Be aware: Annually we overview and enhance the methodology of the Index. For that cause, prior editions usually are not similar to the outcomes on this 2022 version. All knowledge and methodological notes are accessible in our GitHub repository. Under is a preview of the 2022 Index. To entry the complete report, click on the obtain button above.
Introduction
The construction of a rustic’s tax code is a figuring out issue of its financial efficiency. A well-structured tax code is simple for taxpayers to adjust to and may promote financial growth whereas elevating enough income for a authorities’s priorities. In distinction, poorly structured tax methods may be expensive, distort financial decision-making, and hurt home economies.
Many nations have acknowledged this and have reformed their tax codes. Over the previous few many years, marginal tax charges on company and particular person revenue have declined considerably throughout the Organisation for Financial Co-operation and Growth (OECD). Now, most OECD nations increase a big quantity of income from broad-based taxes similar to payroll taxes and value-added taxes (VAT).[1]
Not all latest modifications in tax coverage amongst OECD nations have improved the construction of tax methods; some have made a detrimental impression. Although some nations like the USA and France have decreased their company revenue tax charges by a number of proportion factors, others, like Turkey, have elevated them. Company tax base enhancements have occurred in Chile and the UK, whereas the company tax base has been made much less aggressive in Belgium.
The COVID-19 pandemic has led many nations to undertake short-term modifications to their tax methods. Confronted with income shortfalls from the downturn, nations might want to take into account easy methods to greatest construction their tax methods to foster each an financial restoration and lift income.
The number of approaches to taxation amongst OECD nations creates a necessity to judge these methods relative to one another. For that function, we’ve got developed the Worldwide Tax Competitiveness Index—a relative comparability of OECD nations’ tax methods with respect to competitiveness and neutrality.
The Worldwide Tax Competitiveness Index
The Worldwide Tax Competitiveness Index (ITCI) seeks to measure the extent to which a rustic’s tax system adheres to 2 necessary features of tax coverage: competitiveness and neutrality.
A aggressive tax code is one which retains marginal tax charges low. In in the present day’s globalized world, capital is very cell. Companies can select to spend money on any variety of nations all through the world to seek out the very best price of return. Which means that companies will search for nations with decrease tax charges on funding to maximise their after-tax price of return. If a rustic’s tax price is simply too excessive, it’ll drive funding elsewhere, resulting in slower financial development. As well as, excessive marginal tax charges can impede home funding and result in tax avoidance.
In keeping with analysis from the OECD, company taxes are most dangerous for financial development, with private revenue taxes and consumption taxes being much less dangerous. Taxes on immovable property have the smallest impression on development.[2]
Individually, a impartial tax code is just one which seeks to lift probably the most income with the fewest financial distortions. Which means that it doesn’t favor consumption over saving, as occurs with funding taxes and wealth taxes. It additionally means few or no focused tax breaks for particular actions carried out by companies or people.
As tax legal guidelines turn out to be extra complicated, in addition they turn out to be much less impartial. If, in idea, the identical taxes apply to all companies and people, however the guidelines are such that enormous companies or rich people can change their conduct to realize a tax benefit, this undermines the neutrality of a tax system.
A tax code that’s aggressive and impartial promotes sustainable financial development and funding whereas elevating enough income for presidency priorities.
There are numerous components unrelated to taxes which have an effect on a rustic’s financial efficiency. However, taxes play an necessary function within the well being of a rustic’s economic system.
To measure whether or not a rustic’s tax system is impartial and aggressive, the ITCI seems at greater than 40 tax coverage variables. These variables measure not solely the extent of tax charges, but additionally how taxes are structured. The Index seems at a rustic’s company taxes, particular person revenue taxes, consumption taxes, property taxes, and the therapy of earnings earned abroad. The ITCI offers a complete overview of how developed nations’ tax codes examine, explains why sure tax codes stand out pretty much as good or unhealthy fashions for reform, and offers necessary perception into how to consider tax coverage.
As a result of some knowledge limitations, latest tax modifications in some nations will not be mirrored on this 12 months’s model of the Worldwide Tax Competitiveness Index.
2022 Rankings
For the ninth 12 months in a row, Estonia has the perfect tax code within the OECD. Its high rating is pushed by 4 optimistic options of its tax system. First, it has a 20 % tax price on company revenue that’s solely utilized to distributed earnings. Second, it has a flat 20 % tax on particular person revenue that doesn’t apply to non-public dividend revenue. Third, its property tax applies solely to the worth of land, reasonably than to the worth of actual property or capital. Lastly, it has a territorial tax system that exempts 100% of international earnings earned by home firms from home taxation, with few restrictions.
Whereas Estonia’s tax system is probably the most aggressive within the OECD, the opposite high nations’ tax methods obtain excessive scores on account of excellence in a number of of the most important tax classes. Latvia, which not too long ago adopted the Estonian system for company taxation, additionally has a comparatively environment friendly system for taxing labor revenue. New Zealand has a comparatively flat, low-rate particular person revenue tax that additionally largely exempts capital positive factors (with a mixed high price of 39 %), a well-structured property tax, and a broad-based VAT. Switzerland has a comparatively low company tax price (19.7 %), a low, broad-based consumption tax, and a person revenue tax that partially exempts capital positive factors from taxation. Luxembourg has a broad-based consumption tax and a aggressive worldwide tax system.
France has the least aggressive tax system within the OECD. It has a wealth tax on actual property, a monetary transaction tax, and an inheritance tax. The French VAT covers lower than 50 % of ultimate consumption, revealing each coverage and enforcement gaps.
International locations that rank poorly on the ITCI usually levy comparatively excessive marginal tax charges on company revenue or have a number of layers of tax guidelines that contribute to complexity. 4 of the 5 nations on the backside of the rankings all have greater than common company tax charges. Eire ranks poorly on the ITCI regardless of its low company tax price. This is because of excessive private revenue and dividend taxes and a comparatively slim VAT base. As well as, the 5 lowest-ranking nations have excessive consumption tax charges, with charges of 20 % or greater.
Notable Modifications from Final Yr[3]
Czech Republic 🇨🇿
The Czech Republic elevated the highest tax price on private revenue from 15 % to 27 %. The Czech Republic’s rating fell from 4th to fifth.
France 🇫🇷
France has been lowering its company revenue tax price over a number of years, a course of which concludes in 2022. As a part of this scheduled discount, France dropped its mixed company price (together with a surtax) from 28.41 % in 2021 to 25.83 % in 2022. Its Index rank remained unchanged at 38.
Eire 🇮🇪
Previous to 2022, Eire didn’t have a restrict on curiosity deductions. Now curiosity is restricted to 30 % of earnings earlier than curiosity, depreciation, and amortization. There’s an exemption for borrowing prices under €3 million. Eire’s rank fell from 28 to 35.
Italy 🇮🇹
Italy repealed its patent field and changed it with a 110 % tremendous deduction for analysis and growth spending. Italy’s rank remained at 37.
New Zealand 🇳🇿
New Zealand elevated its high private revenue tax price from 33 % to 39 %. New Zealand’s rating remained unchanged at 3.
Turkey 🇹🇷
Turkey decreased its company revenue tax price from 25 % in 2021 to 23 % in 2022. Turkey’s rank rose from ninth to 4th.
United Kingdom 🇬🇧
The UK launched a brief 130 % super-deduction for plant and tools. The UK’s rating elevated from 27 to 26.
Methodological Modifications
Annually we overview the information and methodology of the Index for ways in which might enhance the way it measures each competitiveness and neutrality. This 12 months we’ve got included a number of modifications to the best way the Index treats company taxes, particular person taxes, consumption taxes, and cross-border tax guidelines.
Now we have utilized every change to prior years to permit constant comparability throughout years. Information for all years utilizing the present methodology is accessible within the GitHub repository for the Index,[4] and an outline of how the Index is calculated is offered within the Appendix of this report. Prior editions of the Index, nonetheless, usually are not similar to the outcomes on this 2022 version on account of these methodological modifications.
Basic
Costa Rica was added to this 12 months’s Index because it grew to become the thirty eighth member of the Organisation for Financial Co-operation and Growth (OECD) in 2021.
The Index beforehand relied on some measures of tax complexity that have been developed by PwC together with the World Financial institution’s Doing Enterprise report. In September 2021, that report was discontinued. The Index not makes use of any variables from that report or PwC’s “Paying Taxes” research. As an alternative, new measures of tax complexity have been included as described under.
Company Tax
The prior tax complexity measures have been changed with three new measures for complexity. The primary is a tally of tax charges that apply to company revenue. These charges might come up as a result of company revenue is taxed at totally different charges on account of enterprise dimension or the scale of enterprise earnings, or as a result of there’s another minimal tax that sits alongside regular company tax guidelines. The second measure is the speed of a company surtax if any exists. The third is the quantity of income collected on company or private revenue from taxes other than commonplace taxes on these strains of revenue.
Particular person Taxes
The prior tax complexity measures for particular person taxes have additionally been changed with two new measures for complexity. The primary is the speed of a company surtax if any exists. The second is the quantity of income collected for social safety or by means of payroll taxes apart from commonplace taxes of that type.
Consumption Taxes
The complexity measure for consumption taxes has been eliminated as no appropriate alternative for the prior measure was discovered to be appropriate.
Cross-Border Tax Guidelines
In 2017, the USA adopted a novel method to taxing international earnings of U.S. companies. That method has been partially included into the design of a worldwide minimal tax proposal. Beginning this 12 months, the Index is together with one other layer to the CFC guidelines variable which identifies whether or not a jurisdiction has a type of the minimal tax, which is at the moment solely true of the U.S.
Anti-abuse provisions of this nature usually are not at the moment accounted for within the Index. Nevertheless, in the event that they have been appropriately accounted for, nations like Australia, the UK, and the USA would seemingly obtain worse scores on their cross-border tax guidelines—probably additionally impacting their general rating on the Index.
Nation Profiles
Australia ranks eleventh general on the 2022 Worldwide Tax Competitiveness Index, two locations worse than in 2021. Study extra concerning the Australian tax system right here.
✔️ Some strengths of the Australian tax system:
Property taxes in Australia are assessed on the worth of the land reasonably than actual property or different enhancements to land.
Australia’s company and particular person taxes have an built-in therapy of dividends, assuaging the burden of double taxation on distributed earnings.
Australia ranks effectively on consumption taxes on account of its low items and companies tax (GST) price however applies it to a comparatively slim base.
❌ Some weaknesses of the Australian tax system:
Australia’s treaty community consists of simply 45 nations, when the typical amongst OECD nations is 74.
The company tax price in Australia is 30 %, above the OECD common (23.6 %).
Firms are restricted of their skill to put in writing off investments.
Austria ranks 18th general on the 2022 Worldwide Tax Competitiveness Index, two locations worse than in 2021. Study extra concerning the Austrian tax system right here.
✔️ Some strengths of the Austrian tax system:
Austria’s worldwide tax system is comparatively aggressive as it’s absolutely territorial with none nation limitations, has a broad tax treaty community of 89 nations, and Managed International Company guidelines that solely apply to subsidiaries that wouldn’t have substantial financial exercise.
The VAT in Austria applies to a broad base.
There are not any property, inheritance, or wealth taxes.
❌ Some weaknesses of the Austrian tax system:
The headline company price of 25 % is barely above the OECD common (23.6 %).
Austria carried out a digital companies tax (DST) in 2020.
The tax wedge on labor is the third highest amongst OECD nations.
Belgium ranks twenty fourth general on the 2022 Worldwide Tax Competitiveness Index, one spot higher than in 2021. Study extra concerning the Belgium tax system right here.
✔️ Some strengths of the Belgium tax system:
Belgium has a broad tax treaty community, with 95 nations, and a territorial tax system because it absolutely exempts foreign-sourced dividends and capital positive factors with none nation limitations.
Capital positive factors ensuing from regular administration of personal wealth are exempt from tax.
Belgium offers an allowance for company fairness (ACE) to handle the debt bias that’s inherent to the usual company revenue tax.
❌ Some weaknesses of the Belgium tax system:
The company price of 25 % is barely above common amongst OECD nations (23.6 %).
Belgium levies an property tax and a monetary transaction tax and launched a brand new annual tax on securities accounts.
The Belgian tax wedge on labor is the very best among the many OECD nations, with the typical wage single employee going through a tax burden of 52.6 %.
Canada ranks sixteenth general on the 2022 Worldwide Tax Competitiveness Index, two spots higher than in 2021. Study extra concerning the Canadian tax system right here.
✔️ Some strengths of the Canadian tax system:
Consumption taxes are low, although the consumption tax base is comparatively slim.
Canada permits companies to right away write off investments in equipment.
Canada doesn’t levy wealth, property, or inheritance taxes.
❌ Some weaknesses of the Canadian tax system:
The non-public tax on dividends is 39.3 %, effectively above the OECD common of 24.2 %.
Canada taxes capital positive factors at a price of 26.75 %, whereas the OECD common is nineteen %.
The company price of 26.2 % is above common amongst OECD nations (23.6 %).
Chile ranks twenty seventh general on the 2022 Worldwide Tax Competitiveness Index, one spot worse than in 2021. Study extra concerning the Chilean tax system right here.
✔️ Some strengths of the Chilean tax system:
As a response to the COVID-19 pandemic, Chile quickly permits companies to right away write off investments in buildings and equipment and to right away amortize intangibles.
Chile quickly decreased its company revenue tax price to 10 % for smaller companies.
Chile has the second lowest tax wedge on labor amongst OECD nations, at 7 %, in comparison with the OECD common of 34.6 %.
❌ Some weaknesses of the Chilean tax system:
Chile has a comparatively small tax treaty community with simply 33 treaties.
The tax price on capital positive factors is 40 %, effectively above the OECD common of 19 %.
Chile has a worldwide tax system, whereas most OECD nations have territorial provisions.
Colombia ranks thirty second general on the 2022 Worldwide Tax Competitiveness Index, three locations higher than in 2021. Study extra concerning the Colombian tax system right here.
✔️ Some strengths of the Colombian tax system:
A employee incomes the nation’s common wage faces the bottom tax burden within the OECD.
Colombia taxes dividends and capital positive factors at very low charges.
Whereas capital positive factors ensuing from inheritance and items acquired are topic to a ten % tax, there is no such thing as a complete property or inheritance tax.
❌ Some weaknesses of the Colombian tax system:
The VAT base could be very slim, overlaying lower than 40 % of Colombian consumption.
Colombia levies a internet wealth tax and a monetary transactions tax.
At 35 %, Colombia’s company revenue tax price is considerably above the OECD common (23.6 %).
Costa Rica ranks nineteenth general on the 2022 Worldwide Tax Competitiveness Index, one place higher than in 2021. Study extra concerning the Costa Rican tax system right here.
✔️ Some strengths of the Costa Rican tax system:
Costa Rica has neither a internet wealth nor an property tax.
The VAT price is simply 13 %, under the OECD common of 19 %.
Capital positive factors and dividends are each taxed at charges under the OECD common.
❌ Some weaknesses of the Costa Rican tax system:
Costa Rica has simply three tax treaties whereas the typical within the OECD is 74.
Costa Rica has 5 separate tax brackets for company revenue.
At 30 %, Costa Rica’s company revenue tax price is considerably above the OECD common (23.6 %).
The Czech Republic ranks fifth general on the 2022 Worldwide Tax Competitiveness Index, one place worse than in 2021. Study extra concerning the Czech tax system right here.
✔️ Some strengths of the Czech tax system:
The company price of 19 % is under the OECD common (23.6 %), with above-average price restoration provisions.
Taxes on labor are minimally distortive.
The Czech Republic has a territorial tax system, exempting each international dividend and capital positive factors revenue from different European nations, mixed with a broad tax treaty community.
❌ Some weaknesses of the Czech tax system:
The VAT threshold is comparatively excessive, contributing to a distortionary VAT design.
Internet working losses can solely be carried ahead for 5 years (they will, nonetheless, even be carried again for 2 years).
The Czech Republic’s skinny capitalization guidelines are among the many stricter ones within the OECD.
Denmark ranks thirty third general on the 2022 Worldwide Tax Competitiveness Index, one place higher than in 2021. Study extra concerning the Danish tax system right here.
✔️ Some strengths of the Danish tax system:
Company revenue taxes are comparatively much less complicated than in different nations.
Denmark has a territorial tax system, exempting each international dividend and capital positive factors revenue for its treaty companions and different European nations.
Property taxes are modest, and Denmark permits property taxes to be deducted in opposition to company revenue tax.
❌ Some weaknesses of the Danish tax system:
Along with a high statutory private revenue tax price of 55.9 % (together with the surtax), the private revenue tax charges on dividends and capital positive factors are each at 42 %, effectively above the OECD averages of 24.2 % and 19 %, respectively.
Internet working losses may be carried ahead indefinitely however are restricted to 60 % of taxable revenue in the event that they exceed a specific amount.
Denmark makes use of First-In-First-Out for assessing the price of stock for tax functions.
Estonia ranks 1st general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021, and for the ninth consecutive 12 months. Study extra concerning the Estonian tax system right here.
✔️ Some strengths of the Estonian tax system:
Estonia’s company revenue tax system solely taxes distributed earnings, permitting firms to reinvest their earnings tax-free.
The VAT applies to a broad base and has a low compliance burden.
Property taxes solely apply to the worth of land.
❌ Some weaknesses of the Estonian tax system:
Estonia has tax treaties with simply 61 nations, under the OECD common (74 nations).
Estonia’s territorial tax system is restricted to European nations.
Estonia’s skinny capitalization guidelines are among the many extra stringent ones within the OECD.
Finland ranks twentieth general on the 2022 Worldwide Tax Competitiveness Index, one place higher than in 2021. Study extra concerning the Finnish tax system right here.
✔️ Some strengths of the Finnish tax system:
Finland has a comparatively low company tax price of 20 %.
The design of company and private revenue taxes makes them comparatively much less complicated than in different nations.
Finland has a territorial tax system and a broad tax treaty community with 76 nations.
❌ Some weaknesses of the Finnish tax system:
Finland levies each an property and a monetary transactions tax.
Corporations are restricted of their skill to hold ahead internet working losses and are restricted to utilizing First-In-First-Out as the associated fee accounting methodology for stock.
Finland’s high statutory price on private revenue is comparatively excessive at 51.3 % (the OECD common is 42.5 %).
France ranks thirty eighth general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Study extra concerning the French tax system right here.
✔️ Some strengths of the French tax system:
France has above-average price restoration provisions for investments in equipment, buildings, and intangibles.
After a number of years of reductions, France’s company tax price (25.8 %) is way nearer to the OECD common of 23.6 %.
France has a broad tax treaty community, with 122 nations.
❌ Some weaknesses of the French tax system:
France has a number of distortionary property taxes with separate levies on estates, financial institution belongings, monetary transactions, and a wealth tax on actual property.
The tax burden on labor of 47 % is among the many highest for OECD nations.
A decreased 10 % tax price applies to revenue derived from IP rights by means of a so-called patent field.
Germany ranks fifteenth general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Study extra concerning the German tax system right here.
✔️ Some strengths of the German tax system:
The VAT price of 19 % is close to the OECD common (19 %).
Germany has a broad tax treaty community, with 96 nations.
Stock can obtain Final-In-First-Out therapy, probably the most impartial therapy of stock prices.
❌ Some weaknesses of the German tax system:
Germany has the sixth highest company revenue tax price amongst OECD nations, at 29.9 %.
The company tax burden features a 5.5 % surtax.
Corporations are restricted within the quantity of internet working losses they will use to offset revenue on future or earlier tax returns.
Greece ranks twenty ninth general on the 2022 Worldwide Tax Competitiveness Index, 4 locations higher than in 2021. Study extra concerning the Greek tax system right here.
✔️ Some strengths of the Greek tax system:
The web private tax price of 5 % on dividends is considerably under the OECD common of 24.2 %.
The company revenue tax price of twenty-two % is under the OECD common of 23.6 %.
Managed International Company guidelines in Greece are modest and solely apply to passive revenue.
❌ Some weaknesses of the Greek tax system:
Corporations are severely restricted within the quantity of internet working losses they will use to offset future earnings, and corporations can not use losses to scale back previous taxable revenue.
Greece has a comparatively slim tax treaty community (57 treaties in comparison with an OECD common of 74 treaties).
At 24 %, Greece has one of many highest VAT charges within the OECD on one of many narrowest bases.
Hungary ranks seventh general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Study extra concerning the Hungarian tax system right here.
✔️ Some strengths of the Hungarian tax system:
Hungary has the bottom company tax price within the OECD, at 9 %.
Hungary has a flat private revenue tax system.
Managed International Company guidelines are better-than-average.
❌ Some weaknesses of the Hungarian tax system:
Corporations are severely restricted within the quantity of internet working losses they will use to offset future earnings, and corporations can not use losses to scale back previous taxable revenue.
Hungary has the very best VAT price amongst OECD nations, at 27 %.
Hungary levies taxes on estates, actual property transfers, and financial institution belongings.
Iceland ranks thirty first general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Study extra concerning the Icelandic tax system right here.
✔️ Some strengths of the Icelandic tax system:
Iceland’s company tax price of 20 % is under the OECD common of 23.6 %, and the tax therapy of investments is among the greatest within the OECD.
Company and labor taxes are much less complicated than they’re on common within the OECD.
Iceland has a territorial tax system that absolutely exempts international dividends and capital positive factors with no nation limitations.
❌ Some weaknesses of the Icelandic tax system:
Corporations are restricted within the quantity of internet working losses they will use to offset future earnings, and corporations can not use losses to scale back previous taxable revenue.
The VAT of 24 % applies to a comparatively slim tax base.
Iceland’s Managed International Company guidelines apply to each passive and lively revenue.
Eire ranks thirty fifth general on the 2022 Worldwide Tax Competitiveness Index, seven spots worse than in 2021. Study extra concerning the Irish tax system right here.
✔️ Some strengths of the Irish tax system:
Eire has a low company tax price of 12.5 %.
Internet working losses may be carried again one 12 months and carried ahead indefinitely, permitting firms to be taxed on their common profitability.
The tax treaty community (73 treaties) is slightly below the typical of 74 nations.
❌ Some weaknesses of the Irish tax system:
Eire’s private tax price on dividend revenue of 51 % is the very best amongst OECD nations.
The VAT price of 23 % is among the highest within the OECD and applies to a comparatively slim tax base.
Firms are restricted of their skill to put in writing off investments.
Israel ranks tenth general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Study extra concerning the Israeli tax system right here.
✔️ Some strengths of the Israeli tax system:
Internet working losses may be carried ahead indefinitely.
The VAT price is comparatively low at 17 % and applies to a comparatively broad base.
Israel doesn’t levy wealth or property taxes.
❌ Some weaknesses of the Israeli tax system:
Israel has complicated incentives that cut back the company tax price to as little as 7.5 % on sure expertise firms.
The steep progressivity of Israel’s taxes on labor results in effectivity prices.
Israel has a comparatively slim tax treaty community, with 58 nations (the OECD common is 74).
Italy ranks thirty seventh general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Study extra concerning the Italian tax system right here.
✔️ Some strengths of the Italian tax system:
Italy has above-average price restoration provisions for investments in intangibles, in addition to an allowance for company fairness (ACE).
Final-In-First-Out therapy of the price of stock is allowed.
Italy has a broad tax treaty community, with 100 nations.
❌ Some weaknesses of the Italian tax system:
Italy has a number of distortionary property taxes with separate levies on actual property transfers, estates, and monetary transactions, in addition to a wealth tax on chosen belongings.
The VAT price of twenty-two % applies to the fourth narrowest consumption tax base within the OECD.
The company tax price of 27.8 % is above the OECD common of 23.6 %.
Japan ranks twenty first general on the 2022 Worldwide Tax Competitiveness Index, 4 locations worse than in 2021. Study extra concerning the Japanese tax system right here.
✔️ Some strengths of the Japanese tax system:
Japan has a low VAT price of 10 %.
The consumption tax base is comparatively broad, overlaying 65 % of consumption.
Japan’s private revenue tax price on dividends is 20.3 %, under the OECD common of 24.2 %.
❌ Some weaknesses of the Japanese tax system:
Japan has poor price restoration provisions for enterprise investments in equipment and buildings.
Japan has a hybrid worldwide tax system with a 95 % exemption for international dividends and no exemption for international capital positive factors, whereas many OECD nations have moved to a totally territorial system.
Corporations are severely restricted within the quantity of internet working losses they will use to offset future earnings.
Korea ranks twenty fifth general on the 2022 Worldwide Tax Competitiveness Index, one spot worse than in 2021. Study extra concerning the Korean tax system right here.
✔️ Some strengths of the Korean tax system:
Korea has a low VAT of 10 % that’s utilized to a comparatively broad base.
Korea has a broad tax treaty community, with 93 nations.
Enterprise investments in equipment obtain better-than-average therapy for company write-offs.
❌ Some weaknesses of the Korean tax system:
Korea has a number of distortionary property taxes with separate levies on actual property transfers, estates, and monetary transactions.
The non-public revenue tax price on dividends is 44.0 % (in comparison with an OECD common of 24.2 %).
Korea is among the few OECD nations that operates a worldwide company tax system (reasonably than a territorial system).
Latvia ranks 2nd general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Study extra concerning the Latvian tax system right here.
✔️ Some strengths of the Latvian tax system:
Latvia’s company revenue tax system solely taxes distributed earnings, permitting firms to reinvest their earnings tax-free.
Firms can deduct property taxes when calculating taxable revenue.
Taxes on labor are comparatively flat, permitting the federal government to lift income from taxes on staff with only a few distortions.
❌ Some weaknesses of the Latvian tax system:
Latvia’s community of tax treaties contains 62 nations, a comparatively low quantity.
Latvia’s thin-capitalization guidelines are among the many stricter ones within the OECD.
The brink at which the VAT applies is considerably greater than the typical VAT threshold for OECD nations.
Lithuania ranks eighth general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Study extra concerning the Lithuanian tax system right here.
✔️ Some strengths of the Lithuanian tax system:
Enterprise investments in equipment, buildings, and intangibles obtain better-than-average tax therapy.
Lithuania’s company tax price is 15 %, effectively under the OECD common of 23.6 %.
Lithuania’s taxes on labor are flatter than common, permitting the federal government to lift income from taxes on staff with only a few distortions.
❌ Some weaknesses of the Lithuanian tax system:
Lithuania has tax treaties with simply 54 nations, under the OECD common (74 nations).
Lithuania has each a patent field and a brilliant deduction for Analysis and Growth expenditures.
Multinational companies face strict skinny capitalization guidelines.
Luxembourg ranks sixth general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Study extra concerning the Luxembourg tax system right here.
✔️ Some strengths of the Luxembourg tax system:
Enterprise investments in equipment and intangibles obtain better-than-average tax therapy.
Luxembourg applies its comparatively low VAT price of 17 % to just about 80 % of ultimate consumption.
Capital positive factors are tax-exempt if a movable asset similar to shares was held for no less than six months, encouraging long-term financial savings.
❌ Some weaknesses of the Luxembourg tax system:
Corporations are restricted within the time interval wherein they will use internet working losses to offset future earnings and are unable to make use of losses to offset previous taxable revenue.
Luxembourg has a number of distortionary property taxes with separate levies on actual property transfers, estates, and company internet belongings.
Luxembourg has a solidarity tax which acts as a 7 % surtax on private revenue.
Mexico ranks thirtieth general on the 2022 Worldwide Tax Competitiveness Index, one place worse than in 2021. Study extra concerning the Mexican tax system right here.
✔️ Some strengths of the Mexican tax system:
The non-public revenue tax price on dividends is 17.1 %, under the OECD common of 24.1 %.
Firms can deduct property taxes when calculating taxable revenue.
Mexico permits for Final-In-First-Out therapy of the price of stock.
❌ Some weaknesses of the Mexican tax system:
Enterprise losses are severely restricted within the quantity of earnings that may be offset over time.
The VAT base is the narrowest within the OECD, with solely 37 % of ultimate consumption being taxed.
Mexico has a higher-than-average company tax price of 30 % (the OECD common is 23.6 %).
The Netherlands ranks 14th general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Study extra concerning the Dutch tax system right here.
✔️ Some strengths of the Dutch tax system:
The Netherlands permits internet working losses to be carried again one 12 months, and the Final-In-First-Out therapy of the price of stock is allowed.
The Netherlands has a territorial tax system exempting each international dividends and capital positive factors and a broad tax treaty community, with 92 nations.
Firms can deduct property taxes when calculating taxable revenue.
❌ Some weaknesses of the Dutch tax system:
The Netherlands has a progressive tax system with a mixed high price on private revenue of 49.5 %.
The VAT of 21 % applies to roughly half of the potential consumption tax base.
Corporations are restricted within the time interval wherein they will use internet working losses to offset future earnings.
New Zealand ranks third general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Study extra concerning the New Zealand tax system right here.
✔️ Some strengths of the New Zealand tax system:
New Zealand permits company losses to be carried ahead indefinitely and has launched a brief one-year carryback provision, permitting companies to be taxed on their common profitability.
The VAT of 15 % applies to just about the whole potential consumption tax base.
New Zealand property taxes apply simply to the worth of land reasonably than actual property or different enhancements to the land.
❌ Some weaknesses of the New Zealand tax system:
New Zealand has an above-average company tax price of 28 % (the OECD common is 23.6 %) and comparatively poor price restoration provisions for enterprise investments.
New Zealand has a slim tax treaty community, with 40 nations.
The price of stock may be accounted for utilizing First-In-First-Out methodology or the typical price methodology (Final-In-First-Out is just not permitted).
Norway ranks seventeenth general on the 2022 Worldwide Tax Competitiveness Index, two locations higher than in 2021. Study extra concerning the Norwegian tax system right here.
✔️ Some strengths of the Norwegian tax system:
Norway permits company losses to be carried ahead indefinitely.
Norway’s company revenue tax price of twenty-two % is near the OECD common (23.6 %).
Norway has a territorial tax system, with a community of 87 tax treaties.
❌ Some weaknesses of the Norwegian tax system:
Firms are restricted of their skill to put in writing off investments.
Norway is among the few OECD nations that levies a internet wealth tax.
Managed International Company guidelines are utilized to each passive and lively revenue.
Poland ranks twenty eighth general on the 2022 Worldwide Tax Competitiveness Index, two locations higher than in 2021. Study extra concerning the Polish tax system right here.
✔️ Some strengths of the Polish tax system:
Poland has a below-average company tax price of 19 % (OECD common is 23.6 %).
Poland’s taxes on labor are usually flat, permitting the federal government to lift income from taxes on staff with relative low effectivity prices.
Poland has a broad tax treaty community together with 86 nations.
❌ Some weaknesses of the Polish tax system:
Poland has a number of distortionary property taxes with separate levies on actual property transfers, estates, financial institution belongings, and monetary transactions.
Corporations are severely restricted within the quantity of internet working losses they will use to offset future earnings and are unable to make use of losses to scale back previous taxable revenue.
Corporations can write off simply 33.8 % of the price of industrial buildings in actual phrases (the OECD common is 50.7 %).
Portugal ranks thirty sixth general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Study extra concerning the Portuguese tax system right here.
✔️ Some strengths of the Portuguese tax system:
Firms can deduct their property taxes from their taxable revenue, and there’s an allowance for company fairness (ACE).
Portugal has a territorial tax system, exempting international dividend and capital positive factors revenue for many nations.
Portugal offers above-average capital price write-offs for investments in equipment.
❌ Some weaknesses of the Portuguese tax system:
Portugal has a excessive company tax price of 31.5 % (the OECD common is 23.6 %).
Corporations are severely restricted within the quantity of internet working losses they will use to offset future earnings and are unable to make use of losses to scale back previous taxable revenue.
The VAT at a price of 23 % applies to only half of the potential consumption tax base.
The Slovak Republic ranks thirteenth general on the 2022 Worldwide Tax Competitiveness Index, two spots worse than in 2021. Study extra concerning the Slovakian tax system right here.
✔️ Some strengths of the Slovakian tax system:
The non-public revenue price on dividends could be very low at 7 % (in comparison with an OECD common of 24.1 %).
The Slovak Republic has better-than-average tax therapy of enterprise funding in equipment, buildings, and intangibles.
Firms can deduct property taxes when calculating taxable revenue.
❌ Some weaknesses of the Slovakian tax system:
Corporations are severely restricted within the quantity of internet working losses they will use to offset future earnings and are unable to make use of losses to scale back previous taxable revenue.
The VAT of 20 % applies to roughly half of the potential consumption tax base.
The Slovak Republic has each a patent field and a brilliant deduction for Analysis and Growth expenditures, including to the complexity of the system.
Slovenia ranks twenty third general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Study extra concerning the Slovenian tax system right here.
✔️ Some strengths of the Slovenian tax system:
Slovenia has a 19 % company tax price, under the OECD common (23.6 %).
Slovenia’s 22 % VAT applies to a tax base of roughly the OECD common.
Capital positive factors taxes are decreased the longer belongings are held (a zero % price applies after holding an asset for no less than 20 years), encouraging long-term financial savings.
❌ Some weaknesses of the Slovenian tax system:
Slovenia’s tax therapy of investments in buildings and intangibles is under the OECD common.
Slovenia has a comparatively slim tax treaty community, with 59 nations, and solely a partial territorial tax system.
Slovenia has a number of distortionary property taxes with separate levies on actual property transfers, estates, and financial institution belongings.
Spain ranks thirty fourth general on the 2022 Worldwide Tax Competitiveness Index, two locations worse than in 2021. Study extra concerning the Spanish tax system right here.
✔️ Some strengths of the Spanish tax system:
Spain has a territorial tax system that exempts 95 % of international dividends and capital positive factors revenue from taxation.
The Spanish tax treaty community is made up of 95 nations.
Property taxes may be deducted in opposition to company revenue taxes.
❌ Some weaknesses of the Spanish tax system:
The VAT of 21 % applies to lower than half of the potential consumption tax base.
Spain has a number of distortionary property taxes with separate levies on actual property transfers, internet wealth, estates, and monetary transactions.
Spain has each a patent field and a credit score for Analysis and Growth.
Sweden ranks twelfth general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Study extra concerning the Swedish tax system right here.
✔️ Some strengths of the Swedish tax system:
Sweden offers for internet working losses to be carried ahead indefinitely, permitting for firms to be taxed on their common profitability.
Sweden has a territorial tax system that exempts each international dividends and capital positive factors revenue from taxation with none nation limitations.
Sweden has a broad tax treaty community, with 85 nations.
❌ Some weaknesses of the Swedish tax system:
Sweden’s private dividend tax price and capital positive factors tax price are each 30 %, above the OECD common (24.2 % for dividends and 19 % for capital positive factors).
Sweden has a high statutory private revenue tax price of 52.3 %.
Sweden has Managed International Company guidelines that apply to each passive and lively revenue.
Switzerland ranks 4th general on the 2022 Worldwide Tax Competitiveness Index, one place higher than in 2021. Study extra concerning the Swiss tax system right here.
✔️ Some strengths of the Swiss tax system:
Switzerland has above-average price restoration provisions for investments in buildings and intangibles.
Switzerland has a broad tax treaty community, with 94 nations.
The Swiss VAT of seven.7 % applies to a broad base.
❌ Some weaknesses of the Swiss tax system:
Switzerland has a number of distortionary property taxes with separate levies on actual property transfers, internet wealth, estates, belongings, and monetary transactions.
Corporations are restricted within the time interval wherein they will use internet working losses to offset future earnings and are unable to make use of losses to scale back previous taxable revenue.
The VAT exemption threshold is sort of twice as excessive because the OECD common.
Turkey ranks ninth general on the 2022 Worldwide Tax Competitiveness Index, 4 locations higher than in 2021. Study extra concerning the Turkish tax system right here.
✔️ Some strengths of the Turkish tax system:
Turkey has a territorial tax system exempting international dividends and capital positive factors revenue with none nation limitations.
The non-public revenue tax on dividends is 20 %, under the OECD common (24.1 %).
Turkey offers an allowance for fairness (ACE), addressing the debt bias inherent to the usual company revenue tax.
❌ Some weaknesses of the Turkish tax system:
Corporations are severely restricted within the time interval wherein they will use internet working losses to offset future earnings and are unable to make use of losses to scale back previous taxable revenue.
Turkey’s VAT price of 18 % applies to lower than half of the potential tax base.
Turkey has a number of distortionary property taxes with separate levies on actual property transfers, estates, and monetary transactions.
The UK ranks twenty sixth general on the 2022 Worldwide Tax Competitiveness Index, one place higher than in 2021. Study extra concerning the UK tax system right here.
✔️ Some strengths of the UK tax system:
The company revenue tax price is nineteen %, under the OECD common (23.6 %).
The UK has a territorial tax system exempting each international dividend and capital positive factors revenue with none nation limitations.
The UK tax treaty community with 130 nations is the broadest within the OECD.
❌ Some weaknesses of the UK tax system:
The highest private revenue tax price on dividends is 39.35 %, effectively above the OECD common (24.2 %).
The true property tax burden is among the many highest within the OECD.
The VAT at a price of 20 % applies to lower than half of the potential consumption tax base.
The US ranks twenty second general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Study extra concerning the U.S. tax system right here.
✔️ Some strengths of the U.S. tax system:
The U.S. offers full expensing for enterprise investments in equipment.
The U.S. permits for Final-In-First-Out therapy of the price of stock.
Firms can deduct property taxes when calculating taxable revenue.
❌ Some weaknesses of the U.S. tax system:
U.S. states’ gross sales taxes apply on common to lower than a 3rd of the potential tax base.
The U.S. has a partial territorial system and doesn’t exempt international capital positive factors revenue.
The true property tax burden is among the many highest within the OECD.
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Be aware: Annually we overview and enhance the methodology of the Index. For that cause, prior editions usually are not similar to the outcomes on this 2022 version. All knowledge and methodological notes are accessible in our GitHub repository.
[1] Daniel Bunn, “Sources of Authorities Income within the OECD,” Tax Basis, Feb. 10, 2022, https://www.taxfoundation.org/publications/sources-of-government-revenue-in-the-oecd/.
[2] Organisation for Financial Co-operation and Growth (OECD), “Tax and Financial Progress,” Economics Division Working Paper No. 620, July 11, 2008.
[3] Final 12 months’s scores revealed on this report can differ from beforehand revealed rankings on account of each methodological modifications and corrections made to earlier years’ knowledge.
[4] Tax Basis, “Worldwide Tax Competitiveness Index,” https://github.com/TaxFoundation/international-tax-competitiveness-index
