A new report on tax competitiveness across Europe has revealed which countries are making significant gains while others continue to struggle.
As governments seek to balance economic growth and public finances, the rankings offer a fresh perspective on which nations are leading the charge and which are falling behind.
Tax Foundation report
While certain countries have improved their standings, others remain stagnant. The UK and Germany, for instance, have made strides, with both nations praised for offering generous allowances for corporate investment in equipment. As Euronews reported, Germany’s efforts to boost business productivity through tax breaks have helped it surge forward in the rankings.
In contrast, Italy has been singled out for its complex property taxes, leaving it at the bottom of the European table, just behind France.
As European economies continue to recover from the pandemic and the energy crisis, the question of how to balance competitiveness with the need for public revenue remains critical. Governments are working to attract business investment, but fears of a “race to the bottom” persist. With digital businesses able to shift operations easily, countries may feel pressured to lower tax rates to stay competitive, risking long-term sustainability.
The Organisation for Economic Co-operation and Development (OECD) has stepped in, encouraging a global minimum corporate tax rate of 15 per cent. This aims to prevent multinational companies from taking advantage of low-tax jurisdictions, a practice brought to light in recent European Union court rulings, including Ireland’s concession to Apple, which allowed the tech giant to pay just 0.005 per cent in taxes on some profits.
Which European country takes the top spot in tax competitiveness?
Estonia continues to dominate the rankings for the 11th year in a row, thanks to its simple and competitive tax code. The Baltic state’s 20 per cent flat rate on both corporate and individual income, combined with a property tax focused on land value rather than investment, has made it an attractive destination for businesses and investors alike.
As the Tax Foundation report (cited by Euronews) explains, “Capital is highly mobile. Businesses can choose to invest in any number of countries throughout the world to find the highest rate of return.”
Tax competitiveness and the impact on business
These rankings provide valuable insights into which countries offer the best environments for both personal finances and business investment. While Estonia remains a leading option, countries like Germany and the UK are making significant improvements. Meanwhile, Italy and France face challenges in reforming their tax systems to foster economic growth. The ongoing competition between countries could shape the future of business and investment across the continent.
