Be aware: Every year we overview and enhance the methodology of the Index. For that cause, prior editions should not akin 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 straightforward for taxpayers to adjust to and may promote financial growth whereas elevating enough income for a authorities’s priorities. In distinction, poorly structured tax programs could be expensive, distort financial decision-making, and hurt home economies.
Many international locations 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 Improvement (OECD). Now, most OECD nations elevate 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 international locations have improved the construction of tax programs; some have made a damaging influence. Although some international locations like the USA and France have diminished their company revenue tax charges by a number of share 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 international locations to undertake non permanent modifications to their tax programs. Confronted with income shortfalls from the downturn, international locations might want to take into account tips on how to greatest construction their tax programs to foster each an financial restoration and lift income.
The number of approaches to taxation amongst OECD international locations creates a necessity to guage these programs relative to one another. For that objective, we’ve developed the Worldwide Tax Competitiveness Index—a relative comparability of OECD international locations’ tax programs 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 essential elements of tax coverage: competitiveness and neutrality.
A aggressive tax code is one which retains marginal tax charges low. In at this time’s globalized world, capital is very cellular. Companies can select to spend money on any variety of international locations all through the world to search out the very best charge of return. Which means that companies will search for international locations with decrease tax charges on funding to maximise their after-tax charge of return. If a rustic’s tax charge is just too excessive, it’s going to 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 influence on development.[2]
Individually, a impartial tax code is solely 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 develop into extra advanced, additionally they develop into much less impartial. If, in concept, the identical taxes apply to all companies and people, however the guidelines are such that enormous companies or rich people can change their habits to achieve 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 a lot of elements unrelated to taxes which have an effect on a rustic’s financial efficiency. Nonetheless, taxes play an essential position 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 appears 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 appears at a rustic’s company taxes, particular person revenue taxes, consumption taxes, property taxes, and the remedy of earnings earned abroad. The ITCI offers a complete overview of how developed international locations’ tax codes examine, explains why sure tax codes stand out pretty much as good or unhealthy fashions for reform, and supplies essential perception into how to consider tax coverage.
Because of some knowledge limitations, latest tax modifications in some international locations is probably not mirrored on this yr’s model of the Worldwide Tax Competitiveness Index.
2022 Rankings
For the ninth yr in a row, Estonia has the perfect tax code within the OECD. Its prime rating is pushed by 4 optimistic options of its tax system. First, it has a 20 p.c tax charge on company revenue that’s solely utilized to distributed earnings. Second, it has a flat 20 p.c 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, fairly than to the worth of actual property or capital. Lastly, it has a territorial tax system that exempts 100% of overseas earnings earned by home companies from home taxation, with few restrictions.
Whereas Estonia’s tax system is probably the most aggressive within the OECD, the opposite prime international locations’ tax programs obtain excessive scores attributable to excellence in a number of of the most important tax classes. Latvia, which lately 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 prime charge of 39 p.c), a well-structured property tax, and a broad-based VAT. Switzerland has a comparatively low company tax charge (19.7 p.c), 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 p.c of ultimate consumption, revealing each coverage and enforcement gaps.
International locations that rank poorly on the ITCI typically 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 international locations on the backside of the rankings all have larger than common company tax charges. Eire ranks poorly on the ITCI regardless of its low company tax charge. This is because of excessive private revenue and dividend taxes and a comparatively slim VAT base. As well as, the 5 lowest-ranking international locations have excessive consumption tax charges, with charges of 20 p.c or larger.
Notable Adjustments from Final Yr[3]
Czech Republic 🇨🇿
The Czech Republic elevated the highest tax charge on private revenue from 15 p.c to 27 p.c. The Czech Republic’s rating fell from 4th to fifth.
France 🇫🇷
France has been decreasing its company revenue tax charge over a number of years, a course of which concludes in 2022. As a part of this scheduled discount, France dropped its mixed company charge (together with a surtax) from 28.41 p.c in 2021 to 25.83 p.c 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 proscribed to 30 p.c 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 p.c tremendous deduction for analysis and growth spending. Italy’s rank remained at 37.
New Zealand 🇳🇿
New Zealand elevated its prime private revenue tax charge from 33 p.c to 39 p.c. New Zealand’s rating remained unchanged at 3.
Turkey 🇹🇷
Turkey diminished its company revenue tax charge from 25 p.c in 2021 to 23 p.c in 2022. Turkey’s rank rose from ninth to 4th.
United Kingdom 🇬🇧
The UK launched a brief 130 p.c super-deduction for plant and gear. The UK’s rating elevated from 27 to 26.
Methodological Adjustments
Every year we overview the info and methodology of the Index for ways in which may enhance the way it measures each competitiveness and neutrality. This yr we’ve included a number of modifications to the best way the Index treats company taxes, particular person taxes, consumption taxes, and cross-border tax guidelines.
We now have utilized every change to prior years to permit constant comparability throughout years. Knowledge 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, nevertheless, should not akin to the outcomes on this 2022 version attributable to these methodological modifications.
Normal
Costa Rica was added to this yr’s Index because it grew to become the thirty eighth member of the Organisation for Financial Co-operation and Improvement (OECD) in 2021.
The Index beforehand relied on some measures of tax complexity that had been developed by PwC at the side of 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” examine. As a substitute, 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 may come up as a result of company revenue is taxed at totally different charges attributable to enterprise measurement or the scale of enterprise earnings, or as a result of there may be 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 aside from customary taxes on these traces 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 way of payroll taxes aside from customary 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 suitable.
Cross-Border Tax Guidelines
In 2017, the USA adopted a singular method to taxing overseas earnings of U.S. companies. That method has been partially included into the design of a worldwide minimal tax proposal. Beginning this yr, 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 should not at the moment accounted for within the Index. Nevertheless, in the event that they had been appropriately accounted for, international locations like Australia, the UK, and the USA would probably obtain worse scores on their cross-border tax guidelines—doubtlessly 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. Be taught 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 fairly than actual property or different enhancements to land.
Australia’s company and particular person taxes have an built-in remedy of dividends, assuaging the burden of double taxation on distributed earnings.
Australia ranks properly on consumption taxes attributable to its low items and providers tax (GST) charge however applies it to a comparatively slim base.
❌ Some weaknesses of the Australian tax system:
Australia’s treaty community consists of simply 45 international locations, when the typical amongst OECD international locations is 74.
The company tax charge in Australia is 30 p.c, above the OECD common (23.6 p.c).
Companies are restricted of their means to put in writing off investments.
Austria ranks 18th general on the 2022 Worldwide Tax Competitiveness Index, two locations worse than in 2021. Be taught 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 international locations, and Managed Overseas Company guidelines that solely apply to subsidiaries that do not need substantial financial exercise.
The VAT in Austria applies to a broad base.
There aren’t any property, inheritance, or wealth taxes.
❌ Some weaknesses of the Austrian tax system:
The headline company charge of 25 p.c is barely above the OECD common (23.6 p.c).
Austria carried out a digital providers tax (DST) in 2020.
The tax wedge on labor is the third highest amongst OECD international locations.
Belgium ranks twenty fourth general on the 2022 Worldwide Tax Competitiveness Index, one spot higher than in 2021. Be taught extra concerning the Belgium tax system right here.
✔️ Some strengths of the Belgium tax system:
Belgium has a broad tax treaty community, with 95 international locations, 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 supplies 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 charge of 25 p.c is barely above common amongst OECD international locations (23.6 p.c).
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 international locations, with the typical wage single employee going through a tax burden of 52.6 p.c.
Canada ranks sixteenth general on the 2022 Worldwide Tax Competitiveness Index, two spots higher than in 2021. Be taught 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 instantly write off investments in equipment.
Canada doesn’t levy wealth, property, or inheritance taxes.
❌ Some weaknesses of the Canadian tax system:
The private tax on dividends is 39.3 p.c, properly above the OECD common of 24.2 p.c.
Canada taxes capital positive factors at a charge of 26.75 p.c, whereas the OECD common is nineteen p.c.
The company charge of 26.2 p.c is above common amongst OECD international locations (23.6 p.c).
Chile ranks twenty seventh general on the 2022 Worldwide Tax Competitiveness Index, one spot worse than in 2021. Be taught 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 instantly write off investments in buildings and equipment and to instantly amortize intangibles.
Chile quickly diminished its company revenue tax charge to 10 p.c for smaller companies.
Chile has the second lowest tax wedge on labor amongst OECD international locations, at 7 p.c, in comparison with the OECD common of 34.6 p.c.
❌ Some weaknesses of the Chilean tax system:
Chile has a comparatively small tax treaty community with simply 33 treaties.
The tax charge on capital positive factors is 40 p.c, properly above the OECD common of 19 p.c.
Chile has a worldwide tax system, whereas most OECD international locations have territorial provisions.
Colombia ranks thirty second general on the 2022 Worldwide Tax Competitiveness Index, three locations higher than in 2021. Be taught 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 presents obtained are topic to a ten p.c tax, there isn’t any complete property or inheritance tax.
❌ Some weaknesses of the Colombian tax system:
The VAT base may be very slim, masking lower than 40 p.c of Colombian consumption.
Colombia levies a web wealth tax and a monetary transactions tax.
At 35 p.c, Colombia’s company revenue tax charge is considerably above the OECD common (23.6 p.c).
Costa Rica ranks nineteenth general on the 2022 Worldwide Tax Competitiveness Index, one place higher than in 2021. Be taught extra concerning the Costa Rican tax system right here.
✔️ Some strengths of the Costa Rican tax system:
Costa Rica has neither a web wealth nor an property tax.
The VAT charge is simply 13 p.c, under the OECD common of 19 p.c.
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 p.c, Costa Rica’s company revenue tax charge is considerably above the OECD common (23.6 p.c).
The Czech Republic ranks fifth general on the 2022 Worldwide Tax Competitiveness Index, one place worse than in 2021. Be taught extra concerning the Czech tax system right here.
✔️ Some strengths of the Czech tax system:
The company charge of 19 p.c is under the OECD common (23.6 p.c), with above-average value restoration provisions.
Taxes on labor are minimally distortive.
The Czech Republic has a territorial tax system, exempting each overseas dividend and capital positive factors revenue from different European international locations, 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.
Web working losses can solely be carried ahead for 5 years (they will, nevertheless, 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. Be taught extra concerning the Danish tax system right here.
✔️ Some strengths of the Danish tax system:
Company revenue taxes are comparatively much less advanced than in different international locations.
Denmark has a territorial tax system, exempting each overseas dividend and capital positive factors revenue for its treaty companions and different European international locations.
Property taxes are modest, and Denmark permits property taxes to be deducted towards company revenue tax.
❌ Some weaknesses of the Danish tax system:
Along with a prime statutory private revenue tax charge of 55.9 p.c (together with the surtax), the private revenue tax charges on dividends and capital positive factors are each at 42 p.c, properly above the OECD averages of 24.2 p.c and 19 p.c, respectively.
Web working losses could be carried ahead indefinitely however are restricted to 60 p.c of taxable revenue in the event that they exceed a certain quantity.
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 yr. Be taught 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 corporations 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 international locations, under the OECD common (74 international locations).
Estonia’s territorial tax system is proscribed to European international locations.
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. Be taught extra concerning the Finnish tax system right here.
✔️ Some strengths of the Finnish tax system:
Finland has a comparatively low company tax charge of 20 p.c.
The design of company and private revenue taxes makes them comparatively much less advanced than in different international locations.
Finland has a territorial tax system and a broad tax treaty community with 76 international locations.
❌ Some weaknesses of the Finnish tax system:
Finland levies each an property and a monetary transactions tax.
Corporations are restricted of their means to hold ahead web working losses and are restricted to utilizing First-In-First-Out as the fee accounting methodology for stock.
Finland’s prime statutory charge on private revenue is comparatively excessive at 51.3 p.c (the OECD common is 42.5 p.c).
France ranks thirty eighth general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Be taught extra concerning the French tax system right here.
✔️ Some strengths of the French tax system:
France has above-average value restoration provisions for investments in equipment, buildings, and intangibles.
After a number of years of reductions, France’s company tax charge (25.8 p.c) is far nearer to the OECD common of 23.6 p.c.
France has a broad tax treaty community, with 122 international locations.
❌ Some weaknesses of the French tax system:
France has a number of distortionary property taxes with separate levies on estates, financial institution property, monetary transactions, and a wealth tax on actual property.
The tax burden on labor of 47 p.c is among the many highest for OECD international locations.
A diminished 10 p.c tax charge applies to revenue derived from IP rights by way of a so-called patent field.
Germany ranks fifteenth general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Be taught extra concerning the German tax system right here.
✔️ Some strengths of the German tax system:
The VAT charge of 19 p.c is close to the OECD common (19 p.c).
Germany has a broad tax treaty community, with 96 international locations.
Stock can obtain Final-In-First-Out remedy, probably the most impartial remedy of stock prices.
❌ Some weaknesses of the German tax system:
Germany has the sixth highest company revenue tax charge amongst OECD international locations, at 29.9 p.c.
The company tax burden features a 5.5 p.c surtax.
Corporations are restricted within the quantity of web 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. Be taught extra concerning the Greek tax system right here.
✔️ Some strengths of the Greek tax system:
The online private tax charge of 5 p.c on dividends is considerably under the OECD common of 24.2 p.c.
The company revenue tax charge of twenty-two p.c is under the OECD common of 23.6 p.c.
Managed Overseas 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 web working losses they will use to offset future earnings, and firms 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 p.c, 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. Be taught extra concerning the Hungarian tax system right here.
✔️ Some strengths of the Hungarian tax system:
Hungary has the bottom company tax charge within the OECD, at 9 p.c.
Hungary has a flat private revenue tax system.
Managed Overseas Company guidelines are better-than-average.
❌ Some weaknesses of the Hungarian tax system:
Corporations are severely restricted within the quantity of web working losses they will use to offset future earnings, and firms can not use losses to scale back previous taxable revenue.
Hungary has the very best VAT charge amongst OECD international locations, at 27 p.c.
Hungary levies taxes on estates, actual property transfers, and financial institution property.
Iceland ranks thirty first general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Be taught extra concerning the Icelandic tax system right here.
✔️ Some strengths of the Icelandic tax system:
Iceland’s company tax charge of 20 p.c is under the OECD common of 23.6 p.c, and the tax remedy of investments is without doubt one of the greatest within the OECD.
Company and labor taxes are much less advanced than they’re on common within the OECD.
Iceland has a territorial tax system that absolutely exempts overseas dividends and capital positive factors with no nation limitations.
❌ Some weaknesses of the Icelandic tax system:
Corporations are restricted within the quantity of web working losses they will use to offset future earnings, and firms can not use losses to scale back previous taxable revenue.
The VAT of 24 p.c applies to a comparatively slim tax base.
Iceland’s Managed Overseas 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. Be taught extra concerning the Irish tax system right here.
✔️ Some strengths of the Irish tax system:
Eire has a low company tax charge of 12.5 p.c.
Web working losses could be carried again one yr and carried ahead indefinitely, permitting corporations to be taxed on their common profitability.
The tax treaty community (73 treaties) is just under the typical of 74 international locations.
❌ Some weaknesses of the Irish tax system:
Eire’s private tax charge on dividend revenue of 51 p.c is the very best amongst OECD international locations.
The VAT charge of 23 p.c is without doubt one of the highest within the OECD and applies to a comparatively slim tax base.
Companies are restricted of their means to put in writing off investments.
Israel ranks tenth general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Be taught extra concerning the Israeli tax system right here.
✔️ Some strengths of the Israeli tax system:
Web working losses could be carried ahead indefinitely.
The VAT charge is comparatively low at 17 p.c and applies to a comparatively broad base.
Israel doesn’t levy wealth or property taxes.
❌ Some weaknesses of the Israeli tax system:
Israel has advanced incentives that scale back the company tax charge to as little as 7.5 p.c on sure expertise corporations.
The steep progressivity of Israel’s taxes on labor results in effectivity prices.
Israel has a comparatively slim tax treaty community, with 58 international locations (the OECD common is 74).
Italy ranks thirty seventh general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Be taught extra concerning the Italian tax system right here.
✔️ Some strengths of the Italian tax system:
Italy has above-average value restoration provisions for investments in intangibles, in addition to an allowance for company fairness (ACE).
Final-In-First-Out remedy of the price of stock is allowed.
Italy has a broad tax treaty community, with 100 international locations.
❌ 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 property.
The VAT charge of twenty-two p.c applies to the fourth narrowest consumption tax base within the OECD.
The company tax charge of 27.8 p.c is above the OECD common of 23.6 p.c.
Japan ranks twenty first general on the 2022 Worldwide Tax Competitiveness Index, 4 locations worse than in 2021. Be taught extra concerning the Japanese tax system right here.
✔️ Some strengths of the Japanese tax system:
Japan has a low VAT charge of 10 p.c.
The consumption tax base is comparatively broad, masking 65 p.c of consumption.
Japan’s private revenue tax charge on dividends is 20.3 p.c, under the OECD common of 24.2 p.c.
❌ Some weaknesses of the Japanese tax system:
Japan has poor value restoration provisions for enterprise investments in equipment and buildings.
Japan has a hybrid worldwide tax system with a 95 p.c exemption for overseas dividends and no exemption for overseas capital positive factors, whereas many OECD international locations have moved to a completely territorial system.
Corporations are severely restricted within the quantity of web 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. Be taught extra concerning the Korean tax system right here.
✔️ Some strengths of the Korean tax system:
Korea has a low VAT of 10 p.c that’s utilized to a comparatively broad base.
Korea has a broad tax treaty community, with 93 international locations.
Enterprise investments in equipment obtain better-than-average remedy 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 private revenue tax charge on dividends is 44.0 p.c (in comparison with an OECD common of 24.2 p.c).
Korea is without doubt one of the few OECD international locations that operates a worldwide company tax system (fairly than a territorial system).
Latvia ranks 2nd general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Be taught 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 corporations to reinvest their earnings tax-free.
Companies 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 consists of 62 international locations, 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 larger than the typical VAT threshold for OECD international locations.
Lithuania ranks eighth general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Be taught 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 remedy.
Lithuania’s company tax charge is 15 p.c, properly under the OECD common of 23.6 p.c.
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 international locations, under the OECD common (74 international locations).
Lithuania has each a patent field and an excellent deduction for Analysis and Improvement expenditures.
Multinational companies face strict skinny capitalization guidelines.
Luxembourg ranks sixth general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Be taught 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 remedy.
Luxembourg applies its comparatively low VAT charge of 17 p.c to almost 80 p.c of ultimate consumption.
Capital positive factors are tax-exempt if a movable asset similar to shares was held for a minimum of six months, encouraging long-term financial savings.
❌ Some weaknesses of the Luxembourg tax system:
Corporations are restricted within the time interval through which they will use web 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 web property.
Luxembourg has a solidarity tax which acts as a 7 p.c surtax on private revenue.
Mexico ranks thirtieth general on the 2022 Worldwide Tax Competitiveness Index, one place worse than in 2021. Be taught extra concerning the Mexican tax system right here.
✔️ Some strengths of the Mexican tax system:
The private revenue tax charge on dividends is 17.1 p.c, under the OECD common of 24.1 p.c.
Companies can deduct property taxes when calculating taxable revenue.
Mexico permits for Final-In-First-Out remedy 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 p.c of ultimate consumption being taxed.
Mexico has a higher-than-average company tax charge of 30 p.c (the OECD common is 23.6 p.c).
The Netherlands ranks 14th general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Be taught extra concerning the Dutch tax system right here.
✔️ Some strengths of the Dutch tax system:
The Netherlands permits web working losses to be carried again one yr, and the Final-In-First-Out remedy of the price of stock is allowed.
The Netherlands has a territorial tax system exempting each overseas dividends and capital positive factors and a broad tax treaty community, with 92 international locations.
Companies 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 prime charge on private revenue of 49.5 p.c.
The VAT of 21 p.c applies to roughly half of the potential consumption tax base.
Corporations are restricted within the time interval through which they will use web working losses to offset future earnings.
New Zealand ranks third general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Be taught 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 p.c applies to almost all the potential consumption tax base.
New Zealand property taxes apply simply to the worth of land fairly 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 charge of 28 p.c (the OECD common is 23.6 p.c) and comparatively poor value restoration provisions for enterprise investments.
New Zealand has a slim tax treaty community, with 40 international locations.
The price of stock could be accounted for utilizing First-In-First-Out methodology or the typical value 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. Be taught 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 charge of twenty-two p.c is near the OECD common (23.6 p.c).
Norway has a territorial tax system, with a community of 87 tax treaties.
❌ Some weaknesses of the Norwegian tax system:
Companies are restricted of their means to put in writing off investments.
Norway is without doubt one of the few OECD international locations that levies a web wealth tax.
Managed Overseas 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. Be taught extra concerning the Polish tax system right here.
✔️ Some strengths of the Polish tax system:
Poland has a below-average company tax charge of 19 p.c (OECD common is 23.6 p.c).
Poland’s taxes on labor are typically 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 international locations.
❌ 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 property, and monetary transactions.
Corporations are severely restricted within the quantity of web 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 p.c of the price of industrial buildings in actual phrases (the OECD common is 50.7 p.c).
Portugal ranks thirty sixth general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Be taught extra concerning the Portuguese tax system right here.
✔️ Some strengths of the Portuguese tax system:
Companies can deduct their property taxes from their taxable revenue, and there may be an allowance for company fairness (ACE).
Portugal has a territorial tax system, exempting overseas dividend and capital positive factors revenue for many international locations.
Portugal supplies above-average capital value write-offs for investments in equipment.
❌ Some weaknesses of the Portuguese tax system:
Portugal has a excessive company tax charge of 31.5 p.c (the OECD common is 23.6 p.c).
Corporations are severely restricted within the quantity of web 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 charge of 23 p.c applies to simply 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. Be taught extra concerning the Slovakian tax system right here.
✔️ Some strengths of the Slovakian tax system:
The private revenue charge on dividends may be very low at 7 p.c (in comparison with an OECD common of 24.1 p.c).
The Slovak Republic has better-than-average tax remedy of enterprise funding in equipment, buildings, and intangibles.
Companies can deduct property taxes when calculating taxable revenue.
❌ Some weaknesses of the Slovakian tax system:
Corporations are severely restricted within the quantity of web 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 p.c applies to roughly half of the potential consumption tax base.
The Slovak Republic has each a patent field and an excellent deduction for Analysis and Improvement 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. Be taught extra concerning the Slovenian tax system right here.
✔️ Some strengths of the Slovenian tax system:
Slovenia has a 19 p.c company tax charge, under the OECD common (23.6 p.c).
Slovenia’s 22 p.c VAT applies to a tax base of roughly the OECD common.
Capital positive factors taxes are diminished the longer property are held (a zero p.c charge applies after holding an asset for a minimum of 20 years), encouraging long-term financial savings.
❌ Some weaknesses of the Slovenian tax system:
Slovenia’s tax remedy of investments in buildings and intangibles is under the OECD common.
Slovenia has a comparatively slim tax treaty community, with 59 international locations, 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 property.
Spain ranks thirty fourth general on the 2022 Worldwide Tax Competitiveness Index, two locations worse than in 2021. Be taught extra concerning the Spanish tax system right here.
✔️ Some strengths of the Spanish tax system:
Spain has a territorial tax system that exempts 95 p.c of overseas dividends and capital positive factors revenue from taxation.
The Spanish tax treaty community is made up of 95 international locations.
Property taxes could be deducted towards company revenue taxes.
❌ Some weaknesses of the Spanish tax system:
The VAT of 21 p.c 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, web wealth, estates, and monetary transactions.
Spain has each a patent field and a credit score for Analysis and Improvement.
Sweden ranks twelfth general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Be taught extra concerning the Swedish tax system right here.
✔️ Some strengths of the Swedish tax system:
Sweden supplies for web 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 overseas dividends and capital positive factors revenue from taxation with none nation limitations.
Sweden has a broad tax treaty community, with 85 international locations.
❌ Some weaknesses of the Swedish tax system:
Sweden’s private dividend tax charge and capital positive factors tax charge are each 30 p.c, above the OECD common (24.2 p.c for dividends and 19 p.c for capital positive factors).
Sweden has a prime statutory private revenue tax charge of 52.3 p.c.
Sweden has Managed Overseas 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. Be taught extra concerning the Swiss tax system right here.
✔️ Some strengths of the Swiss tax system:
Switzerland has above-average value restoration provisions for investments in buildings and intangibles.
Switzerland has a broad tax treaty community, with 94 international locations.
The Swiss VAT of seven.7 p.c 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, web wealth, estates, property, and monetary transactions.
Corporations are restricted within the time interval through which they will use web 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 nearly twice as excessive because the OECD common.
Turkey ranks ninth general on the 2022 Worldwide Tax Competitiveness Index, 4 locations higher than in 2021. Be taught extra concerning the Turkish tax system right here.
✔️ Some strengths of the Turkish tax system:
Turkey has a territorial tax system exempting overseas dividends and capital positive factors revenue with none nation limitations.
The private revenue tax on dividends is 20 p.c, under the OECD common (24.1 p.c).
Turkey supplies 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 through which they will use web working losses to offset future earnings and are unable to make use of losses to scale back previous taxable revenue.
Turkey’s VAT charge of 18 p.c 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. Be taught extra concerning the UK tax system right here.
✔️ Some strengths of the UK tax system:
The company revenue tax charge is nineteen p.c, under the OECD common (23.6 p.c).
The UK has a territorial tax system exempting each overseas dividend and capital positive factors revenue with none nation limitations.
The UK tax treaty community with 130 international locations is the broadest within the OECD.
❌ Some weaknesses of the UK tax system:
The highest private revenue tax charge on dividends is 39.35 p.c, properly above the OECD common (24.2 p.c).
The actual property tax burden is among the many highest within the OECD.
The VAT at a charge of 20 p.c applies to lower than half of the potential consumption tax base.
The USA ranks twenty second general on the 2022 Worldwide Tax Competitiveness Index, the identical as in 2021. Be taught extra concerning the U.S. tax system right here.
✔️ Some strengths of the U.S. tax system:
The U.S. supplies full expensing for enterprise investments in equipment.
The U.S. permits for Final-In-First-Out remedy of the price of stock.
Companies 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 overseas capital positive factors revenue.
The actual property tax burden is among the many highest within the OECD.
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Be aware: Every year we overview and enhance the methodology of the Index. For that cause, prior editions should not akin 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 Improvement (OECD), “Tax and Financial Progress,” Economics Division Working Paper No. 620, July 11, 2008.
[3] Final yr’s scores printed on this report can differ from beforehand printed rankings attributable to 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
