Online incorporation platforms in Estonia and beyond: How administrative spillover effects hamper international taxation

23 Pages Posted: 1 May 2023

See all articles by Matti Ylonen

Matti Ylonen

University of Helsinki

Wolfgang Drechsler

Tallinn University of Technology (TUT) - Ragnar Nurkse School of Innovation and Governance

Veiko Lember

KU Leuven - Public Management Institute

Date Written: April 7, 2023

Abstract

Online platforms that allow non-residents to register firms have emerged to boost economic development goals in jurisdictions ranging from Wyoming (United States) to Estonia. They create novel governance challenges that fall between governance frameworks. The global tax governance agenda needs to address the role of such platforms, which often involve conflicts between economic policy aspirations and other goals. Our Estonian case study demonstrates the inability of authorities to perform background checks of numerous non-resident entrepreneurs, as national administrative capacities get strained. Building on the nascent tax spillover approach, we analyse administrative spillover effects caused by online incorporation platforms in international taxation. Mapping de facto administrative capacities requires analysing conflicts between governmental priorities and the obstacles of sharing information between administrative and criminal procedures. When the non-resident community grows compared with the size of the domestic economy, supervisory systems tailored for domestic entrepreneurs become strained. We show that resolving this policy conflict assumes targeted investments into administrative capabilities from skilled personnel to data exchange and interorganizational coordination.

Keywords: e-governance, e-residency, Estonia, money laundering, tax governance, tax evasion

JEL Classification: M13, O16, O23, O52, P16

Suggested Citation

Ylonen, Matti and Drechsler, Wolfgang and Lember, Veiko, Online incorporation platforms in Estonia and beyond: How administrative spillover effects hamper international taxation (April 7, 2023). Transnational Corporations Journal, Vol. 30, No. 1, 2023, Available at SSRN: https://ssrn.com/abstract=4431829

Matti Ylonen (Contact Author)

University of Helsinki ( email )

Wolfgang Drechsler

Tallinn University of Technology (TUT) - Ragnar Nurkse School of Innovation and Governance ( email )

Akadeemia street 3
Study building X, 4th floor
Tallinn, 12618
Estonia

Veiko Lember

KU Leuven - Public Management Institute ( email )

Parkstraat 45 box 3609
Leuven, B-3000
Belgium

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