![[Global] Results of the 2021 International Tax Competitiveness Index](http://globalpayrollassociation.com/cdn/shop/articles/bigstock-Oecd-Territory-On-World-Map-79527805_1200x.jpg?v=1634724481)
The International Tax Competitiveness Index (ITCI) seeks to measure the extent to which a country’s tax system adheres to two important aspects of tax policy: competitiveness and neutrality. The index for 2021 has been released and Tax Foundation has extensive coverage of the results, some of which are summarised below.
To measure whether a country’s tax system is neutral and competitive, the ITCI considers more than 40 tax policy variables. These variables measure not only the level of tax rates but also how taxes are structured. The Index looks at a country’s corporate taxes, individual income taxes, consumption taxes, property taxes and the treatment of profits earned overseas.
2021 International Tax Competitiveness Index Rankings
Estonia has the best tax code in the OECD, for the eighth year in a row. Its top score is reportedly driven by four positive features of its tax system. First, it has a 20 per cent tax rate on corporate income that is only applied to distributed profits. Second, it has a flat 20 per cent tax on individual income that does not apply to personal dividend income. Third, its property tax applies only to the value of land, rather than to the value of real property or capital. Finally, it has a territorial tax system that exempts 100 per cent of foreign profits earned by domestic corporations from domestic taxation, with few restrictions.
Estonia’s tax system is the most competitive in the OECD, however, the other top countries’ tax systems receive high scores due to excellence in one or more of the major tax categories. Latvia recently adopted the Estonian system for corporate taxation and it also has a relatively efficient system for taxing labour income.
New Zealand has a relatively flat, low-rate individual income tax that also largely exempts capital gains (with a combined top rate of 33 per cent), a well-structured property tax, and a broad-based value-added tax.
Switzerland has a relatively low corporate tax rate (19.7 per cent), a low, broad-based consumption tax, and an individual income tax that partially exempts capital gains from taxation. And Luxembourg has a broad-based consumption tax and a competitive international tax system.
Italy has the least competitive tax system in the OECD. It has a wealth tax on financial assets and real estate held abroad, a financial transaction tax, and an inheritance tax. Italy also has a high compliance burden associated with its individual tax system. It takes businesses an estimated 169 hours to comply with the country’s individual income tax. The Italian value-added tax covers less than 40 per cent of final consumption, revealing both policy and enforcement gaps.
Countries that rank poorly on the ITCI often levy relatively high marginal tax rates on corporate income. The five countries at the bottom of the rankings all have higher than average corporate tax rates, with the exception of Poland, at 19 per cent. Additionally, all five countries have high consumption tax rates, with rates of 20 per cent or higher. Apart from Mexico at 16 per cent.
Source: Tax Foundation
(Links via original reporting)
The International Tax Competitiveness Index (ITCI) seeks to measure the extent to which a country’s tax system adheres to two important aspects of tax policy: competitiveness and neutrality. The index for 2021 has been released and Tax Foundation has extensive coverage of the results, some of which are summarised below.
To measure whether a country’s tax system is neutral and competitive, the ITCI considers more than 40 tax policy variables. These variables measure not only the level of tax rates but also how taxes are structured. The Index looks at a country’s corporate taxes, individual income taxes, consumption taxes, property taxes and the treatment of profits earned overseas.
2021 International Tax Competitiveness Index Rankings
Estonia has the best tax code in the OECD, for the eighth year in a row. Its top score is reportedly driven by four positive features of its tax system. First, it has a 20 per cent tax rate on corporate income that is only applied to distributed profits. Second, it has a flat 20 per cent tax on individual income that does not apply to personal dividend income. Third, its property tax applies only to the value of land, rather than to the value of real property or capital. Finally, it has a territorial tax system that exempts 100 per cent of foreign profits earned by domestic corporations from domestic taxation, with few restrictions.
Estonia’s tax system is the most competitive in the OECD, however, the other top countries’ tax systems receive high scores due to excellence in one or more of the major tax categories. Latvia recently adopted the Estonian system for corporate taxation and it also has a relatively efficient system for taxing labour income.
New Zealand has a relatively flat, low-rate individual income tax that also largely exempts capital gains (with a combined top rate of 33 per cent), a well-structured property tax, and a broad-based value-added tax.
Switzerland has a relatively low corporate tax rate (19.7 per cent), a low, broad-based consumption tax, and an individual income tax that partially exempts capital gains from taxation. And Luxembourg has a broad-based consumption tax and a competitive international tax system.
Italy has the least competitive tax system in the OECD. It has a wealth tax on financial assets and real estate held abroad, a financial transaction tax, and an inheritance tax. Italy also has a high compliance burden associated with its individual tax system. It takes businesses an estimated 169 hours to comply with the country’s individual income tax. The Italian value-added tax covers less than 40 per cent of final consumption, revealing both policy and enforcement gaps.
Countries that rank poorly on the ITCI often levy relatively high marginal tax rates on corporate income. The five countries at the bottom of the rankings all have higher than average corporate tax rates, with the exception of Poland, at 19 per cent. Additionally, all five countries have high consumption tax rates, with rates of 20 per cent or higher. Apart from Mexico at 16 per cent.
Source: Tax Foundation
(Links via original reporting)