Main obstacles for small and medium-sized businesses: taxes burden and bureaucracy

Survey by SEB bank indicates that Latvian, Lithuanian and Estonian entrepreneurs in small and medium-sized companies agree that the main obstacles which limit the growth of their businesses are the heavy tax burden and complex bureaucratic and legislative requirements.

Evaluating these factors on a scale between 1 (no impact) and 5 (very important obstacle), Lithuanian entrepreneurs have rated the impact of the tax burden on company's ability to increase turnover within next 12 months with 3.9 points, Estonians with 3.5 points while Latvian entrepreneurs have given a lower mark of 3.2 points.

Arnis Škapars, board member of SEB Latvia: "Although in Latvia we are hearing quite often opinions about advantages of Estonian tax system, it is clear that also Estonian small and medium-sized companies are worried about their taxes. Any tax will be more painful for small companies, especially for those who have recently started their business and have not yet accumulated experience and grown their business volumes.

However, survey results do reveal several interesting trends. Firstly, I find it interesting that in general Latvian entrepreneurs have rated the obstacles with lower points than their colleagues in other Baltic countries. We could be able to explain this with the general increase of optimism in SME area during the last year, which was fuelled by economic growth and increased purchasing power of the population. Secondly, it is rather interesting that lack of workforce is only #5 obstacle most frequently mentioned by entrepreneurs in Baltics. Taxes, bureaucracy and problems to find demand for goods and services are more important challenges than insufficient workforce."

Baltic entrepreneurs have said that problems to find markets for their goods and services is the #3 frequently mentioned obstacle, which undermines growth of their companies (Lithuanian SMEs: 3.2 points, Estonian: 2.8 points, Latvian: 2.6 points). Failure by customers to pay invoices and late payments is the fourth most frequently voiced concern by small and medium-sized companies (Lithuanian SMEs: 2.9 points, Estonian: 2.7 points, Latvian: 2.4 points).

Baltic Business Outlook is an annual survey by SEB bank, establishing expectations of Baltic small and medium-sized companies in five areas: changes in turnover, number of employees, exports, innovations and investment. Baltic Business Outlook 2019 encompasses answers by 4200 small and medium-sized businesses across Baltic States, including almost 1200 Latvian companies. The survey was done in December of 2018.