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The tax system. Which European country is the most competitive and how does it operate with businesses?

2024-10-22 11:36:10Biznes SHKRUAR NGA REDAKSIA VOX

The tax system. Which European country is the most competitive and how does it

Estonia has the most competitive tax code in Europe, so the UK and Germany are growing, while Italy remains in bad shape, according to a study by the Tax Foundation.

In a report published on Monday, the US-based institute cited 20% corporate and individual income tax rates, and a property tax that looks at land value rather than investment, as giving the Baltic country the top position in the world for the eleventh consecutive year.

"Capital is very mobile. Businesses can choose to invest in any number of countries around the world to find the highest rate of return," the report said, adding that competitive and neutral tax codes can foster sustainable growth.

The report looks at which countries offer the lowest marginal rates, but also examines more detailed structural features, such as the potential for tax systems to distort behaviour.

He cites research showing that corporate income tax is the most damaging to the economy, although alternative sources of revenue, such as sales or consumption taxes, may fall disproportionately on the poor.

The Czech Republic slipped three places in the annual rankings after it raised corporate tax rates from 19% to 21%, but Germany and the UK are praised for offering the most generous allowances for corporate investment in equipment.

Italy is rated as the least competitive tax code in Europe, just behind France, and Rome is criticized for "many distorted property taxes" and an extremely narrow VAT base.

The news comes as major European countries struggle to grow their economies, but also to recover public finances that were hit first by the pandemic, then by the energy crisis.

France's Prime Minister Michel Barnier recently announced he will raise billions by raising taxes on big business and the wealthy as he seeks to reduce the country's deficit, one of the highest in the bloc, in line with EU rules.

The idea of ​​countries competing to lure business through the tax code has also led to fears of a race to the bottom, not least in a world where digital businesses can often easily change operations.

Developed countries meeting at the Organization for Economic Co-operation and Development (OECD) have already agreed that large corporations should face a minimum tax rate of 15% on their profits.

The EU's top court also recently ruled that a tax concession in Ireland that saw Apple charge wages as low as 0.005% amounted to an illegal subsidy.

Despite its low corporate tax rate and reputation for business-friendly deals, high taxes on income and dividends put Ireland at the bottom of the Tax Foundation's table, which looks at the 38 OECD members.


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