In Estonia
THE INVESTMENT CLIMATE IN ESTONIA
The Ministry of Economic Affairs and Communicatios of Estonia informed that Estonia is located at the heart of the Baltic Sea Region – the Europe’s fastest growing market of more than 90 million people. This region is one of the most diverse and rewarding markets in Europe as it spans over the well-developed economies of Scandinavia and Northern Germany, the rapidly expanding economies of the Baltic States and Poland, and the vast potential markets of Northwest Russia. The combination of complementary strengths and advantages offers huge opportunities for international companies. The Estonian Government is convinced that the EU membership will have a positive impact on the Estonian economy, bringing prosperity to our people and enterprises. Full integration with the EU market will enable the Estonian economy to catch up with the economies of our neighboring EU countries, such as Finland and Sweden. For Estonian businesses, this means fast growth and high returns on investments. The mission statement of the Ministry of Economic Affairs and Communications of Estonia is to create favorable and attractive conditions for businesses and provide them with the most competitive economic environment in the region.
The Ministry of Finance of the Republic of Estonia informed that Estonian tax system consists of state taxes provided and imposed by tax Acts and local taxes imposed by a rural municipality or city council in its administrative territory pursuant to law. Tax is a single or periodic financial obligation which is imposed on taxpayers by an Act or a rural municipality or city council regulation issued pursuant to an Act for the performance of the public law functions of the state or local governments or to obtain revenue required therefore and which is subject to performance pursuant to the procedure, in the amount and within the terms prescribed by an Act or a regulation, without direct compensation to taxpayers therefore.
Estonia scores highly in investment freedom, financial freedom, property rights, business freedom, and freedom from corruption. Major reforms after independence from the Soviet Union in the early 1990s have proven to be successful and are a model for all of Europe. The top income and corporate tax rates are low, and business regulation is efficient. Investment is easy but subject to government licensing in some areas of the economy. Estonia’s financial sector is the most developed among the Baltic States. The judiciary, independent of politics and free of corruption, protects property rights effectively.
Freedom Rank 12 (77.8%) in US Heritage Foundation „Index of Economic Freedom” 2008:
Estonia is a member of the European Union and its economy is rated as “high income” by the World Bank.
In 1994, Estonia became one of the first countries in the world to adopt a flat tax, with a uniform rate of 26% regardless of personal income. In January 2005 the personal income tax rate was reduced to 24%. A subsequent reduction to 23% followed in January 2006. The income tax rate will be decreased by 1% annually to reach 18% by January 2010. The Estonian economy is growing quickly, partly due to a number of Scandinavian companies relocating their routine operations to the country and Russian oil transit using Estonian ports. Estonia has a strong information technology (IT) sector, partly due to the Tiigrihüpe project undertaken in the 1990s, and has been mentioned as the most “wired” country in Europe.
Source: (http://www.wired.com/politics/security/magazine/15-09/ff_estonia)Its GDP PPP per capita is at $21,860, the highest of the Baltic States, while its unemployment rate was 4.2% in July 2006, one of the lowest in the European Union.
Source: Eurostat unemployment report, July 2006
Although the annual GDP growth rate in 2006 amounted again 11.4%, some of the leading financial institutions and rating agencies (Danske Bank, S&P) expressed serious concerns about possible overheating syndromes of the booming economy. A number of the main economic indicators (e.g. inflation at the 4.5%, significantly negative trade balance and private credit level) partly support this opinion.
Demographics of Estonia: Linguistically, Estonian is closely related to the Finnish language. Estonians, as an ethnic group, are a Finnic people. Indigenous Estonian-speaking ethnic Estonians constitute nearly 70% of the total population of about 1.3 million people.
Estonia is a party to 181 international organizations, including the BIS, CBSS, CE, EAPC, EBRD, ECE, EU (member since 1 May 2004), FAO, IAEA, IBRD, ICAO, ICRM, IFC, IFRCS, IHO, ILO, IMF, International Maritime Organization, Interpol, IOC, IOM (observer), ISO (correspondent), ITU, ITUC, NATO, OPCW, OSCE, PFP, UN, UNCTAD, UNESCO, UNMIBH, UNMIK, UNTSO, UPU, WCO, WEU (associate partner), WHO, WIPO, WMO, WTO.
Estonia exports machinery and equipment (33% of all exports annually), wood and paper (15% of all exports annually), textiles (14% of all exports annually), food products (8% of all exports annually), furniture (7% of all exports annually), and metals and chemical products. (Source: ) Estonia also exports 1.562 billion kilowatt hours of electricity annually.
Estonia’s export partners are (2006) Finland (18.4%), Sweden (12.4%), Latvia (8.9%), Russia (8.1%), US (5.5%), Germany (5.1%), Lithuania (4.8%), Gibraltar (4.7%).
Estonia imports machinery and equipment (33.5% of all imports annually), chemical products (11.6% of all imports annually), textiles (10.3% of all imports annually), food products (9.4% of all imports annually), and transportation equipment (8.9% of all imports annually). Estonia imports 200 million kilowatt hours of electricity annually.
Estonia’s import partners are Finland (18.2%), Russia (13.1%), Germany (12.4%), Sweden (9%), Lithuania (6.4%), and Latvia (5.7%) as of 2006.
Source: Central Intelegent Agency World Factbook
BusinessmanTime.com / Marcis Skadmanis
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