Comment by jaclaz | Hacker News Reader

Comment by jaclaz | Hacker News Reader

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>Since the proposal was published, I’ve been repeatedly asking audiences if they would be interested in purchasing estcoins and the response is a resounding yes, even if they are not always sure why yet.

Would it be offensive to hint that maybe -just maybe - audiences were (largely) clueless?

>You might be surprised to hear this, but we completely agree with the criticism that estcoin is a solution looking for a problem. However, that is not necessarily a bad thing.

Very clever argument, though:

>E-Residency was also a solution looking for a problem when the programme was launched. The solution was to enable anyone in the world to apply for an Estonian ID digital ID card and then gain access to our e-services, but even many of the first e-residents were not sure what problems this would solve for them. Three years (and almost 30,000 applications) later, we now have a very good understanding of the problems that e-Residency solves by helping democratise access to entrepreneurship globally and enabling the rise of location-independence.

I still completely fail to realize which actual problems were solved by e-residency (setting aside some good money going to Estonia).

Estonian e-residency lets you create an Estonian company.

It’s useful to some people to be able to create a company not tied to a particular location. For example, UK citizens generally can’t operate a UK company if they are not resident in the UK.

So, if you’re a digital nomad type, you’re scratching around to find a jurisdiction where you can run your company and moving around.

There are a few options. But Estonia is in the EU, the tax situation seems reasonable and they are positively welcoming. So, this is one problem that was solved.

I guess they could have just made it easier to start companies, without the e-residency. But being tied into the same ID system seems to make managing the company easier.

Any source?

I thought that it is years since you can have an UK "business" address and incorporate a company remotely (example):

https://www.rapidformations.co.uk/blog/can-a-non-uk-resident...

Needed papers may be much more than what is needed for Estonia, and most probably taxes/fees will be higher, so that Estonia may be a cheaper solution, but it is not like it is a "brand new concept" unavailable before.

You appear to be correct as far as I can tell. From what I’ve heard the tax situation is a pain, I believe the company becomes non-tax resident. At least that’s what the accountant I talked to told me.

Having zero corporation tax on non-distributed fund in Estonia also seems nice.

In fact you still need to go to Estonia for your Bank account and the process takes several weeks. You can open a UK company within minutes from everywhere, the yearly paid address costing less than the e-residency card, and some even manage to get a bank account without going there.

I wouldnt say UK is much harder.

Disclaimer: I am this nomad type, and i went with UK

You can open a transferwise account without going to Estonia. Opening a UK company is easy, taxation seems not so easy. How do you handle taxation, what advise were you given? Accountant of my UK company basically suggested I close down my company when I became non-resident, but that might just be because they didn’t know how to handle international business.

> I still completely fail to realize which actual problems were solved by e-residency (setting aside some good money going to Estonia).

It's still not exactly clear what money would go to Estonia. I'm no tax advisor but reading previous threads indicate that even if you incorporate a company in Estonia but solely operate it from another country that has tax treaties with Estonia (and many do) you still need to do your taxes locally, not in Estonia. So except the fee for the card and processing company application there are no big money to be made here.

>So except the fee for the card and processing company application there are no big money to be made here.

Well, even that is not trifling, when you make due proportions.

The population is 1,350,000 roughly, the 30,000 (till now) e-residencies at - say - 100 Euro each (state fee only) are 3,000,000, if everyone will register a company that will be another 230 Euro, i.e. 6 or 7 millions, then you will have some yearly fees (for keeping the books, etc., etc.) and possibly some other service fees like (example):

https://www.leapin.eu/faq/cost-and-fees

Let's say 1,500 - 2,000 Euro/year as "basic" costs that will go to either the Estonian government or to Estonian firms/individuals.

If the whole thing will generate a direct and indirect income of 30,000x2,000=60,000,000 that will be 50 €/citizen, not that bad in a country where the average salary is around 13,000 Euro/year.

And this is in the hypothesis that no actual transaction is done by any of the 30,000 firms, surely something will be generated (and some part of it remain in Estonia) by them.

Of course these are only guesses, but - unless there are some favourable tax "workarounds" or however lower taxes - there are very few reason that I can see why one would want to establish a "virtual" company in Estonia.

Most probably the people that will be interested in it are non-EU and coming from countries that somehow have no tax treaties (or whatever) and that (still somehow) will have some advantage.

It is the "somehow" and the actual "advantages" that are not clear to me.

The fee used to be 50 EUR which they had to double because of growing demand.

You mean for the income tax right? The tax on company profits I would expect to still go to Estonia?

Several Estonian companies have been created to support this. Estonian banks have new clients. Some taxes will eventually be paid one way or the other. All these are better than nothing for Estonia.

"Clueless people are looking to give me money for something unspecified" is the right kind of problem to have!

Being able to use PayPal wheb it is blocked in your country.

Being able to have a business address within the EU when you live without the EU (and if your business is small you may not have the chance at all to get an address within the EU)

There are no advantages, say, comparing to Hong Kong. People need a bank account to accept payment, move money around and accumulate wealth. The E-Card doesn’t offer that.

People are looking for such solutions to avoid taxes or currency controls. The e program brings the taxes but not the solution. So it is worse than useless. It has tax implications without bringing anything to the table. Worse, you’ll be bound to the EU regulation.

That explains why it failed miserably and shady internet banks and crypto exchanges attracts millions.

E-Residency is still a solution looking for a problem, the program runners just dont want to admit it yet. Instead they sink more money into a pointless cause.

Estonia literally needs to make amendments to their constitution for this to work, yet they refuse to believe it yet. They also need to create actual incentives for people to create their company in Estonia (labour related taxes as pretty high there), as well as work out all the remote banking related issues (banks not wanting to open accounts unless you show up in-person).

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