Trusted Connectivity is the focus of this year’s Tallinn Digital Summit

August 2021

Tallinn Digital Summit – the event where the frontrunners of digital nations drive the global conversation on digitalisation, takes place on the 7th of September. This year’s focus areas are geopolitics, cross-border infrastructure projects and the connections between digital technologies. Let’s now take a closer look at why Trusted Connectivity was chosen as the focal theme.

One of the main challenges facing the democratic world in the 21st century is the development of infrastructure and finding the necessary investments. A well-functioning infrastructure, after all, is the basis of our economic growth as well as the smooth functioning of our daily lives. Along with the rise of digital solutions, however, the significance of infrastructure has changed – it is no longer merely a means to move people, goods or energy. The term ‘infrastructure’ nowadays also includes a strong digital component. This includes who data is created, forwarded, stored, used and protected. Therefore, infrastructures are tightly interwoven with our daily lives.

Everything is based on trust

Modern infrastructure lays the foundation for applying innovation, new technologies and business models. That means who finances the building of infrastructure and what is their impact on its use is becoming ever more important. For example, imagine that GPS belonged to a state that has even a theoretical opportunity to interfere in how it works. Would we trust it then? Would we develop critically important services around their use?

Private sector inclusion is key

Participants at the Tallinn Digital Summit will discuss how guaranteeing trust and the free movement of data could make cross-border infrastructure investments more transparent and, therefore, more attractive for the private sector. Specifically for the private sector, because it is the largest financial muscle of the democratic world and so far in the area of infrastructure its strength has been underused. To change that fact, we need to first agree on common values, rules and control mechanisms to label, so to speak, the projects that meet them. This would provide proof for private capital that the project has a transparent basis, which will be beneficial for its developers as well as the people who will later use it.

In sum, it would be a step towards economic growth and regional security. The infrastructure that forms the basis of our daily functioning could be developed and renewed faster, and more necessary projects would be greenlighted.

It all begins with a common understanding

The keynote speakers of the Tallinn Digital Summit are President of the European Council Charles Michel and Secretary-General of the OECD Mathias Cormann. The opening speech of the Tallinn Digital Summit will be given by the Prime Minister of Estonia Kaja Kallas. The participants include prime ministers, ministers of foreign affairs, of digital development and of the economy from Europe and Asia, high-level representatives from influential international organisations, academic leaders and representatives from the private sector.

Government testbeds

Also, during the Tallinn Digital Summit, e-Estonia will announce a new and innovative collaboration model Digital Testbed Framework, designed by the Estonian government that will give start-ups and govtech innovators access to the technologies that the state uses to build its own digital services. Our Digital Transformation Adviser Anett Numa will lead a panel on the topic of how governments can thrive through public-private partnerships and the role of real-life experimentation, involving multiple stakeholders in the process of digital innovation.

To follow the online broadcast for free on 7 September, please register at: https://www.digitalsummit.ee

Resource: e-estonia

Ratas: Estonia’s tax system needs to be modernized

BNS August 19 2021

Estonia’s tax system needs to be modernized, Jüri Ratas, chairman of the Center Party and speaker of the parliament, said in his opening remarks at a conference on the Estonian economy in Tallinn on Tuesday.

“The tax system is an instrument with which we can reduce inequality and poverty and raise the standard of living of all people and the competitiveness of businesses. The overall tax burden determines the volume of public goods,” Ratas said, opening the conference titled “Our choice – what kind of Estonia do we want?”

Ratas added that the structure of taxes, meaning how much of the tax revenue is collected through taxation of production, income, consumption and property, also has a strong impact.

“We remember well how many were doubtful about the reform raising the amount exempt from income tax. In hindsight, however, it is clear that people with lower than average wages had  more money left in their hands indeed and, according to the OECD, inequality in Estonia decreased,” the chairman of the junior partner in the two-party governing coalition said according to a press release. 

“An equally good example is excise duties, the timely reduction of the rates of which significantly increased our common income,” he added.

Over the last decade, the way people do business, work and consume has changed a lot, Ratas said, adding that the sharing economy, e-services, cross-border trade, forms of teleworking, and volunteering have emerged as new forms.

“If we look at these changes from a taxation perspective, there are even more questions than answers — who and how should we tax and who consumes these services?” Ratas said.

“At the same time, it is clear that Estonia must remain competitive in the world, and do it in the wind of dizzying global changes of course. I mean the direction towards environmental sustainability, innovation and digitalization that we have taken in the European Union,” the former prime minister said.

Ratas added that by this he also means the proposed introduction of a minimum corporate tax rate, which was only recently requested by the G7 states.

“In my opinion, it is wise for Estonia not to resist change or to go along last, but to adapt among the first and help others to implement change. It’s possible to earn through this as well,” Ratas added.

Businessman: Estonia should start levying social tax on passive income

Social tax should be paid in Estonia also on dividends and rental income, businessman Indrek Neivelt said at an economic conference of the Center Party on Tuesday.

“A person pays on income, but basically nothing is paid on dividends and rental income, that’s not fair. We tax work but we do not tax passive income,” Neivelt said. “A normal society would do the opposite, would motivate people to work, not just sit back and do nothing.” 

Neivelt said all income should be subject to the same social tax. However, the tax could be capped at a certain level, such as the president’s salary.

“All people pay social tax on all their income. It does not discriminate against those who receive high wages,” he added.

Neivelt also said that taxes should be used to motivate people to live healthier lives. A large proportion of health care expenditure currently goes on treating lifestyle diseases, he said. Therefore, individualized social taxes could be introduced, with people with lifestyle diseases paying a higher social tax. 

Resourse: err.ee

Precious failures

August 2021

by Peeter Vihma

social scientist at the university of helsinki and the estonian university of life sciences

Failure is not something people want to talk about. Yet, contemporary approaches to development, including IT development, stress that failure is inevitable  – the more we attempt to innovate, the more we see failures – and useful. The wisdom is to prepare for failure and learn from it. As the leader in public sector digitalisation, Estonia has surely failed many times. Kaire Kasearu, Head of IT Financing; and Ott Velsberg, Government Chief Data Officer, both at the Ministry of Economic Affairs and Communication, share some of their experiences from years of work in Estonian public sector development projects.

“It is true that publicly, people often feel uncomfortable sharing their failures. Privately, however, we discuss them thoroughly and try to find the best solutions to minimise risks in the future. Recently, we have even come up with platforms where sharing failures have become more common. Because learning process is a normal part of the development and helps to understand what goes wrong and how we could do it a better way,” Ms. Kasearu states.

Too rigid development

“I think the biggest problems we have had come from procuring too big and rigid development processes,” Ms. Kasearu states. “For example, with the iconic failure of SKAIS 2 (the information system upgrade for Social Security Office) we started to develop a huge project without dividing it into smaller, manageable parts. When something changed – either legislation or a developer bails out, it was almost impossible to make relevant changes in the development process quickly enough.”

Her realisation is backed by similar findings by the State Audit Office’s report from 2019, which pointed to legislative amendments made during the development process which notably slowed down the development work or gave rise to extra costs to developments of SKAIS 2 and 3 other major public sector systems.

Based on these lessons, principles of iterative development have been increasingly implemented in the Estonian public sector according to Mr. Velsberg. This entails focusing on the problem rather than the solution in order to prevent early-stage lock-ins, and encourage creativity.

“This is especially useful regarding data-science projects,” Mr.

Velsberg points out. “For example, when we were developing traffic accident prevention solution we realised that we might benefit from using data about large-scale events and gatherings. No-one had even thought about it in the beginning.”

No overview of available data

Another early-stage problem that can lead to significant failures comes from the lack of an overview of what data is available in the public sector. Mr. Velsberg describes how hundreds of databases are regularly filled with terabytes of information which may or may not fuel a particular solution. Hence, the final solution can differ drastically based on available data. This, however, requires both knowledge of and the inclusion of experts.

“Availability of data and expert input are connected to each other,” Mr. Velsberg explains. “Although some data may be available, experts’ role is crucial in validating the use-case and where necessary annotating the data.”

Mr. Velsberg shares his experience of the recent development of a conversation robot. He describes how running a test project validated that the implementation can save a lot of time and money. Because data quality can drastically change the outcome, test developments ensure that the final product is actually useful both for the organization and for the end-user.

 Not enough competition

„Because most of the development in Estonian public sector is procured, a tangible problem is consortium lock-in,“ Ms. Kasearu points to a third bottleneck. “It is inevitable that there are delays and setbacks during large-scale developments. The problem is that it is difficult to find others to pass on the work when necessary.”

The size of the country surely has an effect. Thorough background checks clear only a handful of companies to compete for government projects. In this environment, even small changes in the business environment have an effect. For example, with the recent sales of IceFire, an Estonian company that has developed many public systems, the global giant checkout.com, competition declined sharply.

Although one cannot simply change the size of the country, changes can be made to the administrative system. Ms. Kasearu describes principles of in-consortium competition that are currently updated in the public procurement contracting processes. “This is something we are currently working on along with our legal team,” Ms. Kasearu explains.

Similarly, other innovative approaches bring up the necessity for change in legislation. For example, as public sector organisations increasingly use hackathons as the development mechanism, procurement laws that did not allow for developing a solution and developing wider implementation by the same company needed to be changed. In this regard, the small size of Estonia comes in handy, as legislation changes can be made quickly.

Underfinanced upkeep

Both Ms. Kasearu and State Audit Office report stress the importance of maintenance to IT systems. “In a sense, this is a chronic failure – the lack of attention to the upkeep of software systems,” Ms. Kasearu laughs. “Politicians are keen to promote a specific solution and argue for securing investments for it but often downplay or simply forget altogether the necessity to keep the system running after it has been implemented.”

According to the State Audit Office Report the planning phase of four major audited projects did not include an analysis of future maintenance of developed software, the provision of support for the agencies’ core processes, or an estimate of the annual maintenance and improvement costs. This resulted in getting stuck to what Ms. Kasearu titles as “financial maintenance hole”.

“I think this is a lesson we had to learn the hard way,” Ms. Kasearu sighs. “We just had to keep these systems running. Now, no development is planned without budgeting for maintenance, improvement, and support.”

User unfriendly

As for the final lesson learned from failure Ms. Kasearu and Mr. Velsberg talk about these instances when projects are developed and run technically smoothly, but the result is suboptimal for the end-user. For example, a widely publicised – but luckily easily repaired – issue came up during the Covid-19 crisis when the digital health care system was clogged by thousands of users trying to book vaccination times, blocking the system for the rest of the users. Technically, the solution was simple – to divert some traffic elsewhere. It only required being receptive to complaints and reacting quickly.

Also the State Audit Office’s report point to the general shortcoming of not gathering feedback from end-users. For 6 of the 9 audited projects, it was hard to determine whether the developed software met the user’s needs or not because regular user satisfaction or usability surveys were not conducted after the completion of development work. Luckily, this issue is among the easiest to fix as end-user feedback is systematically woven into the upkeep and development processes.

Conclusion: Share your failures!

Both Ms. Kasearu and Mr. Velsberg are unanimous about the main lesson about failures: share them! Private discussions are a start, but public ones are even better. They talk about two Estonian platforms where failures are frequently discussed: a panel of digital architecture where about 50 engineers produce feedback on developments; and a working group for AI and data science, where 3-4 organisations share their experience monthly to an audience of 200 people. They both also agree that it is difficult to estimate the savings these panels have produced – but they are big!

✈️  Can’t travel but want to hear the e-Estonia story or implement e-services in your country or company? Take a look at our services and get in touch – we’ve got you covered!

Resourse: e-estonia

Estonia’s digital ecosystem is creating a seamless society

August 2021

by Life in Estonia magazine

For the public sector, seamlessly connected digital services lead to bigger potential for economic growth and a healthier, better living society. For businesses, smart e-solutions are key to save money and to build profitable growth. Estonia is championing both. Estonia is the first country to implement smart parking, legalise ride-sharing and delivery bots, or offer e-Residency. It’s now working on becoming the first country to develop a comprehensive legal framework for Artificial Intelligence.

Estonia combines elements of both the old and new economy; while the success of the technology sector created a blossoming startup scene, the country is also moving up in the value chain in sectors such as forestry and green energy.

With its low red tape, high economic freedom and transparency, the most competitive tax system in OECD and a highly skilled workforce, doing business in Estonia is easy. One of the most important advantages is 0% corporation income tax on retained and reinvested profits. Estonia is ranked first in tax competitiveness in OECD countries for the seventh year in a row! A first-rate tax code is also one that keeps marginal tax rates low.

Just as importantly, taxes can be filed online and 98% of all tax declarations in Estonia are filed electronically, including forms for income tax, social tax, unemployment insurance and contributions to the mandatory pension fund, requests excise duty returns and customs declarations. A company can also be established fully online in just a few hours and from almost anywhere in the world. (Read more here why tax declaration is a favourite sport for Estonians and how much time would your company save on tax compliance if it paid taxes in Estonia.)

Economic freedom and transparency have made e-Estonia one of the most advanced e-societies in the world. Through continuous experimentation, learning and iteration, Estonia considers the natural next step in the evolution of the e-state will involve moving basic services into a fully digital mode. This means that citizens and companies can be served in efficient, rapid and automated ways, with many basic functions occurring seamlessly in the background.

But nothing happens without people who make the decisions and always want to move forward. Estonia has highly skilled workforce, and 86% of adults speaking at least one foreign language! Building a company here is made easy with simple and straightforward labour legislation, easy hiring processes and low unionisation. IT skills are taught extensively in primary school and our students rank in the top 10 globally in science, mathematics and reading at the secondary school level.

Estonia’s solution for maintaining a modern state is X-Road, which saves Estonians 844 years of working time every year. The backbone of e-Estonia, X-Road is a software-based programme allowing the nation’s various public and private sector e-service information systems to link up and function in harmony. As it is designed with growth in mind, it can be scaled up as new e-services and new platforms come online. It can also be exported and today is used in Finland, Kyrgyzstan, Faroe Islands, Iceland, Japan and other countries.

Doing business and living our daily lives both in the physical and virtual world is normal in Estonia. But it is the result of years of work. Information and communications technology (ICT) has taken centre stage in reshaping the global socio-economic order during the past couple of decades. But the spread of ICT technologies in Estonia has been rapid.

A glimpse of history – Estonia had the “late-comer advantage” in the 1990’s, which meant that Estonians could employ the latest systems and solutions necessary for addressing the challenges facing Estonian society without having to replace legacy systems. In the years since, the public sector has been outstanding in the role of initiator and promoter for a variety of e-services initiatives. Estonia’s central government is positioned to continue in this role.

The Estonian Association of Information Technology and Telecommunications (ITL) has been representing the people in the ICT sector to make it easier for ICT companies to operate. “We are a cooperation network in the field of ICT which speaks for the innovation of digital society – our vision is a smart Estonia. We are improving cooperation between the private and public sectors,” says Doris Põld, the ICT Cluster Manager. “The Estonian ICT sector is quite significant for Estonia – we have more than 4800 ICT companies, those companies are generating more than 4 billion euros in annual revenue. Estonian companies’ solutions can be found in more than 140 countries all over the world. And Estonian ICT cluster partners are key players behind most of the Estonian e-governance solutions. Estonian IT companies operate on a one-stop shop logic, offering strategy consulting, change management, and IT development for creating working e-solutions. Seamlessly working digital services increase the potential for economic growth and a higher quality of life.”

Põld promises that all the “big players“ are represented at EXPO, because Estonia’s main storyline in the World Exhibition is the story of digital society.

Pandemic called for digital skills

The past year clearly demonstrated the significance of the digital skills of businesses and organisations. Fortunately, Estonian government was ready to provide its services in a digital way with only some adaptation needed. “Our experience and our learning points from our digital path are worth sharing because we all see that ICT helps to cope in the crisis.”

Doris Põld is especially proud of the fact that during the crisis, public-private partnership remained strong. Many new solutions were created as a response to the crisis almost overnight as a result of several hackathons which were held in cooperation of the Estonian private and public sector players or just by enthusiastic IT companies.

“Estonia gained a lot from this, as did several other countries: new solutions, such as registering your sick leave online, were created within 48 hours. Also, at the same time when a lot of major events around the world were cancelled in 2020, it was possible to hold the WRC Rally Estonia thanks to the creation of a data warehouse solution, which shared critical data between different parties during the event and included also checking the participants’ virus tests.”

Big names in creating e-Estonia

But let’s also take a closer look at the track records of some of the big IT-companies. One of the most important names in the field of creating public e-solutions is Nortal. Approximately 30-40% of the Estonian e-state has been built with their participation.

“In the last fifteen years, we have exported the accumulated experience of the Estonian e-state and e-health services to Germany, Oman, the United Arab Emirates, Finland and many other countries. Today over 80% of Nortal’s turnover is foreign markets and over 150 million end users regularly use solutions created by Nortal,” says Marek Helm, Head to Nortal’s operations in the Middle East. He hastens to add that the development of e-services in Estonia is ongoing.

Just recently, Nortal launched a proactive service for the customers of the Social Insurance Board – a unique innovation not only in Estonia but worldwide. This means that parents of a newborn no longer need to apply for benefits, but receive a proactive proposal from the government for the benefits they are entitled to, which they simply have to confirm.

During Covid lockdowns, Nortal swiftly helped to rearrange the daily work of large hospitals via their IT systems, with the aim to direct all possible resources to dealing with the pandemic. In 2021, the company has helped to develop Estonia’s first vaccine passport as well as a digital Estonian certificate which complies with European standards and can be used all over Europe starting from 1 July.

“As an example of Estonian e-state export, we helped to create a VAT administration solution in Oman, which brought a new tax and reshaped the country’s existing fiscal policy. Hundreds of thousands of entrepreneurs in Oman use the Invest Easy entrepreneur portal created by us.” Marek Helm says that in exporting e-state digital solutions it is important to take into account that every country is different with its challenges, existing infrastructure, background and customs. It is not possible to transfer a solution one-to-one, but the digitalisation journey in each country involves similar steps and it is possible to take advantage of existing experiences and know-how in order to create a specific solution for each country.

“There are some common denominators, similar to what we have seen in Estonia – you need to have the political will, the champions that are able to make decisions, the legal setup, the infrastructure, the IT literacy and incentives for people to move forward. There are many building blocks that are the same in each major digital transformation case, but the Lego that is built – the end result – looks different every time.”

Another IT-company, Net Group, has been a key player in empowering the Estonian digital transformation. Active since 1999, the company develops back-office solutions for investment banks and works on e-governance technologies in order to take public services closer to citizens via machine learning and artificial intelligence [the so-called government-in-your-pocket solution]. For example, just recently Net Group developed the cornerstone for the Estonian governmental chatbot network.

For Tallinn City government they created an automated system called Teele [based on Effocracy – a digital tool for drafting legislation]. Legislation moves faster in the system, and the whole process is more transparent. In the beginning of the COVID-19 pandemic, they also integrated the voting system to Teele. Now the system is even more convenient and user-friendly and, if necessary, city council meetings can be held remotely in the future as well.

As mentioned above, the possibility for holding a big sporting event like Rally Estonia (which reached over 100 million TV viewers!) during the pandemic, became a reality thanks to the cooperation between Synlab and Net Group and their innovative data warehouse platform which helped to move critical data in real time between separate units and enabled fast notification of the stakeholders.

Priit Kongo, CEO of Net Group, says that their value proposition – now also at EXPO – always includes two components. “There is the consultation and sharing of experience. In other words, we explain how to digitalise services and, secondly, there are the solutions themselves – the databases, registers and applications. It is our unique strength that we offer the so-called ‘key in hand’ solution – the consultation together with the technical solution and implementation.”

The Life in Estonia Magazine covers all Estonian walks of life – from business and innovation to culture, design and tourism. The magazine focuses on in-depth coverage rather than short news value and is directed to all readers who want to get a feel of the agile Nordic country. We bring to you all the topics from Life in Estonia, that put the “e” in e-Estonia. 

Resource: e-estonia