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PwC: Estonia Has Simple Tax System, But High Rates

Source: Photo: Postimees/Scanpix

Estonia's tax system ranked 32nd out of 189 countries in a business friendliness index compiled by the international consulting company PwC.

It was a significant improvement from the year before, when Estonia was at 50th. The upgrade came thanks to the scrapping of Tallinn's sales tax. Prior to that though, Estonia has consistently been in the 30 to 40 zone.

The world's most attractive tax systems were found in the United Arab Emirates, Qatar and Saudi Arabia. Those were followed by Hong Kong and Singapore, and the top European country: Ireland. The next-highest ranking EU countries on the list are Denmark and the UK.

The PwC study said Estonia's advantage is its tax system's simplicity and user friendliness. It drew an example from one company which spent a total of 81 hours on dealing with taxes during the year. The Estonian system is half as time consuming as Lithuania's and a third of that of Latvia's.

On the other hand, however, the the company tax burden is relatively high in Estonia, especially labor costs.

Estonia's main taxes are its 21 percent income tax and 33 percent social tax. Most people file taxes online through a platform recognized for its convenience. Other oft-praised factors are the flat rate, lack of social tax on dividends and tax-free reinvestment of capital.

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