The head of the Development Fund, Tõnis Arro, has said he has ideas for helping smaller companies by making the tax system more flexible, but that the system is treated as a sacred cow in Estonia, not to be tampered with.
“For example, when a business is expanding, its expenses grow faster than its income. But tax has to be paid every month,” Arro said, speaking in front of Parliament today.
Arro said expanding enterprises could be given a year-long tax exemption, but they should then pay the missed tax back if development is successful.
Another idea is to halve VAT for the catering business, similarly to the practice in Finland, Arro said.
Arro noted, however, that going anywhere with these ideas is difficult given the reluctance in Estonia to even raise the topic of changing the tax system.
"The subject of tax is like a holy cow in Estonia - it is off limits," Arro said. “All sorts of ideas could be put forward and we would be happy to analyze them, but we do not want to embark on a project only to be told that there is no chance of turning it into law. Social tax is in a similar situation."
The situation in business is worrying, as too many small companies go under, and entrepreneurs generally fear expanding, exporting or venturing into the unknown, he said.