The World's Most Competitive Tax Systems

The Tax Foundation has released its International Tax Competitiveness Index which highlights the most competitive tax rates in different countries around the world. A well-structured corporate tax rate is important in promoting economic development, boosting revenue and ultimately playing an important role in determining overall economuc performance. The research measured two core aspects of tax policy, competitiveness and neutrality, across over 40 tax policy variables.

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. For the sixth consecutive year, Estonia had the highest score in the index. This was mainly due to its a 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 from domestic taxation.

By comparison, France was the least competitive country in the index due to its high corporate income tax rate of 34.4 percent. That isn't helped by high property taxes, a net tax on real estate wealth, a financial transaction tax and an estate tax. Even though the United States improved its score this year due to President Trump's 2017 tax overhaul, it was still down in 21st position with a score of 63.7 out of 100 for its tax system.