Tax burden remains a serious obstacle to start a business in Baltic States
For the second consecutive year companies newly-founded in Baltic States mentioned the high tax burden as their biggest challenge. Attraction of initial funding is also a major challenge for aspiring entrepreneurs in Baltic States. Interviewed businesses in Latvia and Lithuania also mentioned difficulties with funding qualified employees, whereas businesses in Estonia more often mentioned problems with finding clients, according to results of a study performed by SEB Bank.
SEB Bank’s board member Arnis Škapars: «Securing a positive flow of finances is the most difficult task for any business in their early days. With that, payment of taxes can create serious headaches in the first couple of years. The situation is identical in Latvia, Lithuania and Estonia. On top of that, tax payment remains the biggest challenge for newly-formed businesses in all three Baltic States for the second consecutive year. At the same time, overcoming this challenge is a good test for longevity of business ideas and businessmen.» Survey data shows that the number of Latvian companies that concentrate their activities on the local market has increased significantly – 70%, which is 10 percentage points more when compared to last year. The proportion of newly-formed companies that wish to engage in exports has declined 8% (11% a year ago). 22% of newlyformed companies (29% last year) have plans to work on the domestic market and perform exports.
«Growing focus on the domestic market is making us worry. Of course, on one hand, the quality of life and purchasing power of Latvian residents does increase. However, looking in a long-term perspective, demographic tendencies are unforgiving. Sooner or later it will force any company with ambition to grow and develop to search for new markets outside the country’s borders. It would be best to consider that from day one,» says Škapars.
In Lithuania and Estonia, on the other hand, there has been an increase of companies focusing on exports: from 8% to 11% in Estonia, and from 18% to 23% in Lithuania. The survey was performed, interviewing more than 1,500 Latvian, Lithuanian and Estonian companies whose age does not exceed three years.