Latvia has the second most competitive tax system of the Organization for Economic Co-operation and Development (OECD) among Member States, according to the latest International Tax Competitiveness Index compiled by the US Tax Foundation.
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In the overall tax competitiveness rating, Latvia ranks second, lagging only behind Estonia.
In terms of individual tax groups, Latvia ranks 1st in the business tax index, the competitiveness of consumption taxes in our country is the 26th highest among 36 OECD member states, Latvia ranks 6th in the property tax index, 5th in the personal tax index, and Latvia in the international tax index. takes the 9th place.
For the seventh year in a row, Estonia has been recognized as the OECD member with the most competitive tax system. It ranks 1st in the property tax and personal tax indicators, 2nd in the business tax indicator, 9th in the consumption tax assessment, but the worst performance – 16th – in the international tax conditions indicator.
The third most competitive tax system among OECD members is New Zealand, followed by Luxembourg, Lithuania, Sweden, the Czech Republic, Austria and Slovakia.
Lithuania ranks 3rd in the business tax indicator, 7th in the personal and property tax indicators, but 23rd in both the international tax conditions indicator and the consumption tax assessment.
Germany is in 15th place, Canada in 18th place, USA in 21st place, Great Britain in 22nd place, Japan in 26th place, Greece in 39th place, and the last place in 36th place is taken by Italy.
The study indicates that three factors contribute to the competitiveness of the Estonian tax system. First, the Estonian business tax system only taxes distributed profits, allowing companies to reinvest their tax-free profits. Secondly, there is a wide range of value added tax (VAT) but, thirdly, property taxes apply only to the value of the land.
Also in Latvia, in the business tax system, only distributed profits are taxed, allowing companies to reinvest their profits without taxes. Companies can also deduct business taxes when calculating taxable income, and Latvia has a relatively efficient system for taxing labor.
Meanwhile, the French tax system has been recognized as the least competitive among OECD member states for the seventh year in a row. The OECD points out that France has one of the highest corporate tax rates in the OECD (32.02%), with high property taxes, annual wealth taxes, a financial transaction tax and a real estate tax. France also has high progressive personal income taxes on both dividend and capital gains.
A year ago, Latvia ranked 3rd in the overall tax competitiveness rating, lagging only behind Estonia and New Zealand.
The International Tax Competitiveness Index assesses how well a country’s tax system promotes sustainable economic growth and investment. The report examines more than 40 tax policy indicators in five categories: corporate income taxes, personal taxes, consumption taxes, property taxes and the treatment of foreign profits.
The OECD is an intergovernmental organization of 36 developing countries. To join an organization, a country must meet four criteria: a like-minded country, a major player, mutual interest and global considerations. However, compliance with these criteria by countries does not guarantee automatic admission to the organization. The decision is made on the basis of the OECD’s strategic interests, geopolitical balance, the individual economic achievements of the candidates, as well as the organisation’s capacity to absorb new countries.
Latvia joined the OECD in 2016, Estonia joined in 2010, and Lithuania became a member of the OECD in 2018.
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