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1、International Tax Competitiveness Index 2023CENTER for GLOBAL TAX POLICYTenth EditionInternational Tax Competitiveness Index 2023Tenth EditionBy Alex Mengden Table of ContentsIntroduction 1The International Tax Competitiveness Index 12023 Rankings 2Table 1.The International Tax Competitiveness Index
2、 3Notable Changes from Last Year 4Table 2.Changes from Last Year 5Methodological Changes 6Corporate Tax 6Individual Taxes 6Corporate Income Tax 7Combined Top Marginal Corporate Income Tax Rate 7Cost Recovery 7Table 3.Corporate Taxes 8Tax Incentives and Complexity 11Individual Taxes 14Table 4.Individ
3、ual Taxes 15Taxes on Ordinary Income 16Complexity 18Capital Gains and Dividends Taxes 18Consumption Taxes 20Consumption Tax Rate 20Table 5.Consumption Taxes 21Consumption Tax Base 22Property Taxes 23Real Property Taxes 23Table 6.Property Taxes 24Wealth and Estate Taxes 26Capital,Wealth,and Property
4、Taxes on Businesses 27Cross-Border Tax Rules 28Table 7.Cross-Border Rules 29Territoriality 30Withholding Taxes 32Tax Treaty Network 33Anti-Avoidance Rules 33Country Profiles 36Methodology 56The Calculation of the Variable,Subcategory,Category,and Final Score 56Calculating Subcategory Scores 57Calcul
5、ating Category Scores 57Calculating Final Scores 57Distribution of the Final Scores 58Data Sources 59Appendix 60Appendix Table A.Corporate Taxes 60Appendix Table B.Income Taxes 62Appendix Table C.Consumption Taxes 63Appendix Table D.Property Taxes 64Appendix Table E.Cross-Border Tax Rules 66TAX FOUN
6、DATION|1IntroductionThe structure of a countrys tax code is a determining factor of its economic performance.A well-structured tax code is easy for taxpayers to comply with and can promote economic development while raising sufficient revenue for a governments priorities.In contrast,poorly structure
7、d tax systems can be costly,distort economic decision-making,and harm domestic economies.Many countries have recognized this and have reformed their tax codes.Over the past few decades,marginal tax rates on corporate and individual income have declined significantly across the Organisa-tion for Econ
8、omic Co-operation and Development(OECD).Now,most OECD nations raise a significant amount of revenue from broad-based taxes such as payroll taxes and value-added taxes(VAT).1Not all recent changes in tax policy among OECD countries have improved the structure of tax sys-tems;some have made a negative
9、 impact.Though some countries like the United States and France have reduced their corporate income tax rates by several percentage points,others,like Colombia,have increased them.Corporate tax base improvements have occurred in Portugal,while the corporate tax base has been made less competitive in
10、 Belgium.The United States,the United Kingdom,and Chile are phasing out temporary improvements to their corporate tax bases.The COVID-19 pandemic has led many countries to adopt temporary changes to their tax systems.Faced with revenue shortfalls from the downturn,countries will need to consider how
11、 to best structure their tax systems to foster both an economic recovery and raise revenue.The variety of approaches to taxation among OECD countries creates a need to evaluate these sys-tems relative to each other.For that purpose,we have developed the International Tax Competitiveness Indexa relat
12、ive comparison of OECD countries tax systems with respect to competitiveness and neutrality.The International Tax Competitiveness IndexThe International Tax Competitiveness Index(ITCI)seeks to measure the extent to which a countrys tax system adheres to two important aspects of tax policy:competitiv
13、eness and neutrality.A competitive tax code is one that keeps marginal tax rates low.In todays globalized world,capital is highly mobile.Businesses can choose to invest in any number of countries throughout the world to find the highest rate of return.This means that businesses will look for countri
14、es with lower tax rates on investment to maximize their after-tax rate of return.If a countrys tax rate is too high,it will drive investment elsewhere,leading to slower economic growth.In addition,high marginal tax rates can impede domestic investment and lead to tax avoidance.According to research
15、from the OECD,corporate taxes are most harmful for economic growth,with personal income taxes and consumption taxes being less harmful.Taxes on immovable property have the smallest impact on growth.21 Daniel Bunn and Cecilia Perez Weigel,“Sources of Government Revenue in the OECD,”Tax Foundation,Feb
16、.23,2023,https:/taxfoundation.org/publications/https:/taxfoundation.org/publications/sources-of-government-revenue-in-the-oecd/sources-of-government-revenue-in-the-oecd/.2 Organisation for Economic Co-operation and Development(OECD),“Tax and Economic Growth,”Economics Department Working Paper No.620
17、,July 11,2008.2|INTERNATIONAL TAX COMPETITIVENESS INDEXSeparately,a neutral tax code is simply one that seeks to raise the most revenue with the fewest eco-nomic distortions.This means that it doesnt favor consumption over saving,as happens with invest-ment taxes and wealth taxes.It also means few o
18、r no targeted tax breaks for specific activities carried out by businesses or individuals.As tax laws become more complex,they also become less neutral.If,in theory,the same taxes apply to all businesses and individuals,but the rules are such that large businesses or wealthy individuals can change t
19、heir behavior to gain a tax advantage,this undermines the neutrality of a tax system.A tax code that is competitive and neutral promotes sustainable economic growth and investment while raising sufficient revenue for government priorities.There are many factors unrelated to taxes which affect a coun
20、trys economic performance.Neverthe-less,taxes play an important role in the health of a countrys economy.To measure whether a countrys tax system is neutral and competitive,the ITCI looks at more than 40 tax policy variables.These variables measure not only the level of tax rates,but also how taxes
21、are structured.The Index looks at a countrys corporate taxes,individual income taxes,consumption taxes,property taxes,and the treatment of profits earned overseas.The ITCI gives a comprehensive overview of how developed countries tax codes compare,explains why certain tax codes stand out as good or
22、bad models for reform,and provides important insight into how to think about tax policy.Due to some data limitations,recent tax changes in some countries may not be reflected in this years version of the International Tax Competitiveness Index.2023 RankingsFor the 10th year in a row,Estonia has the
23、best tax code in the OECD.Its top score is driven by four positive features of its tax system.First,it has a 20 percent tax rate on corporate income that is only applied to distributed profits.Second,it has a flat 20 percent tax on individual income that does not apply to personal dividend income.Th
24、ird,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 percent of foreign profits earned by domestic corporations from domestic taxation,with few restrictions.While Estonias tax system is th
25、e most competitive in the OECD,the other top countries tax systems receive high scores due to excellence in one or more of the major tax categories.Latvia,which recently adopted the Estonian system for corporate taxation,also has a relatively efficient system for taxing labor income.New Zealand has
26、a relatively flat,low-rate individual income tax that also largely ex-empts capital gains(with a combined top rate of 39 percent),a broad-based VAT,and levies no taxes on inheritance,property transfers,assets,or financial transactions.Switzerland has a relatively low corporate tax rate(19.7 percent)
27、,a low,broad-based consumption tax,and an individual income tax that partially exempts capital gains from taxation.Luxembourg has a broad-based consumption tax and a competitive international tax system.TAX FOUNDATION|3Table 1.2023 International Tax Competitiveness Index RankingsCountryOverall RankO
28、verall ScoreCorporate Tax RankIndividual Taxes RankConsumption Taxes RankProperty Taxes RankCross-Border Tax Rules RankEstonia1100.02115111Latvia288.5132759New Zealand386.12951819Switzerland484.71093361Czech Republic581.26425610Luxembourg678.923217145Turkey778.611713227Israel878.3132311118Lithuania9
29、76.631030722Australia1075.932149421Hungary1175.04638233Slovak Republic1274.318229330Sweden1373.3820211013Netherlands1470.6251916214Canada1569.8242482515Slovenia1666.6713312418Norway1766.61427231512Germany1866.6313514126Finland1966.5925241920Austria2065.32030171616United States2165.0222242935Costa Ri
30、ca2264.836335931Korea2361.6263723226Japan2461.5303462625Greece2561.4198332823Mexico2660.1272812238Belgium2760.01511223033Ireland2858.9531341734Denmark2958.51736201829United Kingdom3056.1282635352Spain3155.83317193717Iceland3255.51218283432Poland3355.31612363127Portugal3452.Chile3550.53538
31、101337France3649.Italy3748.42116373824Colombia3846.438151827364|INTERNATIONAL TAX COMPETITIVENESS INDEXColombia has the least competitive tax system in the OECD.It has a net wealth tax,a financial transac-tion tax,and the highest corporate income tax rate of 35 percent.Colombias VAT cover
32、s less than 40 percent of final consumption,revealing both policy and enforcement gaps.Italy has the second-least competitive tax system in the OECD.It has multiple distortionary property taxes with separate levies on real estate transfers,estates,and financial transactions,as well as a wealth tax o
33、n selected assets.Italys relatively high VAT rate of 22 percent applies to the fifth-narrow-est consumption tax base in the OECD.Countries that rank poorly on the ITCI often levy relatively high marginal tax rates on corporate income or have multiple layers of tax rules that contribute to complexity
34、.The five countries at the bottom of the rankings all have higher than average combined corporate tax rates.Ireland ranks poorly on the ITCI despite its low corporate tax rate.This is due to high personal income and dividend taxes and a relatively narrow VAT base.The five lowest-ranking countries ha
35、ve unusually high corporate income tax rates,between 25.825 and 35 percent.Four out of the five lowest-ranking countries have unusually high top income tax thresholds,at 13 to 21 times the average income.Notable Changes from Last Year33 Last years scores published in this report can differ from prev
36、iously published rankings due to both methodological changes and corrections made to previ-ous years data.AustraliaAustralia introduced a patent box in 2022.Aus-tralias rank decreased from 6th to 10th.BelgiumBelgium limited carryforwards of losses from 70 percent to 40 percent of the taxable amount
37、exceeding EUR 1 million in 2023.It also strength-ened its controlled foreign company(CFC)rules.Belgiums rank decreased from 22nd to 27th.ChileChile phased out temporary full expensing for machinery,industrial buildings,and intangible assets in 2023.It also broadened its VAT base in 2022 by eliminati
38、ng exemptions.Chiles rank fell from 31st to 35th.FranceFrance has been reducing its corporate income tax rate over several years,a process which con-cluded in 2022.As part of this scheduled reduc-tion,France dropped its combined corporate rate(including a surtax)from 28.41 percent in 2021 to 25.83 p
39、ercent in 2022.Its Index rank remained unchanged at 36th.PortugalPrior to 2023,companies could carry forward losses of up to 70 percent of taxable income for up to 12 years.Portugal now allows unlimited carryforwards of up to 65 percent of taxable income.Portugals rank rose from 35th to 34th.TurkeyT
40、urkey reduced its corporate tax rate from 23 percent in 2022 to 20 percent in 2023.Turkeys rank rose from 10th to 7th.TAX FOUNDATION|5Table 2.Changes from Last YearCountry2022 Rank2022 Score2023 Rank2023 ScoreChange in Rank from 2022 to 2023Change in Score from 2022 to 2023Australia678.61075.9-4-2.7
41、Austria1767.42065.3-3-2.0Belgium2264.42760.0-5-4.5Canada1570.01569.80-0.2Chile3157.63550.5-4-7.1Colombia3847.33846.40-0.9Costa Rica2363.52264.811.3Czech Republic581.8581.20-0.6Denmark2958.52958.500.0Estonia1100.01100.000.0Finland1867.11966.5-1-0.5France3648.13649.101.0Germany2066.41866.620.2Greece25
42、62.92561.40-1.5Hungary1175.51175.00-0.5Iceland3455.13255.520.4Ireland3058.22858.920.7Israel878.0878.300.3Italy3747.43748.401.0Japan2662.82461.52-1.3Korea2463.32361.61-1.7Latvia289.7288.50-1.2Lithuania976.7976.60-0.1Luxembourg778.2678.910.7Mexico2860.92660.12-0.7Netherlands1471.01470.60-0.4New Zealan
43、d387.8386.10-1.7Norway1668.51766.6-1-1.9Poland3355.33355.300.0Portugal3551.33452.110.8Slovak Republic1273.91274.300.4Slovenia1966.71666.630.0Spain3256.53155.81-0.7Sweden1373.71373.30-0.5Switzerland485.3484.70-0.6Turkey1075.7778.632.9United Kingdom2761.73056.1-3-5.6United States2166.02165.00-1.06|INT
44、ERNATIONAL TAX COMPETITIVENESS INDEXMethodological ChangesEach year,we review the Indexs data and methodology to improve how it measures both competitive-ness and neutrality.This year,we have changed the way the Index treats corporate taxes and individual taxes.We have applied each change to prior y
45、ears to allow consistent comparison across years.Data for all years using the current methodology is accessible in the GitHub repository for the Index,4 and a description of how the Index is calculated is provided in the Appendix of this report.Prior editions of the Index,however,are not comparable
46、to the results in this 2023 edition due to these methodological changes.Corporate TaxThe surtax rates on corporate income have been replaced by dummies indicating the existence of sur-taxes on corporate income.The surtax rate is integrated into the combined corporate income tax rate.Previously,inclu
47、ding surtax rates challenged interpretation since many surtaxes were only levied on a share of the corporate income.Individual TaxesThe surtax rate on personal income has been replaced by a dummy variable indicating the existence of surtaxes on personal income.The surtax rate is included in the comb
48、ined top personal income tax rate,if applicable.During the production of this years report,the OECD table on Top Personal Income Tax Rates(Table I.7)was temporarily disabled due to errors in the data.We took a previous version of that table and made manual corrections using other sources.Social secu
49、rity taxes are included when these arent phased out before the top threshold or the combined rate is higher than the top rate.4 Tax Foundation,“International Tax Competitiveness Index,”https:/ KingdomThe UK phased out its 130 percent super-deduc-tion for plants and equipment into full expensing.It a
50、lso increased the main corporate rate from 19 percent in 2022 to 25 percent in 2023,while keep-ing a 19 percent reduced rate for small and medi-um-sized companies.The UKs ranking dropped from 27th to 30th.United StatesThe U.S.phased out full expensing for plants and equipment.It also decreased its i
51、mplicit research and development(R&D)subsidy rate from 6.75 percent to 2.75 percent because R&D costs can no longer be expensed.The R&D subsidy rate for the U.S.is the lowest value in the OECD.The U.S.rank remained at 21st.TAX FOUNDATION|7Corporate Income TaxThe corporate income tax is a direct tax
52、on the profits of a corporation.All OECD countries levy a tax on corporate profits,but the tax rates and bases vary significantly across countries.Corporate income taxes reduce the after-tax rate of return on corporate investment.This increases the cost of capital,which leads to lower levels of inve
53、stment and economic output.Additionally,the corporate tax can lead to lower wages for workers,lower returns for investors,and higher prices for consumers.Although the corporate income tax has a relatively significant impact on a countrys economy,it raises a relatively low amount of tax revenue for m
54、ost governmentsthe OECD average was 9.8percent of total revenues in 2021.5The ITCI breaks the corporate income tax category into three subcategories.Table 3 displays each countrys Corporate Income Tax category rank and score along with the ranks and scores of the sub-categories,namely,the corporate
55、rate,cost recovery,and incentives and complexity.Combined Top Marginal Corporate Income Tax RateThe top marginal corporate income tax rate measures the rate at which each additional dollar of tax-able profit is taxed.High marginal corporate tax rates tend to discourage capital formation and thus slo
56、w economic growth.6 Countries with higher top marginal corporate income tax rates than the OECD average receive lower scores than those with lower,more competitive rates.Colombia levies the highest top combined corporate income tax rate,at 35 percent,followed by Por-tugal(31.5 percent)and Australia,
57、Costa Rica,and Mexico(all at 30 percent).The lowest top marginal corporate income tax rate in the OECD is found in Hungary,at 9 percent,followed by Ireland(12.5per-cent)and Lithuania(15 percent).The OECD average combined corporate income tax rate is 23.6 percent for 2023.7Cost RecoveryBusiness profi
58、ts are generally determined as revenue(what a business makes in sales)minus costs(the cost of doing business).The corporate income tax is intended to be a tax on these profits.Thus,it is important that a tax code properly defines what constitutes taxable income.If a tax code does not allow businesse
59、s to account for all the costs of doing business,it will inflate a business taxable income and thus its tax bill.This increases the cost of capital,leading to slower investment and eco-nomic growth.5 Daniel Bunn and Cecilia Perez Weigel,“Sources of Government Revenue in the OECD.”6 OECD,“Tax Policy
60、Reform and Economic Growth,”OECD Tax Policy Studies,No.20,Nov.3,2010,https:/oecd.org/ctp/tax-policy/tax-policy-reform-and-eco-https:/oecd.org/ctp/tax-policy/tax-policy-reform-and-eco-nomic-growth-9789264091085-en.htmnomic-growth-9789264091085-en.htm.7 OECD,“OECD Tax Database,Table II.1 Statutory cor
61、porate income tax rate,”updated April 2023,https:/stats.oecd.org/index.aspx?DataSetCode=Table_II1https:/stats.oecd.org/index.aspx?DataSetCode=Table_II1.8|INTERNATIONAL TAX COMPETITIVENESS INDEXTable 3.Corporate TaxesCountryOverall RankOverall ScoreRate RankRate ScoreCost Recovery RankCost Recovery S
62、coreIncentives/Complexity RankIncentives/Complexity ScoreAustralia3248.43433.01845.92272.4Austria2062.61952.1755.02567.3Belgium1566.62149.0561.81676.9Canada2458.02745.12543.41482.5Chile3540.12942.63824.63456.2Colombia3831.73817.13534.72865.7Costa Rica3639.23433.03729.42965.5Czech Republic675.6468.12
63、344.7691.7Denmark1765.41558.52740.61283.5Estonia298.6864.91100.0395.3Finland974.2864.92840.3299.8France3446.32646.31249.43834.0Germany3150.93333.2850.81873.2Greece1964.21558.53435.51186.8Hungary482.11100.03634.43163.0Iceland1267.2864.92145.02470.4Ireland580.5288.82939.92072.8Israel1366.71855.31348.8
64、1382.8Italy2159.03040.0367.63262.4Japan3051.03233.83137.4890.8Korea2655.02844.5950.53064.3Latvia1100.0864.91100.01100.0Lithuania384.3380.9464.62666.6Luxembourg2358.02049.11149.62766.1Mexico2753.53433.02642.3593.7Netherlands2557.62546.41647.11773.6New Zealand2952.53139.43335.51087.2Norway1466.61558.5
65、3038.8989.9Poland1666.0468.11448.43555.7Portugal3738.83728.2657.83734.4Slovak Republic1865.11461.72244.72370.5Slovenia775.4468.12444.6791.2Spain3348.32149.03237.23652.2Sweden874.31363.01746.4495.2Switzerland1071.0766.01050.21973.2Turkey1169.2864.91548.12172.5United Kingdom2853.42149.01945.73356.8Uni
66、ted States2258.42446.52045.51578.2TAX FOUNDATION|9Loss Offset Rules:Carryforwards and CarrybacksLoss carryover provisions allow businesses to either deduct current year losses against future profits(carryforwards)or deduct current year losses against past profits(carrybacks).Many companies have inve
67、stment projects with different risk profiles and operate in industries that fluctuate greatly with the business cycle.Carryover provisions help businesses“smooth”their risk and income,making the tax code more neutral across investments and over time.8Ideally,a tax code allows businesses to carry for
68、ward their losses for an unlimited number of years,ensuring that a business is taxed on its average profitability over time.While some countries do allow for indefinite loss carryovers,others have timeand deductibilitylimits.In 22 of the 38 OECD countries,corporations can carry forward losses indefi
69、nitely in 2023,though 13 of these limit the amount of taxable income that can be offset by losses from previous years.9 Of the 16 countries with time limits,the average loss carryforward period is eight years.Hungary,Poland,and Slovakia have the most restrictive loss carryover provisions in the OECD
70、:carrybacks are not allowed,and carryforwards are not only limited to five years but also capped at 50 percent of taxable income(coded as 2.5 years).10 The ITCI ranks countries that allow losses to be carried forward indefinitely without limits better than countries that impose time or deductibility
71、 restrictions on carryforwards.Countries tend to be significantly more restrictive with loss carryback provisions than with carryfor-ward provisions.In 2023,only the Estonian and Latvian systems allow,by design,unlimited carrybacks of losses.11 Of the nine countries that allow time-limited carryback
72、s,the average period is 1.3 years.12 The ITCI penalizes the 27 countries that do not allow any loss carrybacks.Capital Cost Recovery:Machines,Buildings,and IntangiblesBusinesses determine their profits by subtracting costssuch as wages and raw materialsfrom revenue.However,in most jurisdictions,capi
73、tal investmentssuch as in buildings,machinery,and intangiblesare not treated like other regular costs that can be subtracted from revenue in the year the money is spent.Instead,businesses are required to write off these costs over several years or even decades,depending on the type of asset.Deprecia
74、tion schedules specify the amounts businesses are legally allowed to write off,as well as the time period over which assets need to be written off.For instance,a government may require a busi-ness to deduct an equal percentage of the cost of a machine over a seven-year period.By the end of the depre
75、ciation period,the business would have deducted the total initial dollar cost of the asset.8 Tibor Hanappi,“Loss carryover provisions:Measuring effects on tax symmetry and automatic stabilisation,”OECD Taxation Working Papers No.35,Feb.22,2018,https:/oecd-ilibrary.org/taxation/loss-carryover-provisi
76、ons_bfbcd0db-enhttps:/oecd-ilibrary.org/taxation/loss-carryover-provisions_bfbcd0db-en;and Michael P.Devereux and Clemens Fuest,“Is the Corporation Tax an Effective Automatic Stabilizer?”National Tax Journal 62:3(September 2009):429-437,https:/journals.uchicago.edu/doi/abs/10.17310/ntj.2009.3.05http
77、s:/journals.uchicago.edu/doi/abs/10.17310/ntj.2009.3.05.9 Countries with unlimited carryforwards are coded as having periods of 100 years.Some countries restrict the amount of taxable income that can be offset by losses each year.For example,Slovenia allows for indefinite carryforwards but only 63 p
78、ercent of taxable income can be offset by losses in any given year.These restrictions are coded as the percentage of taxable income that can be offset by losses times the number of allowable years.Thus,Slovenia is coded as 63.10 Bloomberg Tax,“Country Guides,”https:/ Tax Summaries,”https:/pwc.https:
79、/ individual government websites.11 Estonia and Latvia do not have explicit loss carryover provisions.However,their cash-flow corporate tax system implicitly allows for unlimited loss carryfor-wards and carrybacks.12 Bloomberg Tax,“Country Guides;”PwC,“Worldwide Tax Summaries”;and individual governm
80、ent websites.10|INTERNATIONAL TAX COMPETITIVENESS INDEXHowever,due to the time value of money(a normal real return plus inflation),write-offs in later years are not as valuable in real terms as write-offs in earlier years.As a result,businesses effectively lose the ability to deduct the full present
81、 value of their investment cost.This tax treatment of capital ex-penses understates true business costs and overstates taxable income in present value terms.13The ITCI measures a countrys capital allowances for three asset types,namely,machinery,industrial buildings,and intangibles.14 Capital allowa
82、nces are expressed as a percent of the present value cost that corporations can write off over the life of an asset.A 100 percent capital allowance represents a business ability to deduct the full cost of an investment over its life in real terms.Countries that pro-vide faster write-offs for capital
83、 investments receive better scores in the ITCI.On average,across the OECD,in real terms,businesses can write off 84.9 percent of investment costs in machinery,48.9 percent of the cost of industrial buildings,and 74.9 percent of the cost of intangi-bles.In 2023,Chile phased out full expensing for all
84、 three asset categories.The policy had been put in place as a response to the COVID-19 pandemic.Similarly,the United Kingdom phased out its 130 per-cent deduction for machinery and brought in temporary full expensing.The United States phased out full expensing for machinery to an 80 percent expensin
85、g allowance.Estonia and Latvia are coded as allowing 100 percent of the present value of a capital investment to be written off,as their corporate tax only applies to distributed profits and is thus determined by cash flow.15InventoriesSimilar to capital investments,the costs of inventories are not
86、written off in the year of purchase.Instead,the costs of inventories are deducted at sale.As a result,governments need to define the total cost of inventories sold.There are generally three methods used to calculate inventories:Last In,First Out(LIFO);Average Cost;and First In,First Out(FIFO).The me
87、thod by which a country allows businesses to account for inventories can significantly impact a business taxable income.When prices are rising,as is usually the case,LIFO is the preferred method because it allows inventory costs to be closer to true costs at the time of sale.This results in the low-
88、est taxable income for businesses.In contrast,FIFO is the least preferred method because it results in the highest taxable income.The Average Cost method is between FIFO and LIFO.16Countries that allow businesses to choose the LIFO method receive the best scores,those that allow the Average Cost met
89、hod receive an average score,and countries that only allow the FIFO method receive the worst scores.Fourteen OECD countries allow companies to use the LIFO method of ac-counting,19 countries use the Average Cost method of accounting,and five countries limit companies to the FIFO method of accounting
90、.1713 Lisa Hogreve and Daniel Bunn,“Capital Cost Recovery across the OECD,”Tax Foundation,Apr.26,2022,https:/taxfoundation.org/publications/capital-cost-https:/taxfoundation.org/publications/capital-cost-recovery-across-the-oecd/recovery-across-the-oecd/.14 Intangible assets are typically amortized,
91、but the write-off is similar to depreciation.15 Data and calculations are based on Hogreve and Bunn,“Capital Cost Recovery across the OECD.”16 Kyle Pomerleau,“The Tax Treatment of Inventories and the Economic and Budgetary Impact of LIFO Repeal,”Tax Foundation,Feb.9,2016,https:/taxfounda-https:/taxf
92、ounda-tion.org/tax-treatment-inventories-and-economic-and-budgetary-impact-lifo-repeal/tion.org/tax-treatment-inventories-and-economic-and-budgetary-impact-lifo-repeal/.17 Christoph Spengel,Frank Schmidt,Jost Heckemeyer,and Katharina Nicolay,“Effective Tax Levels Using the Devereux/Griffith Methodol
93、ogy.”European Com-mission,October 2021,https:/taxation-customs.ec.europa.eu/system/files/2022-03/final_report_2021_effective_tax_levels_revised_en.pdf;PwC,“World-wide Tax Summaries:Corporate-Income Determination,”https:/ EY,“Worldwide Corporate Tax Guide 2021.”TAX FOUNDATION|11Allowance for Corporat
94、e EquityBusinesses can finance their operations through debt or equity.However,the return on these two types of finance is taxed differently.Standard corporate income tax systems allow tax deductions of interest payments but not of equity costs,effectively providing a tax advantage to debt over equi
95、ty financethe so-called“debt bias.”This debt bias can be considered a real risk to economic stability.18There are two broad ways to address this debt bias,namely,limiting the tax deductibility of interest and providing a deduction for equity costs.Limiting the tax deductibility of interest expenses
96、creates new distortions,as interest income usually continues to be fully taxed.An allowance for corporate equityor sometimes also referred to as notional interest deductionretains the deduction for interest expenses but adds a similar deduction for the normal return on equity,neutralizing the debt b
97、ias while eliminating tax distortions to investment.Five OECD countriesBelgium,Italy,Poland,Portugal,and Turkeyhave introduced an allowance for corporate equity.19 All countries except Poland apply the allowance only to new equity instead of all equity,limiting the tax revenue costs while preserving
98、 the efficiency gains.The Belgian policy will be abolished in 2024.The allowance rate is frequently based on the corporate or government bond rate and in some cases is adjusted by a risk premium.20Countries that have implemented an allowance for corporate equity receive a better score in the Index.T
99、ax Incentives and ComplexityGood tax policy treats economic decisions neutrally,neither encouraging nor discouraging one activity over another.A tax incentive is a tax credit,deduction,or preferential tax rate that exclusively applies for a specific type of economic activity and can thus distort eco
100、nomic decisions.For instance,when an industry receives a tax credit for producing a specific product,it may choose to overinvest in that activity,although it might otherwise not be profitable.Additionally,the cost of special provisions is often offset by shifting the burden onto other taxpayers in t
101、he form of higher taxes.In addition,the possibility of receiving incentives invites efforts to secure these tax preferences,21 such as lobbying,which creates additional deadweight economic loss as firms focus resources on influenc-ing the tax code in lieu of producing products.For instance,the deadw
102、eight losses in the United States attributed to tax compliance and lobbying were estimated to be between$215 billion and$987 billion in 2012.These expenditures for lobbying,along with compliance,have been shown to reduce econom-ic growth by crowding out potential economic activity.2218 IMF,“Tax Poli
103、cy,Leverage and Macroeconomic Stability,”Policy Papers,Oct.12,2016,https:/imf.org/en/Publications/Policy-Papers/Issues/2016/12/31/https:/imf.org/en/Publications/Policy-Papers/Issues/2016/12/31/Tax-Policy-Leverage-and-Macroeconomic-Stability-PP5073Tax-Policy-Leverage-and-Macroeconomic-Stability-PP507
104、3.19 The European Commission also included an allowance for corporate equity in its proposal for a common corporate tax base in the European Union.See European Commission,“Common Consolidated Corporate Tax Base(CCCTB),”https:/ec.europa.eu/taxation_customs/business/company-tax/common-con-https:/ec.eu
105、ropa.eu/taxation_customs/business/company-tax/common-con-solidated-corporate-tax-base-ccctb_ensolidated-corporate-tax-base-ccctb_en.Switzerland has an optional allowance for corporate equity at the cantonal level,which is currently only in effect in the canton of Zurich.See PwC,“Worldwide Tax Summar
106、ies:Corporate Deductions,”https:/ Bloomberg Tax,“Country Guides;”PwC,“Worldwide Tax Summaries:Corporate Deductions”;and Spengel,Schmidt,Heckemeyer,and Nicolay,“Effective Tax Levels Using the Devereux/Griffith Methodology.”21 Christopher J.Coyne and Lotta Moberg,“The Political Economy of State-Provid
107、ed Targeted Benefits,”The Review of Austrian Economics 28:3(June 2014),337.22 Jason J.Fichtner and Jacob M.Feldman,“The Hidden Costs of Tax Compliance,”George Mason University,Mercatus Center,May 20,2013,http:/mercatus.http:/mercatus.org/sites/default/files/Fichtner_TaxCompliance_v3.pdforg/sites/def
108、ault/files/Fichtner_TaxCompliance_v3.pdf.12|INTERNATIONAL TAX COMPETITIVENESS INDEXThe ITCI considers whether countries provide incentives such as patent box provisions and research and development tax subsidies.Countries which provide such incentives are scored worse than those that do not.Patent B
109、oxesDue to an increasingly globalized and mobile economy,countries have searched for ways to prevent corporations from reincorporating or shifting operations or profits elsewhere.One response to the increase in capital mobility has been the creation of patent boxes.Patent boxesalso referred to as in
110、tellectual property,or IP,regimesprovide tax rates on income derived from IP that are below statutory corporate tax rates.Eligible types of IP are most commonly patents and software copyrights.Patent boxes are an income-based rather than an expenditure-based tax incentive,limiting its benefits to su
111、ccessful R&D projects that have produced IP rights rather than decreasing the ex ante risks of R&D through cost reductions.Intellectual property is extremely mobile.Hence,a country can use the lower tax rate of a patent box to entice corporations to hold their intellectual property within its border
112、s.Research suggests that pat-ent boxes are likely to attract new income derived from patents,implying that businesses reduce their corporate tax liability by shifting IP-related income.Tax revenues,however,are likely to decline,as the negative revenue effects of the lower statutory rate on patent in
113、come can be only partially offset by revenues from newly attracted patent income.23In recent years,patent box rules have become more stringent in some countries as the OECD require-ments for countering harmful tax practices have been adopted.Countries that follow the OECD stan-dards now require comp
114、anies to have substantial R&D activity within their borders to benefit from tax preferences associated with their intellectual property.24Instead of providing patent boxes for intellectual property,countries should recognize that all capital is mobile to some degree and lower their corporate tax rat
115、es across the board.This would encourage investment of all kinds,rather than merely incentivizing corporations to locate their patents in a specif-ic country.Seventeen OECD countriesAustralia,Belgium,France,Hungary,Ireland,Israel,Korea,Lithuania,Luxembourg,the Netherlands,Poland,Portugal,Slovakia,Sp
116、ain,Switzerland,Turkey,and the United Kingdomhave patent box legislation,with rates and exemptions varying among countries.25 The Unit-ed States has a reduced tax rate for profits from exports related to intellectual property held in the U.S.which is treated as a patent box in the Index.Countries wi
117、th patent box regimes receive a lower score.23 Rachel Griffith,Helen Miller,and Martin OConnell,“Ownership of Intellectual Property and Corporate Taxation,”Journal of Public Economics 112(April 2014):1223,https:/ OECD,“Action 5:Agreement on Modified Nexus Approach for IP Regimes,”2015,https:/oecd.or
118、g/ctp/beps-action-5-agreement-on-modified-nexus-approach-https:/oecd.org/ctp/beps-action-5-agreement-on-modified-nexus-approach-for-ip-regimes.pdffor-ip-regimes.pdf;and OECD,“Harmful Tax Practices Peer Review Results,”January 2022,http:/oecd.org/tax/beps/harmful-tax-practices-peer-review-re-http:/oe
119、cd.org/tax/beps/harmful-tax-practices-peer-review-re-sults-on-preferential-regimes.pdfsults-on-preferential-regimes.pdf.25 Bloomberg Tax,“Country Guides;”PwC,“Worldwide Tax Summaries:Corporate-Tax credits and incentives,”https:/ OECD,“Intellectual Property Regimes,”https:/qdd.oecd.org/data/IP_Regime
120、shttps:/qdd.oecd.org/data/IP_Regimes.TAX FOUNDATION|13Research and DevelopmentIn the absence of full expensing,expenditure-based R&D tax incentives(partially)offset the tax costs of business investment.Unfortunately,R&D tax incentives are rarely neutralthey usually define very specific activities th
121、at qualifyand are often complex in their implementation.As with other incentives,R&D incentives distort investment decisions and lead to an inefficient allo-cation of resources.26 Additionally,the desire to secure R&D incentives encourages lobbying activities that consume resources and detract from
122、investment and production.In Italy,for instance,firms can engage in a negotiation process for incentives,such as easy term loans and tax credits.27 Countries could better use the revenue spent on special tax incentives to provide a lower business tax rate across the board or to improve the tax treat
123、ment of capital investment.The implied tax subsidy rate on R&D expenditures,developed by the OECD,measures the extent of expenditure-based R&D tax relief across countries.Implied tax subsidy rates are measured as the dif-ference between one unit of investment in R&D and the pretax income required to
124、 break even on that investment unit,assuming a representative firm.In other words,it measures the extent of the preferen-tial treatment of R&D in a given tax system.The more generous the tax provisions for R&D,the higher the implied tax subsidy rates for R&D.An implied subsidy rate of zero means R&D
125、 does not receive preferential tax treatment.Among OECD countries,Colombia has the highest implied tax subsidy rate on R&D expenditures,at 46 percent.Iceland and Portugal provide the second and third most generous relief,with implied tax subsidy rates of 35 and 34 percent,respectively.Of the countri
126、es that grant notable relief,the United States(3 percent),Mexico(6 percent),and Turkey(6 percent)are the least generous.The implied tax subsidy rates of Costa Rica,Estonia,Finland,Israel,Latvia,Luxembourg,and Switzerland do not show any significant expenditure-based R&D tax relief.28Countries that p
127、rovide more generous expenditure-based R&D tax incentives receive a lower score on the ITCI.Digital Services TaxesOver the last few years,several OECD countries have implemented so-called digital services taxes(DSTs).DSTs are taxes on selected gross revenue streams of large digital businesses.Their
128、tax base typically includes revenues either derived from a specific set of digital goods or services(for example,targeted online advertising)or based on the number of digital users within a country.Relatively high domestic and global revenue thresholds limit the tax to large multinationals.26 This d
129、oes not imply that R&D credits do not meet their policy goal of fostering innovation through R&D activity,technology transfer,and entrepreneurship.See IMF,“Acting Now,Acting Together,”April 2016,https:/imf.org/en/Publications/FM/Issues/2016/12/31/Acting-Now-Acting-Togetherhttps:/imf.org/en/Publicati
130、ons/FM/Issues/2016/12/31/Acting-Now-Acting-Together.However,R&D credits benefit certain firms and industries more than others,creating distortions in the economy.See Gary Guenther,“Research Tax Credit:Current Law and Policy Issues for the 114th Congress,”Congressional Research Service,Mar.13,2015,ht
131、tps:/fas.org/sgp/crs/misc/RL31181.pdfhttps:/fas.org/sgp/crs/misc/RL31181.pdf,and Fulvio Castellacci and Christine Mee Lie,“Do the effects of R&D tax credits vary across industries?A meta-regression analysis,”Research Policy 44:4(May 2015),819-832,https:/https:/ Deloitte,“International Tax Italy High
132、lights 2022,”January 2022,https:/ OECD,“R&D Tax Incentive Indicators:Implied tax subsidy rates on R&D expenditures,”https:/stats.oecd.org/Index.aspx?DataSetCode=RDSUBhttps:/stats.oecd.org/Index.aspx?DataSetCode=RDSUB.The measure used in the Index is the average implied tax subsidy rate of loss-makin
133、g and profitable SMEs and large firms.14|INTERNATIONAL TAX COMPETITIVENESS INDEXDSTs effectively ring-fence the digital economy by limiting the tax to certain revenue streams of large digital businesses,creating distortions based on firm size and business model.In addition,because DSTs are levied on
134、 revenues rather than profits,they do not take into account profitability,and thus disproportionally affect firms with lower profit margins.As of 2023,eight OECD countries have implemented a DST:Austria,France,Hungary,Italy,Poland,Spain,Turkey,and the United Kingdom.29Countries that have implemented
135、 a DST receive a lower score on the ITCI.ComplexityThe ITCI quantifies corporate tax code complexity by measuring the number of separate taxes(and rates)that apply to business income,the existence of surtax rates on business income,and the amount of revenue countries collect from business profits ta
136、xes other than the corporate income tax.These burdens are measured by tallying up the separate rates that apply to business income,identify-ing applicable surtaxes,and relying on OECD revenue data to measure the share of revenue from taxes on business income other than the corporate income tax.Count
137、ries that have multiple rates that apply to corporate income,surtaxes,and collect revenue on income and profits outside of normal income taxes receive worse scores on the ITCI.The nation with the highest number of separate tax rates is Costa Rica with five.Korea and Portugal follow with four.There a
138、re 14 OECD countries that do not have multiple tax rates or bases for their corporate income tax.30Corporate surtaxes are relatively uncommon in OECD countries with just four applying a surtax to business income.Portugal,Luxembourg,Germany,and France all apply a surtax to all or part of their corpor
139、ate income tax base.31The OECD data on tax revenues has a category for revenues that are unallocable to normal personal or business income taxes.32 The data show that Chile(10.4 percent),Switzerland(6.4 percent),Denmark(5.4 percent)and Costa Rica(4.9 percent)collect non-negligible shares of revenue
140、from income(in-cluding personal income)from taxes other than corporate or personal income taxes.Seventeen OECD countries collect no revenue in that category.Individual TaxesIndividual taxes are one of the most prevalent means of raising revenue to fund government.Individual income taxes are levied o
141、n an individuals or households income(wages and,often,capital gains and dividends)to fund general government operations.These taxes are typically progressive,meaning that the rate at which an individuals income is taxed increases as the individual earns more income.29 KPMG,“Taxation of the digitaliz
142、ed economy:Developments summary,”updated June 27,2022,https:/tax.kpmg.us/content/dam/tax/en/pdfs/2022/digi-talized-economy-taxation-developments-summary.pdf.30 EY,“Worldwide Corporate Tax Guide 2022.”31 Ibid.32 OECD,“Revenue Statistics-OECD countries:Comparative tables,”https:/stats.oecd.org/Index.a
143、spx?DataSetCode=REVhttps:/stats.oecd.org/Index.aspx?DataSetCode=REV.The measure used in the Index is tax revenue as a percent of total taxation,code 1300:Unallocable between 1100 and 1200.TAX FOUNDATION|15Table 4.Individual TaxesCountryOverall RankOverall ScoreIncome Tax RankIncome Tax ScoreComplexi
144、ty RankComplexity ScoreCapital Gains/Dividends RankCapital Gains/Dividends ScoreAustralia1475.61380.7299.92160.4Austria3058.13755.0299.92553.3Belgium1177.92870.0299.91576.7Canada2464.22076.5299.93442.0Chile3836.33822.3299.93345.2Colombia1574.72969.43275.0293.0Costa Rica3355.2686.13827.41377.8Czech R
145、epublic494.4293.8299.91083.8Denmark3650.23166.5299.93725.0Estonia1100.01100.0299.9488.3Finland2564.12672.9299.93245.8France3255.93562.5299.93540.6Germany3552.31978.03455.92355.5Greece889.21580.4299.9687.9Hungary691.1393.53099.51377.8Iceland1869.21082.83178.51964.1Ireland3156.51778.5299.93824.3Israel
146、2368.02276.0299.92850.1Italy1670.82375.7299.92256.3Japan3453.03068.63455.91867.4Korea3749.33366.13455.92062.5Latvia394.6490.1299.9488.3Lithuania1084.0884.5299.91673.1Luxembourg2168.71480.43455.9885.8Mexico2860.33462.83364.91180.3Netherlands1969.01878.3299.92949.7New Zealand593.8785.6299.9391.6Norway
147、2762.61281.6299.93633.2Poland1277.12574.6299.91770.0Portugal2959.53658.4299.92652.4Slovak Republic299.9589.2299.91100.0Slovenia1377.13266.1299.91279.2Spain1769.52475.2299.92454.2Sweden2068.71678.91100.03048.4Switzerland989.1983.4299.9984.5Turkey789.41181.9299.9786.8United Kingdom2664.12770.5299.9314
148、8.4United States2268.42176.4299.92750.716|INTERNATIONAL TAX COMPETITIVENESS INDEXIn addition,countries have payroll taxesalso referred to as social security contributions or social insurance taxes.These typically flat-rate taxes are levied on wage income in addition to a countrys general individual
149、income tax.However,revenue from these taxes is typically allocated specifically toward social insurance programs such as unemployment insurance,government pension programs,and health insurance.Individual taxes can have the benefit of being some of the more transparent taxes.Taxpayers are made aware
150、of their total amount of taxes paid at some point in the processunlike,for example,con-sumption taxes,which are collected and remitted by a business,and an individual may not be aware of their total consumption tax burden.Most countries tax individuals on their income using two approaches.First,coun
151、tries tax earnings from work with ordinary income taxes and payroll taxes.The structure of these taxes can influence individuals decisions to work,take an additional part-time job,or whether a second earner in the household will work.Second,individuals are taxed on their savings through taxes on cap
152、ital gains and dividends.In most cases,these taxes are a second layer of tax on corporate profits and can impact decisions on how much to save and invest.High taxes on capital gains and dividends can reduce the aggregate savings and investment in a country.A countrys score for its individual income
153、tax is determined by three subcategories:the rate and progressivity of wage taxation,income tax complexity,and the extent to which the income tax double taxes corporate income.Table 4 shows the ranks and scores for the entire Individual Taxes category as well as the rank and score for each subcatego
154、ry.Taxes on Ordinary IncomeIndividual income taxes are levied on the income of individuals or households.Many countries,such as the United States,rely on individual income taxes as a significant source of tax revenue.33 They are used to raise revenue for both general government operations and for sp
155、ecific programs,such as social insurance and government-provided health insurance.A countrys taxes on ordinary income are measured according to three variables:the top rate at which ordinary income is taxed,the top income tax threshold,and the economic efficiency of labor taxation.Top Statutory Pers
156、onal Income Tax RateMost countries income tax systems have a progressive tax structure.This means that,as individu-als earn more income,they move into tax brackets with higher tax rates.The top statutory personal income tax rate is the top tax rate on all income over a certain level.For example,the
157、United States has seven tax brackets,with the seventh(top)bracket taxing each additional dollar of income over$578,125($693,750 for married filing jointly)at a rate of 37 percent in 2023.34 In addition,U.S.taxpay-ers also pay state and local income taxes,which sum to a combined top combined personal
158、 income tax rate of 43.7 percent.3533 Daniel Bunn and Cecilia Perez Weigel,“Sources of Government Revenue in the OECD.”34 Alex Durante,“2023 Tax Brackets,”Tax Foundation,Oct.18,2022,https:/taxfoundation.org/publications/federal-tax-rates-and-tax-brackets/https:/taxfoundation.org/publications/federal
159、-tax-rates-and-tax-brackets/.35 OECD,“OECD Tax Database:Table I.7-Top statutory personal income tax rates,”updated May 2022,https:/stats.oecd.org/index.aspx?DataSetCode=TABLE_https:/stats.oecd.org/index.aspx?DataSetCode=TABLE_I7I7.Employee social security taxes are included when these are not phased
160、 out before the top threshold or the all-in rate is higher than the top rate.TAX FOUNDATION|17Individuals consider the marginal tax rate when deciding whether to work an additional hour.In many cases the decision will be about taking a second,part-time job or whether households with two adults will
161、have one or two earners.If an individual faces a marginal tax rate of 30 percent on their current earnings,taking additional work or another shift would mean that only 70 percent of those earnings could be brought home.High top personal tax rates make additional work more expensive,which lowers the
162、relative cost of not working.This makes it more likely that an individual will choose leisure over work,maintaining current hours rather than moving to full-time work or taking an additional shift.High tax rates increase the cost of labor,which can decrease hours worked,and,in turn,can reduce the am
163、ount of production in the economy.Countries with high top statutory personal income tax rates receive a worse score on the ITCI than countries with lower top rates.Slovenia has the highest all-in top statutory personal income tax rate(including employee social contributions)at 67.5 percent.Estonia h
164、as the lowest,at 21.6 percent.36Income Level at Which Top Statutory Personal Income Tax Rate AppliesThe level at which the top statutory personal income tax rate first applies is also important.If a country has a top rate of 20 percent,but almost everyone pays that rate because it applies to any inc
165、ome over$10,000,that country essentially has a flat income tax.In contrast,a tax system that has a top rate that applies to all income over$1 million requires a much higher top tax rate to raise the same amount of revenue,because it targets a small number of people that earn a high level of income.C
166、ountries with top statutory personal income tax rates that apply at lower levels score better on the ITCI.The ITCI bases its measure on the income level at which the top rate first applies as compared to the countrys average income.According to this measure,Mexico applies its top tax rate at the hig
167、hest level of income(the top personal income tax rate applies at 25.2 times the average Mexican income),whereas Hungary applies its top rate on the first dollar,with a flat personal income tax of 15 percent.37The Economic Cost of Labor TaxationAll taxes create some economic losses;however,tax system
168、s should be designed to minimize those losses while supporting revenue needs.One way to examine the efficiency of labor taxation in a country is to control for the level of labor taxation using the ratio of the marginal tax wedge to the average tax wedge.38 The marginal tax wedge influences the choi
169、ce to earn another dollar of income while the average tax wedge measures the tax burden at the current income level.39 A higher ratio means that as one earns more income,the influence of the tax system on those decisions and the related economic losses grows.A lower ratio means that an individual ca
170、n decide to work more without the tax system changing their decisions.36 Ibid.37 Ibid.38 The marginal tax burden faced by an average worker in a country and the total tax cost of labor for an average worker in a country are called the marginal and average tax wedge,respectively.The tax wedge include
171、s income taxes and social security contributions(both the employee-side and employer-side).The ratio of marginal to average tax wedges is calculated using the OECD data of marginal and average total tax wedges at four levels of income for single individuals without dependents.It is the average of ma
172、rginal total tax wedges at 67 percent,100 percent,133 percent,and 167 percent of average earnings divided by the average of average total tax wedges at 67 percent,100 percent,133 percent,and 167 percent of average earnings.39 Cristina Enache,“A Comparison of the Tax Burden on Labor in the OECD,”Tax
173、Foundation,April 19,2021,https:/taxfoundation.org/publications/compari-https:/taxfoundation.org/publications/compari-son-tax-burden-labor-oecd/son-tax-burden-labor-oecd/.18|INTERNATIONAL TAX COMPETITIVENESS INDEXFor example,one individual faces an average tax wedge on their earnings of 20 percent an
174、d their marginal tax wedge is also 20 percent.That individual could work more hours without the relative tax burden growing.The ratio of that workers marginal tax wedge to their average tax wedge is 1.Another individual who faces an average tax wedge of 20 percent on their earnings and a marginal ta
175、x wedge of 30 percent,however,would have their decision of whether to work more hours influenced by the tax system.The ratio of that workers marginal tax wedge to their average tax wedge is 1.5.The ITCI gives countries with high ratios a worse score due to the larger impact that those systems have o
176、n workers decisions.Hungary has the lowest ratio of 1,meaning the next dollar earned faces the same tax burden as cur-rent earnings.40 This is because Hungary has a flat income tax,so the marginal and average tax wedge are the same.In contrast,in Israel,the ratio is 1.6.The average across OECD count
177、ries is 1.54.41ComplexityComplexity is measured by the rate of any surtax on personal income and the amount of revenue raised through social security contributions other than those collected through employer or employee payroll taxes.These measures indicate non-standard approaches to taxation of lab
178、or income and,in the case of surtaxes,a less transparent personal income tax system.The Index penalizes countries with surtaxes and significant revenues from non-standard employer and employee payroll taxes.Four OECD countries levy a surtax on personal income:Germany,Japan,Korea,and Luxembourg.Ger-m
179、any levies a 5.5 percent solidarity surcharge on income tax paid in excess of EUR 17,539,equivalent to labor income above EUR 65,500 for single filers,increasing its top marginal income tax rate from 45 percent to 47.475 percent.Japan applies a 2.1 percent surtax on all national(but not local)income
180、 tax liability.Four OECD countries raise some meaningful share of revenue through non-standard social security contributions.In Costa Rica,these revenues make up 28.9 percent of total tax revenues.Mexico(14 percent),Colombia(10 percent),and Iceland(8.5 percent)make up the others in this group.Capita
181、l Gains and Dividends TaxesIn addition to wage income,many countries individual income tax systems tax investment income by levying taxes on capital gains and dividends.A capital gain occurs when an individual purchases an asset(usually corporate stock)in one period and sells it in another for a pro
182、fit.A dividend is a payment made to an individual from after-tax corpo-rate profits.Capital gains taxes and personal dividend taxes are a form of double taxation of corporate profits that contribute to the tax burden on capital.When a corporation makes a profit,it pays corporate income tax.It can th
183、en generally do one of two things.The corporation can retain the after-tax profits,which 40 Colombias ratio is 0.However,this is because a single worker earning the nations average wage does not pay personal income tax.41 OECD,“OECD Tax Database,Table I.4.Marginal personal income tax and social secu
184、rity contribution rates on gross labour income,”updated April 2023,https:/stats.oecd.org/index.aspx?DataSetCode=TABLE_I4https:/stats.oecd.org/index.aspx?DataSetCode=TABLE_I4;and OECD,“OECD Tax Database,Table I.5.Average personal income tax and social security contribution rates on gross labour incom
185、e,”updated April 2023,https:/stats.oecd.org/index.aspx?DataSetCode=TABLE_I5https:/stats.oecd.org/index.aspx?DataSetCode=TABLE_I5.TAX FOUNDATION|19boost the value of the business and thus its stock price.Stockholders then sell the stock and realize a capital gain,which requires them to pay tax on tha
186、t income.Alternatively,the corporation can distrib-ute the after-tax profits to shareholders in the form of dividends.Stockholders who receive dividends then pay dividends tax on that income.A company that makes a taxable profit of$1 million and pays 20 percent in corporate income taxes would have$8
187、00,000 left to either reinvest in the company,which would boost the value of the stock,or pay a dividend.A shareholder might face an additional 20 percent tax on the gains from selling the shares or on a dividend from the company.Effectively,the system taxes the business profits at 36 per-cent.An in
188、dividual hoping that an investment provides a 10 percent real rate of return might see only a 6.4 percent after-tax rate of return.Some tax systems account for this potential double taxation either through credits against capital gains taxes for corporate taxes paid or other deductions.Such a tax sy
189、stem provides integrated taxa-tion of corporate profits,or“corporate integration.”42Apart from double taxation,taxes on dividends and capital gains can change the incentives for busi-nesses when they are looking to finance new projects.If a business can either fund a new project through selling new
190、shares of stock or through reinvesting its profits,the taxes on investors can influence which approach results in higher after-tax returns.Norway uses a rate of return allowance on capital gains taxes to neutralize the decision between reinvesting profits or selling new shares.43Generally,higher div
191、idends and capital gains taxes create a bias against saving and investment,reduce capital formation,and slow economic growth.44In the ITCI,a country receives a better score for lower capital gains and dividends taxes.Capital Gains Tax RatesCountries generally tax capital gains at a lower rate than o
192、rdinary income,provided that specific re-quirements are met.For example,the United States taxes capital gains at a reduced rate if the taxpay-er holds the asset for at least one year before selling it(so-called long-term capital gains).45 The ITCI gives countries with higher capital gains tax rates
193、a worse score than those with lower rates.Some countries use additional provisions to help mitigate the double taxation of income due to the capital gains tax.For instance,the United Kingdom provides an annual exemption of EUR 6,000(USD 7,400),46 and Canada excludes half of all capital gains income
194、from taxation.4742 Taylor LaJoie and Elke Asen,“Double Taxation of Corporate Income in the United States and the OECD,”Tax Foundation,Jan.13,2021,https:/taxfoundation.https:/taxfoundation.org/double-taxation-of-corporate-income/org/double-taxation-of-corporate-income/.43 JanSdersten,“Why the Norwegi
195、an Shareholder Income Tax is Neutral,”International Tax and Public Finance,Apr.26,2019,https:/ Daniel Bunn and Elke Asen,“Savings and Investment:The Tax Treatment of Stock and Retirement Accounts in the OECD,”Tax Foundation,May 26,2021,https:/taxfoundation.org/savings-and-investment-oecd/https:/taxf
196、oundation.org/savings-and-investment-oecd/.45 Erica York,“An Overview of Capital Gains Taxes,”Tax Foundation,Apr.16,2019,https:/taxfoundation.org/capital-gains-taxes/https:/taxfoundation.org/capital-gains-taxes/.46 The average 2021 GBP-USD exchange rate was used.See IRS,“Yearly Average Currency Exch
197、ange Rates,”https:/irs.gov/individuals/international-taxpayers/https:/irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-ratesyearly-average-currency-exchange-rates.47 Deloitte,“Tax Guides and Highlights.”20|INTERNATIONAL TAX COMPETITIVENESS INDEXDenmark has the highest cap
198、ital gains tax rate in the OECD,at 42 percent.Belgium,the Czech Repub-lic,Korea,Luxembourg,New Zealand,Slovakia,Slovenia,Switzerland,and Turkey do not tax long-term capital gains.48Dividend Tax RatesDividend taxes can adversely impact capital formation in a country.High dividend tax rates increase t
199、he cost of capital,which deters investment and slows economic growth.Countries rates are expressed as the top marginal personal dividend tax rate after any imputation or credit system.Countries with lower overall dividend tax rates score better on the ITCI due to the dividend tax rates effect on the
200、 cost of investment(i.e.,the cost of capital)and the more neutral treatment between sav-ing and consumption.Ireland has the highest dividend tax rate in the OECD,at 51 percent.Estonia and Latvia have dividend tax rates of 0 percent due to their cash-flow corporate tax system,and Colombias top divide
201、nd tax rate is 0.The OECD average is 24 percent.49Consumption TaxesConsumption taxes are levied on individuals purchases of goods and services.In the OECD and most of the world,the value-added tax(VAT)is the most common general consumption tax.50 Most general consumption taxes either do not tax inte
202、rmediate business inputs or allow a credit for taxes already paid on them,making them one of the most economically efficient means of raising tax revenue.However,many countries define their tax base inefficiently.Most countries levy reduced tax rates and exempt certain goods and services from VAT,re
203、quiring them to levy higher standard tax rates to raise sufficient revenue.Some countries fail to properly exempt business inputs.For example,states in the United States often levy sales taxes on machinery and equipment.51A countrys consumption tax score is broken down into three subcategories:the t
204、ax rate,the tax base,and complexity.Table 5 displays the ranks and scores for the Consumption Taxes category.Consumption Tax RateIf levied at the same rate and properly structured,a VAT and a retail sales tax will each raise approx-imately the same amount of revenue.Ideally,either a VAT or a sales t
205、ax should be levied at the stan-dard rate on all final consumption(although they are implemented in slightly different ways).With a sufficiently broad consumption tax base,the tax rate can be relatively low.A VAT or retail sales tax with a low rate and neutral structure limits economic distortions w
206、hile raising substantial revenue.48 Bloomberg Tax,“Country Guide”;PwC,“Quick Charts:Capital gains tax(CGT)rates,”https:/ PwC,“Worldwide Tax Summaries:Individual-Income determination,”https:/ the capital gains tax rate varies by type of asset sold,the tax rate applying to the sale of listed shares af
207、ter an extended period of time is used.Includes surtaxes if applicable.49 OECD,“OECD Tax Database,Table II.4-Overall statutory tax rates on dividend income,”updated May 2022,https:/stats.oecd.org/Index.aspx?DataSet-https:/stats.oecd.org/Index.aspx?DataSet-Code=TABLE_II4Code=TABLE_II4.50 There are ot
208、her types of consumption taxes,such as excise taxes.However,these are generally narrowly based,as they are levied on specific goods,ser-vices,and activities,rather than all final consumption.The Index only considers general consumption taxes(VAT and retail sales tax).51 Janelle Fritts and Jared Walc
209、zak,2023 State Business Tax Climate Index,Tax Foundation,Oct.22,2022,https:/taxfoundation.org/2023-state-business-tax-https:/taxfoundation.org/2023-state-business-tax-climate-index/climate-index/.TAX FOUNDATION|21Table 5.Consumption TaxesCountryOverall RankOverall ScoreRate RankRate ScoreBase RankBa
210、se ScoreAustralia981.6389.53047.4Austria1758.81649.01860.4Belgium2252.22144.92155.0Canada881.7679.81959.2Chile1079.81353.0288.1Colombia1858.21353.02354.6Costa Rica586.0777.3968.7Czech Republic2550.42144.92752.3Denmark2053.53528.7476.2Estonia1564.21649.0868.8Finland2451.63232.81068.6France3241.21649.
211、03633.2Germany1465.11353.01365.4Greece3338.23232.82947.8Hungary3831.83820.62652.3Iceland2847.43232.81662.1Ireland3436.12936.83439.8Israel1177.81061.1575.4Italy3732.92740.93730.0Japan685.7389.52453.8Korea295.0389.51168.1Latvia2748.32144.92849.0Lithuania3045.82144.93245.1Luxembourg784.51061.1385.7Mexi
212、co1267.6965.22254.7Netherlands1659.72144.91266.6New Zealand1100.0869.21100.0Norway2351.63528.7773.4Poland3635.22936.83538.4Portugal2650.32936.81761.7Slovak Republic2946.31649.03341.0Slovenia3144.02740.93147.2Spain1957.32144.91563.0Sweden2152.43528.7674.6Switzerland394.9298.82057.0Turkey1366.81257.11
213、463.2United Kingdom3535.61649.03824.5United States493.61100.02553.422|INTERNATIONAL TAX COMPETITIVENESS INDEXHowever,many countries have consumption taxes that exempt certain goods and services from VAT or tax them at a reduced rate,requiring higher standard rates to raise sufficient revenue.If not
214、neutrally structured,high tax rates create economic distortions by discouraging the purchase of highly taxed goods and services in favor of untaxed,lower taxed,or self-provided goods and services.Countries with lower consumption tax rates score better than those with higher tax rates,as lower rates
215、do less to discourage economic activity and allow for more future consumption and investment.The average general consumption tax rate in the OECD is 19.0 percent.Hungary has the highest tax rate at 27 percent,while the United States has the lowest tax rate at 7.4 percent.52Consumption Tax BaseIdeall
216、y,either a VAT or a sales tax should be levied at a standard rate on all final consumption.In other words,consumption tax collections should be equal to the amount of final consumption in the economy times the rate of the sales tax or VAT.However,many countries consumption tax bases are far from thi
217、s ideal.Many countries exempt certain goods and services from the VAT or tax them at a reduced rate,requiring a higher standard rate than would otherwise be necessary,or apply the tax to business inputs,increasing the cost of capital.VAT/Sales Tax Exemption ThresholdMost OECD countries set exemption
218、 thresholds for their VATs/sales taxes.If a business is below a certain annual revenue threshold,it is not required to participate in the VAT system.This means that small businessesunlike businesses above that thresholddo not collect VAT on their outputs sold to customers but also cannot receive a r
219、efund for VAT paid on business inputs.53 Although exempting very small businesses saves administrative and compliance costs,unnecessarily large thresholds create a distortion by favoring smaller businesses over larger ones.Countries receive better scores for lower thresholds.The United Kingdom recei
220、ves the worst thresh-old score with a VAT threshold of$123,188.54 Seven countries receive the best scores for having no general VAT/sales tax exemption threshold(Chile,Colombia,Costa Rica,Mexico,Spain,Turkey,and the United States).The average across the OECD countries that have a VAT threshold is ap
221、proximately$57,500.55Consumption Tax Base as a Percentage of Total ConsumptionOne way to measure a countrys VAT base is the VAT revenue ratio.This ratio looks at the difference between the VAT revenue actually collected and collectable VAT revenue under a VAT that was applied at the standard rate on
222、 all final consumption.The difference in actual and potential VAT revenues is due to 1)policy choices to exempt certain goods and services from VAT or tax them at a reduced rate,and 2)lacking VAT compliance.5652 OECD,“Taxes on Consumption:Value Added Tax/Goods and Services Tax(VAT/GST)(1976-2021):VA
223、T/GST:standard and any reduced rates(2022),”http:/http:/oecd.org/tax/tax-policy/tax-database/oecd.org/tax/tax-policy/tax-database/.The U.S.sales tax rate is the average of all U.S.state sales tax rates(weighted by population).See Janelle Fritts,“State and Local Sales Tax Rates,2023,”Tax Foundation,F
224、eb.7,2023,https:/taxfoundation.org/2023-sales-taxes/https:/taxfoundation.org/2023-sales-taxes/.The Canadian consumption tax rate is the average of all Canadian province tax rates(weighted by population).See Retail Council of Canada,“Sales Tax Rates by Province,”https:/retailcouncil.https:/retailcoun
225、cil.org/resources/quick-facts/sales-tax-rates-by-province/org/resources/quick-facts/sales-tax-rates-by-province/.53 The VAT exemption thresholds listed in the Index generally apply to resident businesses.Nonresident businesses might face different thresholds.54 Measured in U.S.dollars(purchasing pow
226、er parity,PPP).55 OECD,“Taxes on Consumption:Value Added Tax/Goods and Services Tax(VAT/GST)(1976-2019):VAT/GST:Registration/Collection Thresholds(2021).”56 The same concept can be applied to retail sales taxes.TAX FOUNDATION|23For example,if final consumption in a country is$100 and a country levie
227、s a 10 percent VAT on all goods and services,a pure base would raise$10.Revenue collection below$10 reflects either a high number of exemptions or reduced rates built into the tax code or low levels of compliance(or both).The base is measured as a ratio of the pure base collections to the actual col
228、lections.Countries with tax base ratios near 1signifying a pure tax basescore better.Under this measure,New Zealand has the broadest tax base covering approximately 100 percent of total consumption.Luxembourg and Estonia follow with ratios of 0.86 and 0.78,respectively.Greece(0.36),the United States
229、(0.36),and Colombia(0.37)have the worst ratios.The OECD average tax base ratio is 0.58.57Property TaxesProperty taxes are government levies on the assets of an individual or business.The methods and intervals of collection vary widely among the types of property taxes.Estate and inheritance taxes,fo
230、r example,are due upon the death of an individual and the passing of his or her estate to an heir,respec-tively.Taxes on real property,on the other hand,are paid at set intervalsoften annuallyon the value of taxable property such as land and real estate.Many types of property taxes are highly distor
231、tive and add significant complexity for taxpayers.Estate and inheritance taxes create disincentives against additional work and saving,which damages pro-ductivity and output.Financial transaction taxes increase the cost of capital,which limits the flow of investment capital to its most efficient all
232、ocations.58 Taxes on wealth limit the capital available in the economy,which damages long-term economic growth and innovation.59Sound tax policy minimizes economic distortions.Except for taxes on land,most property taxes in-crease economic distortions and have long-term negative effects on the econo
233、my and its productivity.Table 6 shows the ranks and scores for the property taxes category and each of its subcategories,which are real property taxes,wealth and eptate taxes,and capital and transaction taxes.Real Property TaxesReal property taxes are levied on a recurrent basis on taxable property.
234、For example,in most states or municipalities in the United States,businesses and individuals pay a property tax based on the value of their real property.57 The VAT Revenue Ratio was calculated using the following formula in line with the OECDs VRR calculations:VRR=VAT Revenue/(Consumption-VAT reven
235、ue)x standard VAT rate.The calculations are based on OECD,“Consumption Tax Trends 2018,”Dec.5,2018,https:/read.oecd-ilibrary.org/taxation/https:/read.oecd-ilibrary.org/taxation/consumption-tax-trends-2018_ctt-2018-en#page92consumption-tax-trends-2018_ctt-2018-en#page92.58 Colin Miller and Anna Tyger
236、,“The Impact of a Financial Transaction Tax,”Tax Foundation,Jan.23,2020,https:/taxfoundation.org/financial-transaction-tax/https:/taxfoundation.org/financial-transaction-tax/.59 Huaqun Li and Karl Smith,“Analysis of Sen.Warren and Sen.Sanders Wealth Tax Plans,”Tax Foundation,Jan.27,2020,https:/taxfo
237、undation.org/wealth-https:/taxfoundation.org/wealth-tax/tax/.24|INTERNATIONAL TAX COMPETITIVENESS INDEXTable 6.Property TaxesCountryOverall RankOverall ScoreReal Property Taxes RankReal Property Taxes ScoreWealth/Estate Taxes RankWealth/Estate Taxes ScoreCapital/Transaction Taxes RankCapital/Transac
238、tion Taxes ScoreAustralia479.4282.61100.01463.9Austria1662.93047.41100.01463.9Belgium3045.12361.83449.42548.1Canada2552.93338.81100.02946.6Chile1367.41965.11270.9584.8Colombia2748.22063.83257.23246.1Costa Rica973.61270.71100.02263.4Czech Republic676.7573.91270.91100.0Denmark1862.32458.41270.9779.1Es
239、tonia1100.01100.01100.01100.0Finland1961.01667.31270.92263.4France3340.72752.33449.42548.1Germany1268.2971.11270.9779.1Greece2847.12850.01270.92946.6Hungary2357.01370.01270.92548.1Iceland3440.23822.61270.91463.9Ireland1762.71071.01270.92263.4Israel1168.62948.41100.0779.1Italy3831.83635.03449.43246.1
240、Japan2650.32556.61270.92946.6Korea3241.03437.41270.93246.1Latvia577.11766.51100.0779.1Lithuania775.31170.91270.91100.0Luxembourg1464.9375.01270.91463.9Mexico280.5673.71100.0779.1Netherlands2159.22163.01270.91463.9New Zealand874.63146.01100.01100.0Norway1563.1871.33257.2779.1Poland3143.92654.61270.93
241、730.8Portugal2060.61866.01270.91463.9Slovak Republic380.41469.51100.0584.8Slovenia2455.03242.91270.9779.1Spain3736.62262.43728.03246.1Sweden1072.51567.91100.01463.9Switzerland3636.9474.23728.03730.8Turkey2257.7772.91270.93246.1United Kingdom3540.13733.91270.92548.1United States2946.13535.11270.91463
242、.9TAX FOUNDATION|25Structure of Property TaxesAlthough taxes on real property are generally an efficient way to raise revenue,some real property taxes can become direct taxes on capital.This occurs when a tax applies to more than just the value of the land itself,such as the buildings or structures
243、on the land.This increases the cost of capital,discourages the formation of capital(such as the building of structures),and can negatively impact business location decisions.When a business wants to improve its property through renovations or expanding a factory,a prop-erty tax that applies to both
244、the land and those improvements directly increases the costs of those improvements.However,a tax that just applies to the value of the land would not create an incentive against property improvements.Countries that tax the value of structures and buildings as well as land receive the worst scores on
245、 the ITCI.Some countries mitigate this treatment with a deduction for property taxes paid against corpo-rate taxable income.These countries receive slightly better scores.Countries receive the best possible score if they have either no property tax or only tax land.Every OECD country except Australi
246、a and Estonia applies its property tax to all capital(land and build-ings/structures).60 These countries only tax the value of land,which excludes the value of any build-ings or structures on the land.Of the 35 OECD countries with taxes on all capital,30 allow for a deduc-tion against corporate taxa
247、ble income.61Real Property Tax CollectionsThe variable“property tax collections”measures property tax revenues as a percent of a countrys private capital stock.Higher tax burdens,specifically when on capital,tend to slow investment,which damages productivity and economic growth.Countries with a high
248、 level of collections as a percent of their capital stock place a larger tax burden on taxpayers and receive a worse score on the ITCI.Seven countries in the OECD have property tax col-lections that are greater than 1 percent of the private capital stock.Leading this group are the United Kingdom(1.8
249、 percent),the United States(1.7 percent),and Canada(1.6 percent).Austria,the Czech Republic,Luxembourg,Mexico,and Switzerland have a real property tax burden of below 0.1 percent of the private capital stock.6260 When the property tax base is set at the sub-national level,the Index evaluates the mos
250、t representative model.For example,in Germany,some states tie property taxes only to the area,location,or value of the land.However,most states use the federal model which also taxes to the value of buildings.See https:/grundsteuerreform.de/.https:/grundsteuerreform.de/.61 Deloitte,“Tax Guides and H
251、ighlights,”https:/ Tax,“Country Guides”;and PwC,“Worldwide Tax Summaries:Corpo-rate-Income Determination.”62 Authors calculations using OECD,“OECD Revenue Statistics-OECD Countries:Comparative tables,”updated December 2021,https:/stats.oecd.org/index.https:/stats.oecd.org/index.aspx?DataSetCode=reva
252、spx?DataSetCode=rev;and IMF,“IMF Investment and Capital Stock Dataset,1960-2019,”May 2021,https:/infrastructuregovern.imf.org/content/dam/https:/infrastructuregovern.imf.org/content/dam/PIMA/Knowledge-Hub/dataset/IMFInvestmentandCapitalStockDataset2021.xlsxPIMA/Knowledge-Hub/dataset/IMFInvestmentand
253、CapitalStockDataset2021.xlsx.26|INTERNATIONAL TAX COMPETITIVENESS INDEXWealth and Estate TaxesMany countries also levy property taxes on an individuals wealth.These taxes can take the form of estate or inheritance taxes that are levied either upon an individuals estate at death or upon the assets tr
254、ansferred from the decedents estate to the heirs.These taxes can also take the form of a recurring tax on an individuals wealth.Estate and inheritance taxes limit resources available for investment or production and reduce the incentive to save and invest.63 This reduction in investment adversely af
255、-fects economic growth.Moreover,these taxes,the estate and inheritance tax especially,can be avoid-ed with certain planning techniques,which makes the tax an inefficient and unnecessarily complex source of revenue.Wealth TaxesIn addition to estate and inheritance taxes,some countries levy wealth tax
256、es.Wealth taxes are often low-rate,progressive taxes on an individuals or familys assets or the assets of a corporation.Unlike estate taxes,wealth taxes are levied on an annual basis.While some countries levy a comprehensive tax on net wealth,others limit their wealth taxes to selected assets,such a
257、s security accounts,finan-cial assets held abroad,or real estate.Four countries levy net wealth taxes,namely Colombia,Norway,Spain,and Switzerland.Belgium,France,and Italy impose wealth taxes on selected assets.Countries with no type of wealth tax receive the best score,countries with wealth taxes o
258、n selected assets receive an average score,and countries with net wealth taxes receive the lowest score.64Estate,Inheritance,and Gift TaxesEstate taxes are levied on the value of an individuals taxable estate at the time of death and are paid by the estate itself,while inheritance taxes are levied o
259、n the value of assets transferred to an individ-uals heirs upon death and are paid by the heirs(not the estate of the deceased individual).Gift taxes are taxes on the transfer of property(cash,stocks,and other property)that are typically used to pre-vent individuals from circumventing estate and inh
260、eritance taxes by gifting away their assets before death.Rates,exemption levels,and rules vary substantially among countries.For example,the United States levies a top rate of 40 percent on estates but has an exemption level of$12.92 million.Belgiums Brus-sels capital region,on the other hand,has an
261、 inheritance tax with an exemption of EUR 15,000(USD 14,270)65 and a variety of tax rates depending on who receives assets from the estate and what the assets are.6663 Jared Walczak,“State Inheritance and Estate Taxes:Rates,Economic Implications,and the Return of Interstate Competition,”Tax Foundati
262、on,July 17,2017,https:/taxfoundation.org/state-inheritance-estate-taxes-economic-implications/#_ftn84https:/taxfoundation.org/state-inheritance-estate-taxes-economic-implications/#_ftn84.64 Bloomberg Tax,“Country Guides”;and EY,“Worldwide Estate and Inheritance Tax Guide 2022,”https:/ The average 20
263、22 EUR-USD exchange rate was used.See IRS,“Yearly Average Currency Exchange Rates.”66 EY,“Worldwide Estate and Inheritance Tax Guide 2022.”TAX FOUNDATION|27Estate,inheritance,and gift taxes create significant compliance costs for taxpayers while raising insignificant amounts of revenue.According to
264、OECD data for 2021,estate,inheritance,and gift taxes across the OECD raised an average of 0.15 percent of GDP in tax revenue,with the highest amount raised being only 0.74 percent of GDP in France,despite Frances top inheritance tax rate of up to 60 percent in some cases.67Countries without these ta
265、xes score better than countries that have them.Thirteen countries in the OECD have no estate,inheritance,or gift taxes:Australia,Austria,Canada,Colombia,Costa Rica,Estonia,Israel,Latvia,Mexico,New Zealand,Norway,Slovakia,and Sweden.All others levy an estate,inheritance,or gift tax.68Capital,Wealth,a
266、nd Property Taxes on BusinessesThere are various taxes countries levy on the assets and fixed capital of businesses.These include taxes on the transfer of real property,taxes on the net assets of businesses,taxes on raising capital,and taxes on financial transactions.These taxes contribute directly
267、to the cost of capital for business-es and reduce the after-tax rate of return on investment.Property Transfer TaxesProperty transfer taxes are taxes on the transfer of real property(real estate,land improvements,ma-chinery)from one person or firm to another.A common example in the United States is
268、the real estate transfer tax,which is commonly levied at the state level on the value of homes that are purchased by individuals.69 Property transfer taxes represent a direct tax on capital and increase the cost of purchas-ing property.Countries receive a worse score if they have property transfer t
269、axes.Six OECD countries do not have property transfer taxes:Chile,the Czech Republic,Estonia,Lithuania,New Zealand,and Slovakia.70Corporate Asset TaxesSimilar to wealth taxes,asset taxes are levied on the wealth,or assets,of a business.For instance,Luxembourg levies a 0.5 percent tax on the worldwid
270、e net wealth of nontransparent Luxem-bourg-based companies every year.71 Similarly,cantons in Switzerland levy taxes on the net assets of corporations,varying from 0.001 percent to 0.5 percent of corporate net assets.72 Other countries levy these taxes exclusively on bank assets.Nineteen OECD countr
271、ies have some type of corporate wealth or asset tax.Fourteen of these coun-tries have bank taxes of some type.7367 OECD,“OECD Revenue Statistics-OECD Countries:Comparative tables.”68 Bloomberg Tax,“Country Guides”;EY,“Worldwide Estate and Inheritance Tax Guide 2022”;PwC,“Worldwide Tax Summaries:Indi
272、vidual Taxes Other taxes.”69 Janelle Fritts and Jared Walczak,2023 State Business Tax Climate Index.70 Deloitte,“Tax Guides and Highlights”;Bloomberg Tax,“Country Guides.”71 Luxembourg levies this tax on non-Luxembourg companies as well,but only on wealth held within Luxembourg.See Government of the
273、 Grand Duchy of Luxembourg,“Net wealth tax,”Mar.22,2017,http:/guichet.public.lu/entreprises/en/fiscalite/impots-benefices/impots-divers/impot-fortune/index.htmlhttp:/guichet.public.lu/entreprises/en/fiscalite/impots-benefices/impots-divers/impot-fortune/index.html.72 PwC,“Worldwide Tax Summaries:Cor
274、porate Taxes Other taxes.”73 Bloomberg Tax,“Country Guides-Other Taxes,”and“Country Guides-Special Industries,”https:/ TAX COMPETITIVENESS INDEXCapital DutiesCapital duties are taxes on the issuance of shares of stock.Typically,countries either levy these taxes at very low rates or require a small,f
275、lat fee.For example,Switzerland requires resident companies to pay a 1 percent tax on the issuance of shares of stock.74 These types of taxes increase the cost of capital,limit funds available for investment,and make it more difficult to form businesses.75Countries with capital duties score worse th
276、an countries without them.Ten countries in the OECD levy some type of capital duty.76Financial Transaction TaxesA financial transaction tax is a levy on the sale or transfer of a financial asset.Financial transaction taxes take different forms in different countries.Finland levies a tax of 1.6 perce
277、nt on the transfer of Finnish securities.On the other hand,Poland levies a 1 percent stamp duty on exchanges of property rights based on the transaction value.For transactions on a stock exchange,the tax is the responsibili-ty of the buyer.77Financial transaction taxes impose an additional layer of
278、taxation on the purchase or sale of stocks.Markets run on efficiency,and capital needs to flow quickly to its most economically productive use.A financial transaction tax impedes this process.78The ITCI ranks countries with financial transaction taxes worse than countries without them.Fourteen count
279、ries in the OECD have financial transaction taxes,including France and the United Kingdom,while 24 countries do not impose financial transaction taxes.79Cross-Border Tax RulesIn an increasingly globalized economy,businesses often expand beyond the borders of their home countries to reach customers a
280、nd build supply chains around the world.Countries have defined rules that determine how,or if,corporate income earned in foreign countries is taxed domestically.Cross-border tax rules comprise the systems and regulations that countries apply to those business activities.There has been a growing tren
281、d of moving from worldwide taxation toward a system of territorial taxation,in which a countrys corporate tax is limited to profits earned within its borders.80 In a pure territorial tax system,corporations only pay taxes to the country in which they earn income.Since the 1990s,the number of OECD co
282、untries with worldwide tax systems has dropped from more than 20 to a handful.8174 PwC,“Worldwide Tax Summaries:Corporate Taxes.”75 EUR-Lex,“Council Directive 2008/7/EC,concerning indirect taxes on the raising of capital,”February 2008,http:/eur-lex.europa.eu/legal-content/EN/http:/eur-lex.europa.eu
283、/legal-content/EN/ALL/?uri=CELEX:32008L0007ALL/?uri=CELEX:32008L0007.76 Bloomberg Tax,“Country Guides;”and PwC,“Worldwide Tax Summaries:Corporate Taxes.”77 Ibid.78 Colin Miller and Anna Tyger,“The Impact of a Financial Transaction Tax.”79 Ibid.80 Narine Nersesyan,“Chapter 3:The Current International
284、 Tax Architecture:A Short Primer,”in Corporate Income Taxes under Pressure Why Reform Is Needed and How It Could Be Designed(Washington,D.C.:International Monetary Fund,2021),https:/imf.org/en/Publications/Books/Issues/2021/03/01/Corporate-https:/imf.org/en/Publications/Books/Issues/2021/03/01/Corpo
285、rate-Income-Taxes-under-Pressure-Why-Reform-Is-Needed-and-How-It-Could-Be-Designed-48604Income-Taxes-under-Pressure-Why-Reform-Is-Needed-and-How-It-Could-Be-Designed-48604.81 Ibid.TAX FOUNDATION|29Table 7.Cross-Border RulesCountryOverall RankOverall ScoreDiv/Cap Gains Exemption RankDiv/Cap Gains Exe
286、mption ScoreWithholding Taxes RankWithholding Taxes ScoreTax Treaties RankTax Treaties ScoreAnti-Tax Avoidance RankAnti-Tax Avoidance ScoreAustralia2172.21100.02940.43344.6378.8Austria1676.91100.01658.81273.33039.5Belgium3359.81100.03725.6777.23821.3Canada1578.83169.83238.0577.9378.8Chile3738.03727.
287、93630.73636.8869.7Colombia3639.93646.22150.43723.2960.7Costa Rica3161.61100.01954.03817.3775.8Czech Republic1081.71681.61362.8976.61157.7Denmark2962.01681.62645.42064.83039.5Estonia1180.81681.6391.22655.71157.7Finland2072.71681.61165.32064.82248.6France1479.92877.31756.6294.83039.5Germany687.51597.3
288、1263.4577.91157.7Greece2370.41681.61067.03151.81157.7Hungary396.71100.01100.01769.41157.7Iceland3261.31100.01856.33344.63039.5Ireland3459.23551.52546.12362.91157.7Israel884.81100.03436.92854.41100.0Italy2467.22678.93138.6481.13039.5Japan2564.43074.92349.32263.52248.6Korea2663.83456.52645.4976.62248.
289、6Latvia983.91681.61100.02655.71157.7Lithuania2271.11681.6870.93250.51157.7Luxembourg592.61100.0487.11670.01157.7Mexico3835.53727.93534.62953.83039.5Netherlands495.31100.0487.11175.31157.7New Zealand1973.81100.02249.93541.4378.8Norway1280.72580.7678.51472.02248.6Poland2763.73358.02051.21571.32248.6Po
290、rtugal2863.61681.63238.01965.52248.6Slovak Republic3062.01681.63039.12461.62248.6Slovenia1874.33267.71362.82953.8378.8Spain1776.22678.92448.5777.21157.7Sweden1380.21100.0774.21769.43039.5Switzerland1100.01100.02843.9381.8297.0Turkey786.51100.01562.11372.6960.7United Kingdom297.41100.0967.61100.02248
291、.6United States3550.12976.43725.62558.33039.530|INTERNATIONAL TAX COMPETITIVENESS INDEXAs part of the Tax Cuts and Jobs Act in December 2017,the United States adopted a hybrid interna-tional tax system.Foreign-sourced dividends are now exempt from domestic taxation,but base ero-sion rules are now st
292、ronger and more complex.82 The new U.S.system has three pieces:Global Intangible Low-Tax Income(GILTI),Foreign-Derived Intangible Income(FDII),and the Base Erosion and Anti-Abuse Tax(BEAT).GILTI liability is effectively a 10.5 percent minimum tax on supra-normal returns derived from certain foreign
293、investments earned by U.S.companies.FDII is designed to be a reduced rate on exports of U.S.companies connected to intellectual property located in the U.S.Effectively,FDII earnings are taxed at 13.125 percent.Paired together,GILTI and FDII create a worldwide tax on intangible income.The BEAT is des
294、igned as a 10 percent minimum tax(initially 5 percent in 2018)on U.S.-based multina-tionals with gross receipts of$500 million or more.The tax applies to payments by those large multi-nationals if payments to CFCs exceed 3 percent(2 percent for certain financial firms)of total deduc-tions taken by a
295、 corporation.The proposal for a global minimum tax will dramatically change the landscape for cross-border tax rules.Many OECD countries are proceeding to implement the global minimum tax rules,including the 27 EU Member States,the United Kingdom,Japan,Korea,and Australia.Nonetheless,those rules wil
296、l not be in place until 2024 at the earliest.83 Table 7 displays the overall rank and score for the Cross-Border Tax Rules category as well as the ranks and scores for the subcategorieswhich include a category for dividends and capital gains ex-emptions(territoriality),withholding taxes,tax treaties
297、,and anti-tax avoidance rules.TerritorialityUnder a territorial tax system,multinational businesses pay taxes to the countries in which they earn their income.This means that territorial tax regimes do not generally tax corporate income companies earn in foreign countries.A worldwide tax systemsuch
298、as the system previously employed by the United Statesrequires companies to pay taxes on worldwide income,regardless of where it is earned.Several countriesas is now the case in the U.S.operate some sort of hybrid system.Countries enact territorial tax systems through so-called“participation exempti
299、ons,”which include full or partial exemptions for foreign-earned dividend or capital gains income(or both).Participation exemptions eliminate the additional domestic tax on foreign income by allowing companies to ig-noresome or allforeign income when calculating their taxable income.A pure territori
300、al system fully exempts foreign-sourced dividend and capital gains income.Companies based in countries with worldwide tax systems are at a competitive disadvantage because they face potentially higher levels of taxation than their competitors based in countries with territorial tax systems.Additiona
301、lly,taxes on repatriated corporate income in a companys home country in-crease complexity and discourage investment and production.8482 Kyle Pomerleau,“A Hybrid Approach:The Treatment of Foreign Profits under the Tax Cuts and Jobs Act,”Tax Foundation,May 3,2018,https:/taxfoundation.https:/taxfoundat
302、ion.org/treatment-foreign-profits-tax-cuts-jobs-act/org/treatment-foreign-profits-tax-cuts-jobs-act/.83 Daniel Bunn and Sean Bray,“Whats in the New Global Tax Agreement?”Tax Foundation,Jun.13,2023,https:/taxfoundation.org/global-tax-agreement/https:/taxfoundation.org/global-tax-agreement/.84 Kyle Po
303、merleau,Daniel Bunn,and Thomas Locher,“Anti-Base Erosion Provisions and Territorial Tax Systems in OECD Countries,”Tax Foundation,Jul.7,2021,https:/taxfoundation.org/anti-base-erosion-territorial-tax-systemshttps:/taxfoundation.org/anti-base-erosion-territorial-tax-systems.TAX FOUNDATION|31The terri
304、toriality of a tax system is measured by the degree to which a country exempts for-eign-sourced income through dividend and capital gains exemptions.Dividends Received ExemptionWhen a foreign subsidiary of a parent company earns income,it pays corporate income tax to the country in which it does bus
305、iness.After paying the tax,the subsidiary can either reinvest its profits into ongoing activities(by purchasing equipment or hiring more workers,for example)or it can distribute its profits back to the parent company in the form of dividends.Under a worldwide tax system,the dividends received by a p
306、arent company are taxed again by the parent companys home country,minus a tax credit for taxes already paid on that income.Under a pure territorial system,those dividends are exempt from taxation in the parents country.Countries receive a score based on the level of dividend exemption they provide.C
307、ountries with no dividend exemption(worldwide tax systems)receive the worst score.Twenty-six OECD countries exempt all foreign-sourced dividends received by parent companies from domestic taxation.Eight countries allow 95 percent or 97 percent of foreign-sourced dividends to be exempt from domestic
308、taxation.Four OECD countries have a worldwide or hybrid tax system that gen-erally does not exempt foreign-sourced dividends from domestic taxation.85Branch or Subsidiary Capital Gains ExclusionAnother feature of an international tax system is its treatment of capital gains earned through for-eign i
309、nvestments.When a parent company invests in a foreign subsidiary(i.e.,purchases shares in a foreign subsidiary),it can realize a capital gain on that investment if it later divests the asset.A territo-rial tax system would exempt these gains from domestic taxation,as they are derived from overseas a
310、ctivity.Taxing foreign-sourced capital gains income at domestic tax rates can discourage saving and invest-ment.Countries that exempt foreign-sourced capital gains from domestic taxation receive a better score on the ITCI.Foreign-sourced capital gains are fully excluded from domestic taxation in 25
311、OECD coun-tries.Six countries partially exclude foreign-sourced capital gains.Seven countries do not exclude foreign-sourced capital gains income from domestic taxation.86Restrictions on Eligible CountriesAn ideal territorial system would only concern itself with the profits earned within the home c
312、ountrys borders.However,many countries have restrictions on their territorial systems that determine when a business dividends or capital gains received from foreign subsidiaries are exempt from domestic tax.85 Deloitte,“Tax Guides and Highlights 2022”;Bloomberg Tax,“Country Guide”;EY,“Worldwide Cor
313、porate Tax Guide 2021”;and PwC,“Worldwide Tax Summa-ries.”86 Ibid.32|INTERNATIONAL TAX COMPETITIVENESS INDEXSome countries treat foreign corporate income differently depending on the country in which the foreign income was earned.For example,several countries restrict their territorial systems based
314、 on a“blacklist”of countries that do not follow certain requirements.Among EU countries,it is common to restrict the participation exemption to member states of the European Economic Area.The eligibility rules create additional complexity for companies and are often established in an arbi-trary mann
315、er.Portugal,for instance,limits exemptions for foreign-sourced dividends and capital gains to those earned in countries that are not listed as a tax haven and that impose an income tax listed in the EU parent-subsidiary directive or have an income tax equal to at least 60 percent of the Portuguese c
316、orporate tax rate.87 Italy,which normally allows a 95 percent tax exemption for foreign-sourced divi-dends paid to Italian shareholders,does not allow the exemption if the income was earned in a subsid-iary located in a blacklisted country,unless evidence that an adequate level of taxation was borne
317、 by the foreign entity can be provided.88In the OECD,20 of 35 countries that provide participation exemptions place restrictions on whether they exempt foreign-sourced income from domestic taxation based on the source country of the in-come.89 Countries that have these restrictions on their territor
318、ial tax systems receive a worse score on the ITCI.Withholding TaxesWhen firms pay dividends,interest,and royalties to foreign investors or businesses,governments often require those firms to withhold a certain portion to pay as tax.For example,the United States requires businesses to withhold a maxi
319、mum 30 percent tax on dividends,interest,and royalty payments to for-eign individuals unless a tax treaty provides otherwise.These taxes make investment more costly both for investors,who will receive a lower return on divi-dends,and for firms,that must pay a higher amount in interest or royalty pay
320、ments to compensate for the cost of the withholding taxes.These taxes also reduce funds available for investment and produc-tion and increase the cost of capital.Countries with higher withholding tax rates on dividends,interest,and royalties score worse in the ITCI.Dividends,interest,and royalties f
321、rom these countries do not always face the same tax rate as when distributed to domestic shareholders.Tax treaties between countries either reduce or eliminate with-holding taxes.Chile and Switzerland levy the highest dividend and interest withholding rates,requiring firms to with-hold 35 percent of
322、 a dividend or interest payment paid to foreign entities or persons.Meanwhile,Esto-nia,Hungary,and Latvia do not levy withholding taxes on dividends or interest payments.87 Deloitte,“Tax Guides and Highlights Portugal Highlights 2023,”https:/ Deloitte,“Tax Guides and Highlights Italy Highlights 2023
323、,”https:/ Deloitte,“Tax Guides and Highlights 2023”;Bloomberg Tax,“Country Guide”;EY,“Worldwide Corporate Tax Guide 2022”;and PwC,“Worldwide Tax Summa-ries.”TAX FOUNDATION|33For royalties,Mexico requires firms to retain the highest amount,at 35 percent,followed by Australia,Belgium,and the United St
324、ates,at 30 percent.Hungary,Latvia,Luxembourg,the Netherlands,Norway,Sweden,and Switzerland do not require companies to retain any amount of royalties for withholding tax purposes.90Tax Treaty NetworkTax treaties align many tax laws between two countries and attempt to reduce double taxation,par-ticu
325、larly by reducing or eliminating withholding taxes between the countries.Countries with a greater number of partners in their tax treaty network have more attractive tax regimes for foreign investment and receive a better score than countries with fewer treaties.The United Kingdom has the broadest n
326、etwork of tax treaties(130 countries)and thus receives the best score.Costa Rica receives the worst score,with a treaty network of only three countries.Across the OECD,the average size of a tax treaty network is 74 countries.91Anti-Avoidance RulesAnti-avoidance rules seek to prevent corporations fro
327、m minimizing their tax liability through aggres-sive tax planning.These rules can take several forms,such as rules for controlled foreign corporations(CFC rules),thin capitalization rules,and diverted profits taxes.Anti-avoidance rules can have the effect of making countries with uncompetitive tax s
328、tructures even less competitive,as these rules can add significant complexity.92 Controlled Foreign Corporation(CFC)RulesCFC rules are intended to prevent corporations from shifting their pretax profits from a high-tax coun-try to a low-tax country by using highly mobile forms of income.CFC rules ar
329、e generally applied in mul-tiple steps.First,they determine whether a foreign subsidiary is deemed a“controlled foreign corpora-tion”for tax purposes.Second,if a foreign entity is deemed“controlled,”there is an applicability test to determine whether the CFC rules applygenerally through an income te
330、st,a predefined minimum tax rate,or a black/white list for countries.Third,if both tests are passed,the CFC rules subject the foreign corporations passive income(rent,royalties,interest)and sometimes active income to the tax rate of the home country of the subsidiarys parent corporation.In the Unite
331、d States,CFC rules are called Subpart F rules,and the recently adopted GILTI regime is an additional type of CFC rule.GILTI is treated separately by the Index because it operates as a minimum tax on foreign earnings that uses a formula to assess tax liability rather than standard distinctions of act
332、ive or passive income.90 Deloitte,“Domestic rates:Withholding tax,”https:/ EY,“Worldwide Corporate Tax Guide:2022.”The source may not include all active tax treaties,potentially underestimating the scope of tax treaty networks.Tax treaties with former countries,such as the USSR,Yugoslavia,and Czecho
333、slovakia,are not counted as one.Every country the treaty applies to is counted individually.92 Thomas Hoppe,Deborah Schanz,Susann Sturm,and Caren Sureth-Sloane,“The Tax Complexity Index A Survey-Based Country Measure of Tax Code and Framework Complexity,”TRR 266 Accounting for Transparency Working Paper Series No.5,WU International Taxation Research Paper Series No.2019-06,Sept.16,2020,https:/ TAX