Estonia Becomes the Country with the Most Competitive Tax System in 2024

The Tax Foundation released the International Tax Competitiveness Index, which analyzes a number of countries with the most competitive tax systems in the world.

The countries analyzed in this index are limited to the 38 members of the Organisation for Economic Co-operation and Development (OECD), most of which are developed countries.

In 2024, Estonia scored the highest index, namely 100 points on a scale of 0-100. The Tax Foundation states that Estonia has maintained this position for 11 consecutive years, as its tax system is the best among OECD countries.

According to The Tax Foundation, this achievement is driven by four advantages in its tax system. First, the country has a corporate income tax rate of 20% that is only levied on distributed profits.

Second, the flat personal income tax of 20% does not apply to personal dividend income.

Third, property tax is only applied to the value of land, not to the value of property or capital. Lastly, Estonia has a territorial tax system that exempts 100% of foreign profits earned by domestic companies from domestic taxation with few restrictions.

In The Tax Foundation's view, this approach can create a tax environment that supports business and economic growth.

“Although Estonia’s tax system is the most competitive in the OECD, other top-ranked countries also score highly due to advantages in one or more key tax categories,” said The Tax Foundation.

Next are Latvia, New Zealand, Switzerland, and Slovakia in the top 10 list. Here is the complete list:

1. Estonia: 100 points

2. Latvia: 92.2 points

3. New Zealand: 84.2 points

4. Switzerland: 83.6 points

5. Lithuania: 79.5 points

6. Luxembourg: 78.8 points

7. Hungary: 77.5 points

8. Czech Republic: 77.3 points

9. Slovak Republic: 76.5 points

10. Israel: 76.4 points.

This research measures two main aspects of tax policy: competitiveness and neutrality. The five types of taxes analyzed are corporate tax, individual tax, consumption tax, property tax, and cross-border tax.