As of today, the Estonian Tax and Customs Board (ETCB) provides business operators with a new e-service that is unique in the world - tax behaviour ratings, which is a tool for businesses to keep their tax matters in order.
Through the application, the company’s legal representative can see what the company looks like to the tax administration and whether the tax administration estimates that there are shortcomings in the provided data.
The service also provides specific guidance on how to remedy deficiencies.
The ratings are visible only to the legal representatives of the company, who have the opportunity to grant access to the accountant, if they so wish.
In addition, the service will also bring together public data in one environment, which currently requires multiple inquiries into the ETCB information systems (e.g. address, national taxes paid, number of employees, debts, different permits and authorisations). These data are visible to everyone.
“Such a wish and the need for the service have actually come from business operators themselves,” said Valdur Laid, Director General of ETCB.
“Seeing oneself through the eyes of ETCB - whether tax liabilities have been met in due time and whether there are discrepancies in the data submitted - enables companies to rectify their shortcomings. In this way, businesses will be able to prevent tax controls and save their valuable time. At the same time, it should be borne in mind that if the ratings reveal that there have been significant shortcomings over a longer period of time, we will take contact.
According to Laid, the aim of ETCB is to make the payment of taxes as simple as possible. "The convenience of declaring the income of natural persons in Estonia has long been world-famous.
With the tax behaviour ratings service, we are making a huge leap in facilitating the lives of companies, while reducing the administrative burden for businesses and officials and increasing tax receipts," he said. “We will continue to develop the service based on feedback from business operators, for example, we will add the possibility to share the company's ratings with its business partners.”
According to Ats Albre, head of Nortal's delivery in Estonia, the tax behavior ratings e-service is a significant step forward in data-driven value creation, providing even more transparent user-centered experience for entrepreneurs. The service confirms once again the role of the Estonian Tax and Customs Board as one of the leaders in the field of digitalization in the world. “We are pleased to contribute into the innovative tax solutions and be part of the success story,” adds Albre.
Tax behaviour ratings are based on public information as well as on the information protected by tax secrecy which entrepreneurs themselves have provided to ETCB. No new data will be requested or collected for this purpose.
Entrepreneurs receive feedback in two parts:
The rating of tax compliance characterizes the timeliness and correctness of the performance of the company’s obligations under the law (corporate debt, the existence of offences, tax proceedings, background of the responsible person, submission of declarations).
In addition, the payments of wages declared by the company are compared with the average wages in Estonia in the same positions.
The assessment of tax matters draws the company’s attention to possible shortcomings and inconsistencies in the declaration of data, thereby enabling the company to improve its tax behaviour in good time.
The correctness of data in the employment register and in tax returns (sales, purchases, payments, taxable expenses) as well as other observations made by ETCB shall be taken into account.
Ratings and related indicators are displayed as a numeric value on a scale of 1 to 3, and with colours.
Green (3) – everything is OK. Yellow (2) - there are some deficiencies. Red (1) – there are serious deficiencies.
More than 135 000 companies can view the tax behaviour ratings concerning them. As of May, 62 per cent of them had the rating "everything is OK", i.e. all the indicators were in “green”. 13 per cent had the rating „yellow“, i.e. there were some deficiencies in their tax matters, and a quarter of them had serious deficiencies and their rating was „red“.
In the largest number of cases, the outcome of the ratings was affected by the risk of envelope wages – the wages declared by the company were significantly lower than the average wages for similar jobs. There were also many problems with unscheduled debts, backgrounds of the responsible persons and not-submitted declarations. More than 10 000 companies are advised to review the use of a company-owned car, as it is not indicated as a means of transport only for professional travel.
If a company rectifies its shortcomings, there will be no need for further notification thereof to ETCB. As a general rule, changes will be visible in the service on the following day.
Tax behaviour ratings can be seen by companies and self-employed persons who are liable to VAT.
The development of the tax behaviour ratings service was funded by the European Regional Development Fund. The service was developed by ETCB in collaboration with AS Nortal and the Information Technology Centre of the Ministry of Finance (RMIT).