Business angel: Estonia should create tax incentives (E24)

30 Jun 2014

The head of business angels investing in the start-ups, Paulo Andrez, visited Tallinn.

Although the network of Estonian business angels EstBAN, which was created in 2012, has raised Estonia to the first place from the European countries in terms of the relationship between investments and GDP, the latest success can vanish fast if the state won’t offer business angels also discounts, said the President of European Business Angels Association Paulo Andrez.

Business angels are entrepreneurs, who invest their money in the start-ups, currently mainly in the technological and online businesses. They are now more and more valuable in Europe for investing risk capital. According to EBAN, last year the business angels invested 5.5 billion euros in the start-ups, while venture capital companies invested only 2 billion euros.

Andrez sees that there is a danger of decreasing amount of business angels’ investments in Estonia.

„I have seen some countries, where angel investors’ organisations have been very successful in the first years, but after some time old investors run out of money and there is no new generation with money. This is not sustainable and Estonia has a threat of following the same path,“ said Andrez.

„Estonia has so many advantages: you have start-ups with a high potential that are also oriented to the global market; you are located in the middle of many cultures and languages; you already have some success stories that are known to the whole world, for example Skype and TransferWise. However, it is useless if nothing changes – if the government does not create a better environment for angel investors,“ commented Andrez. He said that angel investors either already have or have been promised tax incentives or exemptions in Denmark, Finland and Latvia.

„Business angels should be offered discounts on income taxes, and tax incentives could also consider dividends,“ said EBAN’s president.

According to Aare Tammemäe, the head of the FinanceEstonia, the public-private cluster initiative that operates in the interests of financial sector, and the Senior Partner of Redgate Capital, changing Estonian tax system has been a taboo so far, but the relevant bodies should definitely gather and discuss the issue, and base the discussion on the experience of other countries. „Tax incentives for are not so terrible. If we assume that the key points of fiscal policy remain the same, then the state could to some discounts to bring in more alternative capital: business angels, private or venture capital. It would not be too expensive for the state; however, it could boost the economic growth,“ estimated Tammemäe.

The representative of Ministry of Finance has said that Estonia does not plan to create tax incentives for the business angels. The ministry did not comment whether this issue will be discussed with EstBAN or other parties.

You can read the full article here.