Estonia: The Digital Nation

 

“Estonia is the first country to  offer e-Residency, a government-issued digital identity and status that provides access to Estonia’s transparent digital business environment” [1]

 

 

 

The small Baltic state of Estonia is home to just over 1.3 million people and more than 60,000 e-residents. While only receiving its independence from the Soviet Union in 1991, Estonia has managed to transform itself into the most advance digital nation in the world.

E-Gov

So, what makes Estonia remarkable? Well simply put, their government is digital with 99% of services are available online. It is all completely connected and integrated on a single platform. With an ID card, it is possible to vote, pay taxes, buy tickets and even medical records are assessible online, meaning no longer unreasonable waiting time for medical files.  Below are some facts about Estonian digital services;

  • 46.7% of Estonians use internet voting,
  • 98% of Estonians have ID cards,
  • 99% bank transfers done online,
  • 98% companies established online and
  • 98% of tax declarations filed online

So, when looking at all this, one must wonder why all countries don’t offer these services. You are able to vote the same way most of us check our bank account.

Estonia is relatively geographically small with 51% of its land forest, not really a country that one might expect to be a tech superpower. So how did this occur? Well one thing for sure, it did not happen overnight. Below you can see a timetable Estonia’s e-gov evolution.

So why did Estonia go on this path of e-governance? When we look at Estonia, we see a small country, with no large amount of natural resources such as oil and not a very large tourist economy either. Since its independence from the Soviet Union in 1992, Estonia had no constitution, democratic institutions, poor infrastructure and a declining GDP to say the least. Estonia decided not to go down the traditional route of rebuilding its nation. The Estonian Government decided to invest in technology and minimise bureaucracy, therefore, improving efficiency and most importantly reducing the cost.

So did this investment pay off? Well close to 70% of Estonia’s GDP is credited the service sector.  Furthermore, 2% of the nation’s GDP is saved through digital signatures[1].

E-Residency

With Estonia’s large investment in e-governance, it seems only natural that Estonia would move towards digital residency. So what is this latest Estonian innovation? E-residency was created in 2014. The transnational digital identity document, does not grant you citizenship, permission to reside in Estonia and it is neither a visa nor a passport. So, why is this digital residency interesting? Well it can be seen as a way of getting around Brexit, avoiding its complications as well as many other situations.

Becoming an e-resident could not be easier, you fill out an online form and after the compliance check and a small fee of 100 euros, you will be able to pick up the ID card from the nearest embassy. The ID card serves as an instrument created to manage international business without having to ever step foot in Estonia. E-residency allows you to have access to all Estonian services as if you were an Estonian yourself. You are able to open a company, potentially open and have access to a bank account and sign documents digitally, allowing you to manage your business without you or your partners having to be physically in the same room let alone the same country. This does not only allow you to save time, you are able to create a company, and sell your services across the EU. In addition, you are able to travel operating your business remotely and paperless. This is of interest to not only EU citizens, but digital nomads, freelancer, start-ups or British citizens fearing the impending denture and anyone wishing to conduct business in the EU.

Apart from the administration advantages of opening a company in Estonia, they also provides tax incentives. So how do they do this? Well apart from making it easy to become an e-resident and being able to open a company in just 3 hours, it is possible to pay zero tax. So the Estonian government decided that not only making it easy to create a business but they would like for you to keep investing in it. While containing a flat tax of 20%, if you decide to keep the capital in the company, by essentially not paying director fees or dividends, you are not required to pay any tax. This allows you to invest in your company year after year, helping you build a successful business.

It is clear that Estonia leads the world in purely technical sense becoming a hub for start ups and technology minded individuals. It is uncertain whether Estonia’s digital approach will spread to the single market. The freedom of data circulation is a necessary condition, with Estonia knocking down digital borders and bringing about a new level of transparency and accountability of the state, as well as efficiency. What is clear, the future of e-governance is bringing a new debate to web-sovereignty and exciting innovations questioning traditional notions of residency, citizenship, globalisation and the conventional understanding of the nation state.

[1] https://investinestonia.com/wp-content/uploads/eestonia-guide-veeb.pdf

[1] https://e-resident.gov.ee/

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