Thanks to rapid and decisive reform after the dissolution of the Soviet Union and the regaining of independence in 1991, Estonia has achieved one of Eastern Europe’s most free-market–oriented economies. The reforms are marked by tight budgetary policies, foreign trade liberalization, and extensive privatization. The kroon is pegged to the euro through a currency board.

The country has a flat income tax rate of 26 percent, which should be reduced to 20 percent by 2006. The corporate tax on reinvested profits is 0 percent.

2004 Index of Economic Freedom

Source: Heritage Foundation, 2004