Corporate Tax

Comparability of corporate tax techniques in Europe, 2021

On October 17th, we published the International Tax Competitiveness Index 2021, a study that measures and compares the competitiveness and neutrality of tax systems in all 37 OECD countries. In the coming weeks we will show how the European OECD countries perform in each of the five components of the index: corporate taxes, individual taxes, consumption taxes, property taxes and the international tax system. Today we look at how corporate tax systems of European countries compare within the OECD.

In contrast to other studies that compare tax burdens, the index measures how well a country structures its tax legislation. A competitive and neutral tax regime promotes sustainable economic growth and investment while ensuring sufficient revenue for government priorities. Our corporate tax component evaluates countries not only with regard to their corporate tax rates, but also with regard to their handling of net operating losses, capital allowances, inventory valuation and allowances for corporate equity, whether and to what extent distorting patent boxes and R&D tax incentives are granted, the application of taxes to digital services and the complexity of corporate tax.

Click the link below for an interactive version of the corporate tax rankings of OECD countries, then click your country for more information on the strengths and weaknesses of its tax system and how it compares to the top and bottom -Five countries of the OECD cut off.

Latvia and Estonia have the best corporate tax systems in the OECD. Both countries impose a cash flow tax on corporate profits. This means that profits are only taxed if they are distributed to shareholders. If a company chooses to reinvest its profits instead of paying dividends to shareholders, those profits will not be taxed.

In contrast, Portugal has the least competitive and neutral corporate tax system in Europe (Japan ranks lowest in the OECD). Portugal has one of the highest corporate tax rates on corporate profits at 31.5 percent. Only limited net operating losses can be carried forward and back; Purchases of machinery, buildings and intangible assets cannot be fully expensed.

To see if your country’s corporate tax rank has improved in recent years, see the table below. To learn more about how we came up with these rankings, check out our full methodology here.

Comparison of corporate tax systems in Europe, 2021

Corporate income tax component of the International Tax Competitiveness Index between 2019 and 2021 (for all OECD countries)
OECD country 2021 rank 2020 rank Change from 2020 to 2021 2019 rank
Australia (AU) 29 30th 1 30th
AustriaAT) 21 23 2 19th
Belgium (BE) fifteen 10 -5 20th
Canada (CA) 23 21 -2 22nd
Chile (CL) 1 5 4th 32
Colombia (CO) 37 37 0 36
Czech Republic (CZ) 8th 7th -1 6th
Denmark (DK) 16 16 0 fifteen
Estonia (EE) 3rd 2 -1 2
Finland 7th 8th 1 7th
France (FR) 34 36 2 37
Germany (DE) 27 28 1 28
Greece (GR) 22nd 22nd 0 21
Hungary (HU) 6th 6th 0 5
Iceland (IS) 13th 11 -2 10
Ireland (IE) 5 4th -1 4th
Israel (IL) 17th 29 12th 29
Italy (IT) 30th 31 1 26
Japan (JP) 36 35 -1 35
Korea (KR) 33 33 0 33
Latvia (LV) 2 1 -1 1
Lithuania (LT) 4th 3rd -1 3rd
Luxembourg (LU) 25th 25th 0 25th
Mexico (MX) 31 32 1 31
Netherlands (NL) 24 24 0 24
New Zealand (NZ) 28 27 -1 23
Norway (NO) 11 14th 3rd 12th
Poland (PL) 14th fifteen 1 13th
Portugal (PT) 35 34 -1 34
Slovak Republic (SK) 19th 17th -2 16
Slovenia (SI) 12th 12th 0 11
Spain (ES) 32 26 -6 27
Sweden (SE) 9 9 0 8th
Switzerland (CH) 10 13th 3rd 9
Turkey (TR) 26 18th -8th 14th
United Kingdom (GB) 18th 20th 2 17th
United States (USA) 20th 19th -1 18th
Source: International Tax Competitiveness Index 2021.

Introduction of the International Tax Competition Index 2021

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