According to US-based think tank, Estonia currently has the most competitive tax code in the industrialized world.
Tax Foundation’s International Tax Competitiveness Index (ITCI) seeks to measure the business competitiveness of national tax systems. In order to do this, the ITCI looks at over 40 tax policy variables, including corporate income taxes, individual income and payroll taxes, consumption taxes, property taxes, and the treatment of foreign earnings. The ITCI scores the 34 member countries of the OECD (the Organisation for Economic Co-operation and Development) based on these five categories in order to rank the most competitive tax codes in the industrialized world.
Based on this ranking, Estonia currently has the most competitive tax code in the OECD. “Its top score is driven by four positive features of its tax code," the Tax Foundation said. "First, it has a 20 percent tax rate on corporate income that is only applied to distributed profits. Second, it has a flat 20 percent tax on individual income that does not apply to personal dividend income. Third, its property tax applies only to the value of land rather than taxing the value of real property or capital. Finally, it has a territorial tax system that exempts 100 percent of the foreign profits earned by domestic corporations from domestic taxation, with few restrictions.”
The foundation said that in today’s globalized economy, the structure of a country’s tax code is an important factor for businesses when they decide where to invest, how much to invest, and which types of operations to locate in which countries. “No longer can a country levy high taxes on business investment and activity without adversely affecting its economic performance. In recent years, many countries have recognized this fact and have moved to reform their tax codes to be more competitive. However, others have failed to do so and are falling behind the global movement.”
Other countries in the top 5 were New Zealand, Switzerland, Sweden, and Netherlands.
The Tax Foundation is a non-partisan research think tank, established in 1937, and based in Washington, DC.
Editor: S. Tambur