Estonia’s successful e-residency program, which brought 64.3 million euros in tax revenue to the state budget last year, could be severely impacted by the introduction of a corporate profit tax, according to non-parliamentary The Right party.
Businessman Kristjan Vanaselja, deputy chairman of The Right, slammed the government’s plan to tax corporate profits as ill-considered and short-sighted.
“This move will heavily impact Estonia’s e-residency program, which has become a significant source of revenue for the state budget,” he said.
Last year, the e-residency program contributed 64.3 million euros to the state budget through dividend taxes, having set a new revenue record each year since its inception. In 2020, the program brought in 17.5 million euros, 32.5 million in 2021, 48.4 million in 2022, and 64.3 million euros last year. According to Vanaselja, there is no reason to believe that this growth will stop any time soon.
“In fact, within the next few years, the e-residency program could generate as much revenue for the state budget as the planned corporate profit tax,” he said.
The government hopes to collect around 200 million euros annually through the taxation of corporate profits, based on statements made in the media.
While e-residency offers many advantages to foreign entrepreneurs, such as access to Estonia’s digital infrastructure and minimal bureaucracy, Vanaselja emphasized that Estonia’s low bureaucracy and tax system, where income tax is only levied on distributed profits, have been key attractions for e-residents.
“This advantage will disappear if these companies are required to pay corporate income tax and hire separate accounting services to calculate it. The situation is even worse since the profit tax is planned to be collected in advance, before the profits are even earned,” Vanaselja explained.
Vanaselja argued that the entire plan to introduce a corporate profit tax is marked by poor planning, rushed decision-making, and a desperate attempt to avoid budget cuts.
The Right aims to prevent the implementation of the corporate income tax and have started meetings with business associations to build public pressure.
“The Estonian state budget should be balanced by cutting expenditures, not by imposing new burdens,” Vanaselja said.
Source: BNS
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