonia’s tax burden eased in 2011

Estonia’s tax-to-GDP ratio in Estonia declined 1.3 percent year on year to 32.8 percent in 2011, which puts Estonia in 18th place in the EU, according to Taxation Trends in the European Union”, an annual publication of Eurostat and the European Commission.

Estonia’s tax burden decreased in 2011 thanks to the rapid economic growth based on export.

Since the positive effect of export on tax receipts is smaller than of domestic consumption, nominal GDP grew significantly faster than tax receipts. Besides the technical effect from the partial resumption of contributions by the state into people’s second pillar pension plans reduced the tax burden.

In 2011, the overall tax ratio, that is, the sum of taxes and social contributions in the 27 EU member states amounted to an equivalent of 38.8 percent of the same countries’ GDP, a figure 0.5 percent higher than in 2010. The member states with the highest tax ratios were Denmark with 47.7 percent and Sweden with 44.3 percent.

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Properties of company executives seized over tax debts

Estonian tax authority has seized four properties that belong to executives of a construction company who are believed to have deliberately bankrupted the company and left behind almost 100,000 euros in tax debts, reports Äripäev.

The properties were seized as a security for payment of the tax arrear.

The company in question is believed to have used fictious invoices, employed some construction workers illegally, ie without paying social tax on them, and paid them wages without declaring them to the tax authority.

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Tax authorities use Google Street View

Estonian tax authority Maksuamet has followed the example of its Lithuanian colleagues and starting to use Google Maps Street View to detect possible tax evasion, writes Äripäev.

Tõnis Kuuse, head of the information department of the Estonian Tax Authority, said that Google Map Street View is only one of several public tools that tax inspectors are using at their work.

“It’s an additional information source that we can use to check on real estate, for instance in case when a person who has declared minimum income is living in a very valuable house,” says Kuuse.

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Tallinn sucking in residents from Northeast Estonia

More than 4,000 people became residents of Tallinn in January alone, mainly as a result of domestic migration from Northeast Estonia, writes Postimees.

Yevgeni Solovjov, Mayor of Kohtla-Järve in Northeast Estonia, says that Tallinn is attracting residents of other counties thanks to its benefits including the free public transport.

“We expected it so it’s no surprise. We don’t have enough jobs in our county and they are moving elsewhere for work,” said Solovjov, adding that while, before, people remained residents of their home counties also when they were working elsewhere, but they are now re-registering themselves in order to use free public transport in Tallinn.

Haldo Oravas, governor of Viimsi municipality, said that Viimsi municipality is offering tax-exemption from land tax. Homeowners in Viimsi who have a property of 1,200 sqm can save between 350 and 400 euros a year.

“I would not be surprised if there are families where the father is registered in Viimsi to get the land tax benefit and the mother is registered now in Tallinn to get free public transport,” he said.

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Companies replace dividends with decrease of share capital

More and more companies in Estonia have chosen a tax-free option to reduce share capital instead of paying dividends, writes Äripäev.

Ice cream maker Premia, for instance, cut its share capital last year and paid out to shareholders almost 4 million euros.

The company’s CEO Kuldar Leis says that the objective was to adjust the company’s return on equity.

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Estonians can soon file tax reports via smartphones

Estonian tax and customs authority is working on a solution that would enable taxpayers to file their tax reports via smartphones.

The authority’s director-general Marek Helm told Postimees daily that, hopefully, the new service will be in use in time for filing next year’s income tax declarations.

Businessmen can already check tax arrears of business partners, company VAT payer’s codes and use personal reference number search.

Starting next year it will be possible to communicate to the tax board also via Skype.

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Agreement for the avoidance of double taxation concluded with Mexico

In Mexico City Foreign Minister Urmas Paet and Mexican Minister of Finance José Antonio Meade Kuribreña signed an agreement for the avoidance of double taxation and prevention of fiscal evasion between Estonia and Mexico.

“Estonia is interested in strengthening economic ties with one of the world’s leading industrial nations, chairman of the G20 and home to over a hundred million people,” said Paet. “The agreement is one way to facilitate the promotion of economic relations.”

When meeting with members of the Mexican Business Council for Foreign Trade, Investment and Technology (COMCE), Paet said that Estonian entrepreneurs’ interest in Mexico is growing. “We feel it is important to create direct contacts between the chambers of commerce and industry in Estonia and Mexico and to organise reciprocal visits by business delegations,” Paet noted.

Paet stated that the experiences of Estonian IT companies working in Mexico have thus far been good. “Hopefully many more of Estonia’s innovative e-solutions, as well as companies from other sectors, will soon reach Mexico,” Paet added.

Source: Estonian Ministry of Foreign Affairs