A think tank rewards Estonia, the United Kingdom, Germany, Italy and France in tax matters, while governments try to avoid competing through fiscal dumping.
Estonia has the most competitive taxation from Europe; The United Kingdom and Germany are climbing positions and Italy remains in the doldrums, according to the results of a recent study carried out by Tax Foundation.
In its report published this Monday, the American think tank cites the 20% rates applied in Tallinn to companies and individuals, as well as a real estate tax that takes into account the value of land instead of investment, to grant this Baltic nation the first position in its ranking for the eleventh consecutive year.
The report analyzes which countries offer the lowest marginal rates, but also examines more detailed structural characteristics, such as the likelihood that tax systems distort behavior. “Capital is highly mobile. Companies can choose to invest in any number of countries around the world to find the highest rate of return,” the report states, adding that competitive and neutral tax codes can foster sustainable growth.
This ‘think tank’ cites studies that show that corporate tax is the most harmful to the economy, although other alternative sources of income such as VAT may fall disproportionately on the poor.
Czech Republic drops three places in the annual ranking after raising corporate tax rates from 19% to 21%while Germany and the United Kingdom are praised for offering more generous reliefs for business investment in capital goods.
The results come at a time when major European countries are struggling to boost their economies, but also to recover battered public finances due to the coronavirus pandemic and the energy crisis resulting from the Russian invasion of Ukraine.
The idea that countries compete against each other through tax dumping has also raised fears, especially in a world where digital companies can often easily move their headquarters.
The developed countries gathered in the Organization for Economic Cooperation and Development (OECD) agreed in 2021 that large companies must pay taxes through a minimum tax rate of 15% about its benefits.
The Court of Justice of the European Union (CJEU)also recently ruled that tax rates applied in Ireland – which saw corporations like Apple paying ultra-low rates of up to 0.005% – are illegal. On the other hand, high income taxes place Ireland at the bottom of the table in the Tax Foundation ranking, which examines the 38 members of the OECD.
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