A unique service to boost tax compliance

Doing your company’s taxes can be distressing. A new e-service provides business operators with tax behavior ratings to help keep their tax matters in order.

Nortal has been partnering with Estonia’s Tax and Customs Board (ETCB) for more than 15 years, helping Estonia to become a country with one of the highest voluntary tax compliances. The new application developed together helps entrepreneurs see their financial behavior through the eyes of ETCB, thus helping them correct their tax compliance. The service also provides specific guidance on how to remedy deficiencies. The ratings are visible only to the company’s legal representatives, who have the opportunity to grant access to an accountant if they so wish.

Tax behavior ratings are based on public information as well as on the data protected by tax secrecy, which entrepreneurs themselves have provided to ETCB. No new data will be requested or collected for this purpose.

Companies provide data to the ETCB every month. So far, the main form of feedback has been the tax proceedings carried out, which are burdensome and sometimes discouraging in nature. The e-service of tax behavior ratings is based on the greater openness of the ETCB’s control activities and cooperation between the tax authority and business operators.

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 authorizations). These data are visible to everyone.

Ratings and data are updated once a day, and the application receives vast datasets from the data warehouse frequently, fast, and without any downtime.

Requested by entrepreneurs

“Such a wish and the need for the service have come from business operators themselves,” says 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 valuable time. At the same time, it should be kept in mind that if the ratings reveal that there have been significant shortcomings over a more extended period, we will make contact.“

According to Laid, ETCB aims 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 behavior 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 says. “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 in data-driven value creation, providing an 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 to the innovative tax solutions and be part of the success story,” adds Albre.

Calculating tax behavior

Entrepreneurs receive feedback in two parts:

1. 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 offenses, tax proceedings, the background of the responsible person, and submission of declarations). Also, the payments of wages declared by the company are compared with the average wages in Estonia in the same positions.
2. 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 behavior in good time.

The correctness of data in the employment register and tax returns (sales, purchases, payments, taxable expenses), and 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 colors. Green (3) – everything is OK. Yellow (2) – there are some deficiencies. Red (1) – there are serious deficiencies. Read more specifically here.

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 behavior ratings can be seen by companies and self-employed persons who are liable to VAT.