The Tax Foundation has released its International Tax Competitiveness Index which highlights the most competitive tax rates in different countries around the world. For the 11th consecutive year, Estonia had the highest score in the index. This was mainly due to its 20 percent tax on corporate profit only applied to distributed profits, a 20 percent tax on individual income not applying to personal dividend income, a property tax only applying to the value of land and finally an exemption on 100 percent of foreign profits earned by domestic corporations.
By comparison, France, Italy and Colombia were the least competitive countries in the index that takes into account the 38 OECD countries. While France and Colombia score low on their corporate income tax rates (meaning they collect a lot of them), Italy received bad marks for its consumption and property taxes. All three countries also levy wealth taxes.
Even though the United States improved its score this year, it was still only in the ranking's midfield, coming in 15th position with a score of 72.5 out of 100, up from rank 16 last year. Better expensing for corporate investments in industrial plants and machinery was lauded, while the country scored relatively poorly on property taxes and cross-border taxes. The later received the worst grades as the United States is one of the few countries which continued to tax the global income of companies to a high degree. However, as corporate minimum tax rules are implemented globally, this playing field is leveling.
For countries all over the world, a well-structured corporate tax rate is important in promoting economic development, boosting revenue and ultimately determining overall economic performance. Businesses tend to invest in countries where they can expect the highest rate of return and the most successful nations in the index were the ones with the lowest corporate tax rates as well as with the easiest processes for companies to comply with local tax laws. The research measured two core aspects of tax policy, competitiveness and neutrality, across corporate, individual, consumption, property and cross-border taxes.
