Given that Estonia's tax office is 100 percent digital, new tax changes mainly mean developing tech solutions, Uukivi said.

Dealing with changes in rates to existing taxes is easier, he went on.

Speaking to "Esimene stuudio," the MTA chief said: "There will be dozens of changes in tax rates and various regulations over the next couple of years."

"Perhaps the most complicated are those which have never been implemented before. Altering rates is simpler, and completely new taxes are more complex," Uukivi continued.

The planned corporate profit tax should not be overly dramatized in its effects, he commented.

"If we look take a look around Europe, Estonia and Latvia are the only two states which do not calculate corporate profit taxes as based on reported accounting profits."

"The others do, yet profits haven't evaporated as a result," Uukivi continued, noting that companies ought not to get too creative in hiding profits as they then may no longer be able to obtain bank loans, receive state support, and in any case would also attract the attention of his authority.

Uukkivi said that the real challenge facing the MTA is not collecting a profit tax if it comes in, but rather dealing with those companies that have never, ever submitted declarations and do not know how to do so going forward.

Profits generated by such firms amounted to hundreds of millions of euros last year alone, funds which did not find their way to state coffers at a time of serious state budgetary deficit issues.

Uukivi said: "I would say, that the real challenge that my colleagues and I are thinking about is certainly this: That many companies which have earned profits have never submitted declarations to the MTA."

"We looked into this ourselves, and found that those who are not VAT payers and do not declare disbursements to employees or owners, had an accounting profit of more than €500 million in their annual financial reports last year," Uukkivi went on.

"And let's consider this, that many of them – most likely in the tens of thousands – also lack the practical experience and the skill to submit quarterly declarations to us, which would be the basis for calculating profit tax, I think that is the true challenge. They forget, never knew how, or have been unaware of how to find solutions to automate the process as much as possible, pre-fill things, and make thins as simple as possible," he continued.

According to Uukkivi, between 100,000 and 110,000 companies do submit VAT declarations to the tax office, and about the same number submit declarations for payroll and dividend payments.

He added that approximately 150,000 companies do not declare anything to the MTA, as their turnover is not high enough to make or surpass the VAT registration threshold, or because they do not make payouts to employees as they have no staff on payroll, and do not pay dividends (under the current system, corporate tax is only payable on dividends – reinvested profits are not taxed, though this would change under the proposed new system – ed.).

Another issue recently reported on is "OÜ-tamine," meaning taking advantage of the system by creating a limited liability company, known as an OÜ (Osaühing) in Estonian, simply to avoid paying taxes.

Tech main way to combat 'OÜ-tamine'

Finance Minister Jürgen Ligi (Reform) has said he intends to tackle the issue, but has not yet revealed specific steps.

Raigo Uukkivi said the solutions would primarily be technological.

He sid. "We are talking about OÜ-tamine in the respect that someone is essentially at work, but invoices via an OÜ, so does not receive a salary, thus avoiding payroll taxes."

"Another and perhaps more common interpretation is that people live off their company's expenses," he went on.

"The solutions are mainly technological; we can't station an MTA official at every bar, café, or construction site, so the solutions will be technological," Uukkivi expounded.

"I believe tech solutions, primarily in terms of how the business sector manages transactions and operates, are important in the context of business sector reporting," he continued.

The layer cake of invoicing and VAT declaration needs unraveling too, he went on.

"We certainly have too much of this situation where at the end of the month, a business owner pulls out a pile of receipts from their wallet and gives instructions to the accountant on what to do with them. Or PDF invoices are sent, which are essentially photos of some paper or other. I hope the business sector will move more towards e-invoicing, so we can, for example, start VAT invoice declarations from zero, or from the bottom. Plus different information exchanges, which show signs of business activity, for example," the MTA chief said.

According to Uukkivi, businesspeople would have much more to gain than to lose from this e-invoicing.

"All of this can be used to lighten their reporting obligations. Things that get complained about as being bureaucratic can essentially be struck off. So I think there's much more to gain."

Last month, the coalition government made the decision to press forward with a 2 percent tax on corporate profits.

In addition to the situation with the state budget as a whole, the tax has been presented as a way of increasing Estonia's defense spending in the current security climate, making it harder for opponents to gainsay. Most of the criticism of the planned tax have been about detail rather than principle.

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