The idea of everyone having a digital ID is nothing new, but there are few successful implementations around the world. Estonia is one of those that has not only been successful, but it has opened it up to non-citizens with its e-residency programme. But how did it get there?

There is no question that it is a success story that many governments would like to copy and for many reasons. Citizens are more engaged with their government as part of the digital ID. All services are delivered directly to citizens without them having to leave their houses and travel to a government office.

Enterprise Times has spent a week in Estonia finding out about digital IDs. We talked with those involved with introducing the digital ID, the e-residency programme and those using it. One of those we heard from was Kersti Kaljulaid, a former President of Estonia.

Costs are lower than the savings

Kaljulaid talked about the challenges and benefits of a digital government. She said, “Digitisation didn’t change what we do, and all government services had to be linked to a digital ID.”

Kersti Kaljulaid, a former President of Estonia
Kersti Kaljulaid, a former President of Estonia

Kaljulaid continued, “Costs are difficult to calculate, but it cost us 1% of GDP and has saved citizens 2% of GDP roughly 4-5 days per year of their time. Mothers at home and poor people have no time to spend at government offices. This is about making things more equal for everyone.”

It is not, of course, just citizens who save time. The government no longer needs a large property estate which means savings on buildings, power, maintenance, security and other costs. It also saves on manpower to staff offices, allowing those staff to be released to do other tasks. That helps to keep the government small without losing effectiveness.

How do you get adoption?

When Kaljulaid talks about adoption, you realise how this programme was able to be successful. The first step was to ensure digital inclusivity by telling people that access to the Internet was a human right. Kaljulaid admits there was no actual law stating this, but it was about convincing people that no one was to be left behind.

Computers were installed in public places like libraries, and the government opened other places where people could access computers. It embarked on training people in how things worked and then used those same people to train others.

One example Kaljulaid gives is that retired people were trained in their villages. They didn’t have to travel to get training. It made it possible to get adoption in a group that many countries see as being disenfranchised by digital.

One group that was trained and who then did the training were librarians. Kaljulaid said, “Librarians would watch bus stops in small towns and villages. If they saw a retired person waiting for a bus, they would ask where they were going and why. If it were to visit a government office, they would explain that it could be done from the library and no need to travel. They would then bring them in and show them how to use the computer.”

It is not just about engaging the retired community. Kaljulaid says, “There is a generation of people who have never been to any government office.”

Education is a key driver

As the world goes digital, how do you get a wider adoption of skills? In Estonia, that was simple. You start with education. Kaljulaid made the point that “if you start learning languages and computers before you are 10, you find it easier.”

To that end, Estonia is ahead of many countries in how its education system works. Importantly, this is not a bolt-on or something pushed on an education system that is struggling with constant tinkering to the syllabus. Instead, the use of computers is as fundamental as using pen and paper. In taking that approach, computing is demystified, and it allows for those that want to go further, to do so.

Using a carrot and stick approach

If you want people to change their behaviour, you have to incentivise them. In Estonia, Kaljulaid says this is done through the tax system. Laughing, she said, “filing taxes early has almost become a national sport.”

The tax system in Estonia is built so that people get money back. If people declare their taxes in the first five days, they get money back. It’s quite an incentive.

Digital ID enables greater mobility and brings challenges

Digital IDs are the future as workforces become more mobile and people want to move where the jobs are. However, this brings some interesting challenges. One of those is how to make a digital ID universal.

There is a European Union project to make digital IDs valid across Europe. Citizens will be able to engage with government services wherever they are by using their digital ID. It’s a grand vision, especially with so many countries a long way behind Estonia.

Among the challenges it brings are data interchange and how services are delivered between governments. The question is, will each country support delivery of services to citizens of another country? What if that country doesn’t have that digital service? How will it then deliver that service? Will people have to go back to visiting government offices?

Perhaps a better question is, what services would citizens want when travelling? Interestingly, this is something that few people could answer when we asked them. The reality is, who knows what they will want when travelling.

The tax challenge of the digital nomad

Entrepreneurs and the digital nomad is an interesting tax challenge. Current taxation systems assume a work and home address. However, Kaljulaid sees that changing. She says that a new generation of highly mobile workers is rejecting the current taxation system and wants taxation to be global. The question is how to achieve that and allow them to work free of national taxation constraints.

One of the risks of giving people the freedom to choose how and where they should be taxed is a significant shift in tax revenue for governments. Kaljulaid said, “If people are successful, they will be able to opt-out of systems when it suits them and opt-in again later.”

Most people would accept that if you are consuming services and resources in a country, you should pay for those. But what about long-term services that are based on the expectation of taxation over time? Education is one of those. People who are educated in one country and then live elsewhere deliver no return on the cost of that education. Furthermore, if they return later in life to have their children educated in that country, their contribution to the costs of education is minimal.

Kaljulaid wants to see a much fairer way to tax people based on location and citizenship. For example, if you are a citizen of Estonia and work in another country, she would like to see taxation split equally between the two countries. If you opt to use a tax treaty where you choose to pay the lowest rate of tax, say 20%, then 10% goes to where you are living and 10% to where you claim to be a citizen.

It is an interesting idea, and it is a long way from the OECD position on taxation for those who work in countries where they are not a citizen. Will it gain traction? It will be interesting to see.

Enterprise Times: What did we learn?

It has been an interesting week in Tallinn learning about digital governments, digital IDs and e-residency. There are a lot of things that need to be considered by governments around the world.

How many will reach the level of digitisation that Estonia has is questionable. There is a drive and an interest in digital government services and digital IDs. However, Enterprise Times questions the political will to see those systems through and the way that many countries will deliver them.

The same is true of the idea of a global digital ID that will replace passports. It will happen, to a degree, in certain cases, such as the EU, but it will take longer than politicians expect. It is also unlikely that many, if any, will be able to point to the same cost-benefit that Estonia has achieved with a cost of 1% of GDP and a saving of around 2%.

Despite this, Estonia offers a real view of what can be achieved if governments have the will. What was interesting was that at the Open Government Partnership (OGP) Global Summit that also took place this week, there were signs that many countries are looking for guidance from Estonia on how to achieve digitisation. Only the future will tell us how many will be successful.

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