Head of Estonian Tax Board questions Latvian business data

Marek Helm, head of the Estonian tax authority, is questioning claims that hundreds of Estonian businesses have been set up in Latvia because Latvia offers them better tax benefits than Estonia, reported Delfi today.

Speaking in Reporter, an investigative TV journal of Kanal2, Helm said that he does not believe that so many Estonian companies want to set up operations in Latvia simply because Latvia offers microenterprises bigger tax benefits.

Commenting the claims made by the head of Viatax Ltd, an Estonian consultancy that helps Estonian businessmen establish a company in Latvia, Helm said that this seems like a promotion campaign of one company.

“It seems that it is advertising for a company that some people use as an example of their own claims and others find it a good way to deride politicians,” Helm told Reporter.

Helm questioned claims that Viatax that has been in business for two months has helped over 50 enterprisses to set up business in Latvia.

He added that one should also look at how many Latvian businessmen have set up a company in Estonia.

LATVIA LESS COMPETITIVE THAN ESTONIA – PM

In comment, Estonian PM Taavi Rõivas said that claims that the Estonian tax system has fallen behind Latvia’s are an exaggeration.

„Facts do not uphold this claim. Estonia’s GDP per capita is 14,800 euros, while in Latvia it is 12,100 euros. Our economy is more competitive than that of Latvia and the general labour tax burden of enterprises is smaller in Estonia. Latvia also does not offer zero income tax on reinvested profits. Add to this our e-Tax Board and digital services and less bureucracy. Also, we have less tax fraud than in Latvia. In the recent economic freedom index of the Heritage Foundation ranked Estonia 8th and Latvia 37th.“

50 COMPANIES IN TWO MONTHS

Laumets himself believes that over the last year about a thousand Estonian businessmen have set up a company in Latvia.

One key aspect that attracts Estonian companies to set up a business in Latvia is the tax benefits that Latvia is now offereing micro-enterprises.

Eesti Päevaleht wrote yesterday that over the last year, at least five hundred Estonian entrepeneurs have set up a business in Latvia.

According to experts, this is a conservative estimate and the actual number could well be 1,500.

The real answer is hard to find because Latvian business register did not respond to the paper’s enquires, while privately owned business register Lursoft said that 531 Estonian companies have set up business in Latvia in the last year.

Kristi Hunt, head of legal services of EVEA, the Estonian association of small and medium-sized businesses, says that EVEA has wanred the Estonian government that Latvian tax benefits will affect Estonia’s tax revenues.

„Unfortunately, the Estonian government has not been recently interested to think how to promote business, on the contrary,“ she added.

Hunt said that it shows that countries are in tax competition and whenever tax amendments are planned, it should be taken into account.