Stories about Estonian e-Government

Since regaining freedom in 1991 from the Russian occupation, we have had few things in Estonia that everyone agrees with. Initially, it was in foreign policy: we had to join the NATO and the European Union. We joined both in 2004. Then, after a couple of years without a clear grand theme, we now seem to have the next big consensus: we have a great e-Government. Probably the best in the world. All our politicians talk about it, everywhere, regardless of their political affiliation.

Personally, I fully agree. At least, I never saw anything even close as good in the world as our e-Government: we can vote online from abroad, create a company in a few minutes and immediately open a bank account for that company, our tax office is making e-tax returns on our behalf, we have e-prescriptions, e-police… we have an e-service for everything. And yet, to say that we are the best… I don’t think we have done so well in the last 10 years.

In (Ströbele, Leosk, & Trechsel, 2017) authors provide an excellent account of the Estonian e-Government milestones. According to them the development of Estonian e-Government starts in 1991, “when the dial-up connection was established between the Estonian Government and the State Chancellery”. The timeline of new e-developments ends with eHealth in 2008. True, e-Residency was launched in 2014, but this is a service for foreigners, not citizens. The authors politely state that “since 2010, the development of internal e-services has somewhat slowed down as the priority has shifted”. In other words, due to that shifted priority during the last decade, we have not received any new e-Government features in Estonia (or at least not interesting enough to land in the scholars’ report).

I don’t think the reason is shifting priorities. According to my personal experience, the development of our e-Government was never centrally planned or managed, it was not guided by a smart task force or something similar. In that sense, it is not possible to change the priorities of a process, which was never managed. In my view the reason for a remarkable slow-down is not shifting of priorities. Neither is it that our e-Government is ready. We are far from being ready. We have just arrived to the point where building e-Government should be real fun, because we have an entire country, who understands what it is all about. The real reason for the slowdown is that our e-Government became too complex, and it is not possible to develop it according to the same old patterns. While all the low-hanging fruit have already been picked. I will elaborate on those claims.

(Ströbele, Leosk, & Trechsel, 2017) state that “in 1993, a central IT department – the Department of State Information Systems (RISO) – was established at the State Chancellery of Estonia, marking the beginning of central coordination of IT developments in Estonia. After that, all IT development plans of all ministries and agencies had to be submitted to and approved by the central IT department”. One may assume that this department is somehow related to the successful development of e-Government. I know, that this is not the case.

Let’s look, for example, at the history of the development of e-Tax in Estonia. According to (Kalvet, Tiits, & Hinsberg, 2013) e-Tax was by far the most popular e-Government service in 2011, at the time when all the noteworthy e-services had already been developed. 64% of the surveyed population were using e-Tax, second came the e-prescription service with 49%. As such, the story of e-Tax can be considered representative in the context of the whole e-Government.

Story of e-Tax

I was managing IT in the Estonian Tax Administration from 1994 to 2003. Exactly during that period the e-Tax was designed and implemented in the way it is still functioning today, and I can assure that no central coordination was of any use in that development. On the contrary, in order to make the e-Tax a success, many of our choices were based on the very specific knowledge available only to my team in the Tax Administration.

First of all, an e-service can be successful only when the organisation delivering it has control over its own internal processes and is knowledgeable about concepts like quality-of-service and being-user-centric. And this is what we were doing through the whole period of 1990-ies: making ourselves a service delivery organisation. In 1994, when I joined the Tax Administration, it was a post-Soviet old-fashioned bureaucratic organisation, where the staff believed that value lies in knowing tax legislation and all taxpayers are enemies and fraudsters. It took a lot of time and effort by the whole team to transform the Tax Administration into a customer-oriented service organisation. By the end of 1990-ies we had created a manageable organisation with a functioning internal IT-system with leverage.

In the beginning, we started slowly – our first e-services were made available through commercial banks. The main reason for that was not our low capacity. No, banks were used mainly because the online banks were popular – people knew to go there, e-services of banks were trustworthy, banks were known to be secure. By the way, recently, when trying to introduce the concept of zero bureaucracy and no-tax-return, our Tax Administration again used a local bank (LHV). In 2016 the idea of using banks was neither innovative nor really helping anymore. Today the Tax Administration does not need banks for their innovations. E-government in Estonia is so prominent and trustworthy that it is able to introduce transformation of a revolutionary scale without any bank – in fact, banks are slowing them down. I will elaborate on that in my next post.

Then again, while building our e-services we tried to understand the behaviour of our users and influence them in the right direction. For example, initially in the 1990-ties personal income tax was distributed between local municipalities and the state budget based on the address data collected from employers. It was employers who told the Tax Administration how many employees municipality X has and the amount of income tax they paid. Municipalities manipulated this data by pressuring employers. We stopped that by making it obligatory to declare personal data of each employee, and then we checked that person against his or her address in the population registry to distribute personal income tax to the relevant municipality. With this move, we not only ensured fair distribution of income tax but also supported data quality processes in the population registry.

When we designed the system of declaring personal income tax we had a dilemma whether to collect that information annually or monthly. Business management side favoured once per year, in order not to complicate life for entrepreneurs. But IT people insisted that tax returns for personal income tax must be monthly, as this would force all companies to automate the submission of tax returns. Indeed, all things that are done only once per year seem unfamiliar and complicated every time when the deadline approaches. We decided to implement a monthly tax return and devoted quite a lot of effort to persuade companies to declare this data electronically from their accounting software directly to our IT system. As a result of such a smart approach, the new tax model was implemented without any remarkable investments on the Tax Administration’s side and smoothly for taxpayers (at least no complaints).

Once e-services were available, we continued to search for options to make paying taxes attractive to people. One incentive was to prioritise tax returns submitted through the Internet. The law required to pay tax refund in one month’s time after the submission deadline of the personal income tax declaration, which makes the deadline for refunds at the end of April. We promised people to refund income tax within five days from the submission of the tax return, which effectively meant in February. People appreciated the early refund, and the popularity of the e-Tax service was growing.

Finally, we implemented the Nordic model to fully prepare the tax return for the people. That required changes in tax law, a lot of convincing of conservative bureaucrats, and quite a change in IT systems. But we did it to make our product convenient for our users – the taxpayers.

In summary, my argument here in the e-Tax story is that in order to create a good e-service, whether in the domain of tax or even in the entire e-Government, one has to dive deep into specificities of that business sector. The central IT coordinators of that time were not even able to imagine the required elements to make the e-Tax happen, let alone coordinate or guide us. I am confident that all the people who claim today that they strategically guided or initiated the development of e-Government in Estonia have no idea what they are saying (I have for instance heard that some believe that the former president Toomas H. Ilves is one who guided the development of e-Government – no, he did not).

This story about building one e-service in the Estonian e-Government clearly shows that things were done in a completely unplanned way. And credit should be given to the people who were involved in the process. A simple example is that we decided to make a pre-filled tax declaration because our then boss (Aivar Sõerd) had studied in Finland and knew how tax returns are filed there. He told us to go and learn from Finland, we simply carried over the Finnish system by using digital era opportunities. But before one could even dare thinking of e-Tax, it was necessary to create a governmental network. The next story is about how unplanned that was.

Story of Governmental Network

This story is about the early days of governmental network development in Estonia. The main character is Tarvi Martens. He is probably better known as “the man who created Internet Voting”. That is also true, but I want to tell the story about his first innovation in the public sector (which was not his first big thing, however).

It was more than 20 years ago, in mid-1990-ies, when all the major state agencies were developing their IT systems in Estonia. It was clear that offices scattered all over the country needed some interconnectivity. Customs and Border Guard had offices all along the border; Police Department, Tax Administration, Social Insurance, and Health Insurance Fund had offices in all major towns. All those offices needed some exchange of information with their headquarters. Some were even already then envisioning a fully centralised national IT system. But there was no government-wide network, and the six organisations were looking for a way out. This is when Tarvi said: “I will take care of the connectivity, I will connect all your offices into the wide area network, and ensure the security of the connection.”

Tarvi knew what is needed for information exchange between the offices of the major state agencies – find the nearest broadband provider, solve the last mile issue, add a router to connect the LAN of the office to the WAN, and add some crypto-device to secure the data traffic. He also suggested that everyone trying to do connectivity separately is not the best way. Instead, he proposed to create a virtual informal cooperative organisation to finance the development and administration of the connectivity solution for all the six state agencies at the same time (the development of the network started in 1993 for Border Guard and Customs remote offices). To develop the network, the IT managers of the six organisations – Customs, Police, Border Guard, Tax, Social Insurance, and Health Insurance – came together in 1995 and agreed to act as informal Admeside Osakond (ASO – Data Communications Department). IT managers were acting like a Board of Directors and Tarvi was like a CEO of the ASO (at some point there were even some employees in this virtual organisation). In three years’ time Tarvi arranged the full connectivity of the participating administrations, including for very remote and small office on the south-east border.

This innovation is extremely outstanding due to several reasons. First of all, in the middle of the 1990-ies nobody really knew anything about the Internet and the idea to connect all governmental offices into a wide area network would not be supported by the official state management (ASO was financed due to the backing of the IT managers). Second, there was no organisational framework for co-operation between different ministries or agencies and no accounting rules and procedures for acquiring “shared” assets for the public sector. And last but not least, it was really not a trivial technical task to connect all the involved offices into a reliable and secure network. Tarvi was able to find answers for all the three aspects of the problem and deliver the final result. The impact was tremendous. For example, already in January 1998 Tax Administration launched its first version of the system without any servers in local tax offices. All other agencies followed the suit.

It was not easy to carry this innovation forward – every year the state audit complained about illegal activities and asked to “tidy up” the accounting. Also, the employment arrangement of Tarvi and his team was minimalistic and with many limitations. But the result was great and finally, the state took over the virtual organisation of ASO in 1997 and institutionalised it into the governmental data network management organisation (Riigiasutuste andmesidevõrk ASOnet).

At the end of this small remark about a great but unknown innovation in the Estonian public sector, I want to underline once more that nobody really guided the good things happening. There were people, who knew what had to be done and how it was doable. They somehow succeed in mobilising resources, and, despite all obstacles, arrived at a decent result. Again, this is a hugely remarkable success story of Estonian e-Government but it is not in line with the claim that Estonian e-Government was orchestrated.

And the last case to support my theory of unmanaged e-Government building is a story not about technology but about institutione building.

Story of IT in Ministry of Finance

I was a public servant from 1994 until the end of 2003, and, as far as I remember, the concept of IT management in the Estonian public sector was a very new discipline. First computers arrived in most cases in 1993–94. Organisations were alone in trying to figure out how to organise the IT management: what competencies were needed, what processes to set up, how to integrate IT into the existing management model etc. Many questions, and everyone trying to find the right answer.

In 1999, Siim Kallas, a representative of a new innovative political party Reformierakond become the Minister of Finance and started to innovate. IT management was also on his agenda. He brought along some people from the Central Bank, such as Enn Teiman, who became Deputy Permanent Secretary responsible for IT. He was eager to improve everything that could be improved.

Initially, the IT Council of the Ministry of Finance was created. The role of the Council was to coordinate the whole IT for the whole Ministry of Finance regardless of the official division of labour between departments. At the time there were four kingdoms: the Ministry itself with Treasury and Budget departments, Tax Administration, Customs Administration and Statistical Office.

The new IT Management Council was tasked with the overall governance, i.e. the overall portfolio management (with the IT project as a priority), security policy development and implementation, overall IT architecture management, IT development policies development and implementation monitoring, IT operations policies development and implementation monitoring. I was the first Chairman of the Council (2000–2001).

The Council started out as an informal organisation to foster the modernisation of the ministry and to do it in the most efficient way (there was a total lack of resources). The Council was operating on the basis of the decree of the Minister of Finance from 2000 establishing a permanent working group named “IT Council of the Ministry of Finance” responsible for guiding the IT management, development, operations and security management of the ministry. But in reality, all the IT managers of all the units under the Ministry of Finance were informed that the Council is the new management body and all projects and ideas should go through the Council. The Council’s decisions regarding IT policy recommendations were binding, and that all IT budget applications were required to receive the approval of the Council. In that way, the Council was created and very quickly fully operationalised as the IT governance body without changing the existing hierarchy of the ministry or its subordinated administrations.

The Council’s initial priority was to develop IT policies for operations and security management, including that the IT security management was to be based on ISO standards (today it is ISO 27000 family of standards), that the ministry should not buy computers but lease them instead, that all hardware procurements should be done globally for the whole ministry, that IT operations processes should be based on the ITIL framework etc. Also, at that time e-services were a new and rather unknown thing. In 2000 only the Tax Administration had an already functioning online digital self-service portal for its customers. The Council also started spreading know-how on how to quickly build reliable and secure e-services in all other areas of the Ministry of Finance.

At some point of (I think, it was in 2011) the informal ministry-level IT management structure was transformed into a full-fledged consolidated IT unit, to deliver IT services to all business units of the Ministry of Finance.

Like that, during first 20 years after regaining independence (from 1992 until 2012), the IT function of the Ministry of Finance was transformed from the initial “diversified” model with organisations “loosely coupled together under headquarter” (see detailed taxonomy description in (Kattel, January 2016)), through entrepreneurial informal and flexible, into a machine-like proper mature organisation, which consolidates all IT services delivery processes for all units under the Ministry of Finance. Through this whole period, the IT function was one important source and implementer of innovation. And if you ask me, the main drive for innovation was always accountability before people. In a small country like Estonia you just have to deliver and do things well. Improve things. Such a wish to do things better and better, in my view, was the main drive in all my stories.

Instead of Conclusion

During the last 10 years, I have often seen how prominent politicians and scholars talk about how the e-Estonia was built, and that there was a great plan, and how well all things were executed. This is not how I see it as a practitioner in the 1990-ies and in the beginning of this century. I see, that all the major initiatives in the public sector were more like solo initiatives of smart individuals, who were able to deliver despite all bureaucratic obstacles.

Also, I see, that our e-Government has not evolved over the past 10 years and that there are many reasons for that. The main reasons being a higher level of complexity and smaller accountability of players.

High complexity. It was easy to automate the initial business processes. It is much harder to evolve an e-government ecosystem. The Ministry of Social Affairs has recently admitted publicly that the development of the IT system for the social insurance department failed. The vendor for this project (IceFire) is probably one of best IT companies in Estonia, and the department itself is a mature and well-managed structure. But the complexity is just too high and old methodologies are not fit for the job.

Low accountability. You do not get fired if you are not delivering. One funny example is how Madame Marika Priske, the Permanent Secretary of the Ministry of Social Affairs, explained the failure of the social insurance information system development project – an absurd sum of 5 million euros was spent on building of basic infrastructure components (dafaaqe !?!)… that is really funny, and nobody gets fired. After the failure bureaucrats created a new organisation, asked for another 10 million euros and keep on spending and automating according to a19th century business model.



Kalvet, T., Tiits, M., & Hinsberg, H. (2013). E-teenuste kasutamise tulemuslikkus ja mõju. Tallinn: Balti Uuringute Instituut ja Poliitikauuringute Keskus Praxis.

Kattel, E. K. (January 2016). How to organize for innovation: Entrepreneurial State and Organizational Variety . Technology Governance and Economic Dynamics, no. 66.

Ströbele, M., Leosk, N., & Trechsel, A. (2017). A brief comparison of e-government solutions in Estonia and Switzerland. Zurich: xUpery Ltd.