In Estonia, tax filing is done in one minute

Apr 17, 2017

A couple of weeks ago I received an email reminding me that it would soon be time to file my U.S. tax return for 2016. The email said that first and foremost, I’d have to locate my W-2 form showing my earnings and taxes for last year.

Secondly, if I decided to use a tax service, I would have to find a reputable company that is aware of the specific conditions concerning my visa and the specific laws of the state of California.

But if I decided to file my own taxes, I would need to find the 1040NR-EZ form on the IRS webpage. After I have filled in all of the correct forms with correct information, then I’d have to mail it to the IRS.

This is too much for an Estonian

For an Estonian, even talking about tax filing in the US, trying to understand the system - it is too much effort. This story has up to this point used about one minute of air time. And this is approximately how long it took me to file my Estonian tax return - about one minute. Let me walk you through the process.

I have to log in to my bank account, where I will find my tax return form, which has already been filled in for me. There I see my annual income, the taxes I paid and the amount of over or underpaid taxes. Then I click one button to confirm that all of the information is correct and I agree to it, and that’s about it. One minute.

Just think about it for a second: all of the information required for tax forms already exists in digital databases. So, in my case, my Estonian employer has stated my annual salary, and my income tax can easily be calculated by that. My doctor and hence our digitized health care system knows exactly how many days I was sick and how much sick leave I’ve received. And my bank account states my exact income. So there's really no reason for me to duplicate this information and fill it in on paper.

An Estonian luxury

In the Estonian case the tax and customs board pre-fills the tax forms based on the information they already have. So they're not asking me to prove I have paid the right amount of tax; rather they’re asking me to make sure they’ve taxed me correctly.

How is it possible that Estonians can enjoy this luxury of filing their taxes in one minute with a single mouse click?

A very important aspect to keep in mind is the minuscule size of my country, especially as compared to the U.S. For us, tax reform is much easier. As an example, imagine changing direction in a kayak. You can do a full turn within seconds, without moving any distance. But this is not the case if you want to turn around an oil tanker.

An underdog reality

The small size of my country also means that we simply can’t afford complicated systems. Using our people for things that computers can do is a luxury we are not able to indulge. Maybe you have heard about a small Estonian company called Starship Technologies that's testing small delivery robots from Redwood City, CA to Washington, D.C. The idea springs directly from the fact that it’s too costly to use people for that same job.

And surely you have heard about the idea to connect San Francisco and LA with Hyperloop trains, which would enable travel by rail at speeds faster than airliners. This is something a lot of people think of as an utopian fantasy. Well, for us, building A Hyperloop train under the Baltic Sea is probably the most efficient and reasonable way to connect to neighboring capitals.

For us this is very real. But this is a different kind of reality, the underdog reality. Because we, as underdogs, cannot afford to take the ineffective way.