Estonia, Latvia and Lithuania are ranked 1st, 2nd and 5th respectively in the International Tax Competitiveness Index published by the Tax Foundation think-tank on Monday 20 October. Conversely, Spain, Poland, Italy and France rank 34th, 35th, 37th and 38th respectively out of the 38 OECD countries.
Alex Mengden, a policy analyst at the Tax Foundation, explained on Tuesday 21 October that this competitiveness is assessed on two principles: low marginal rates on income and neutrality. In other words the least distortion between different activities. It’s all about the simplicity of the tax system, which can have an impact on a country’s economy.
For the third year running, Estonia’s tax code has been ranked the best. Corporation tax applies only to distributed profits and personal income tax does not apply to personal dividend income. These two taxes are set at 20%. What’s more, its property tax only applies to the value of the land. Finally, the country has a territorial tax system that exempts 100% of foreign profits earned by domestic corporations from domestic taxation.
Mr Mengden pointed out, however, that the Baltic States have decided to postpone the European directive on the minimum tax on large companies (see EUROPE 13283/25) for six years, which contributes to this high ranking. “It makes sense because they’re not burdening their companies with lots of compliance costs”, he points out.
Read the report: https://aeur.eu/f/j3h (Original version in French by Anne Damiani)