Globalisation has led eDiscovery businesses to operate across multiple jurisdictions, and understanding the intricate tax landscape becomes a cornerstone of their strategic planning.
Emerging Europe, with its diverse economies and evolving tax systems, offers a unique landscape for eDiscovery businesses. The International Tax Competitiveness Index (ITCI) provides a comprehensive analysis of tax policies across the globe, with particular emphasis on the OECD countries.
This article dives deep into the ITCI, highlighting its relevance to eDiscovery businesses considering expansion into emerging Europe, a region teeming with opportunities and challenges. By offering insights into countries like Estonia, which consistently ranks first on the ITCI, this piece guides eDiscovery professionals on strategic investment and expansion decisions in the region.
Emerging Europe and the ITCI: A comprehensive overview
The International Tax Competitiveness Index (ITCI), published annually by the Tax Foundation since 2014, ranks OECD countries based on their tax systems’ capacity to foster sustainable economic growth and investment.
The ITCI evaluates over 40 variables across five tax categories, offering a 360-degree view of global tax policies. This becomes particularly pertinent for businesses considering the vibrant and diverse economic landscape of emerging Europe.
The eDiscovery landscape in emerging Europe
Globalisation has led eDiscovery businesses to operate across multiple jurisdictions, and understanding the intricate tax landscape becomes a cornerstone of their strategic planning. The ITCI serves as an essential tool, shedding light on tax policies and their implications for business competitiveness and growth.
Estonia, an exemplar in emerging Europe, consistently ranks first on the ITCI. Its corporate cash flow tax and broad VAT set benchmarks for tax policies that can enhance business competitiveness in the region. As eDiscovery firms contemplate their European strategies, countries like Estonia, with its advanced tax system, emerge as key contenders.
Insights from the 2023 ITCI Rankings
Estonia’s continued dominance on the ITCI, retaining the top spot for the 10th consecutive year, underscores its favourable tax climate. Key factors driving Estonia’s #1 ranking include its corporate cash-flow tax, which only taxes distributed business profits, and its broad value-added tax (VAT) base. This positions Estonia as an attractive destination for eDiscovery firms.
Following Estonia is Latvia, which has adopted a similar cash-flow corporate tax system. Other notable mentions include New Zealand, Switzerland, and the Czech Republic, which complete the top five nations. However, not all countries experienced positive shifts. The United Kingdom, for instance, slid from 27th to 30th place in the 2023 rankings after phasing out full expensing for capital investments and increasing its corporate tax rate.
Emerging Europe: Key tax insights for eDiscovery firms
Corporate Tax Rates: The average corporate tax rate among OECD nations in 2023 stands at 23.6 per cent, with Hungary boasting a low rate of nine per cent and Colombia at the higher end with 35 per cent.
Individual Income and Payroll Taxes: The average top personal income tax rate across the OECD is 42.5 per cent, ranging from Estonia’s 21.6 per cent to Italy’s 57.3 per cent.
Consumption Tax Design: New Zealand has the broadest VAT base, while Greece lags, reflecting exemptions and multiple rates. Chile and Mexico have the lowest VAT rates in the OECD at 19 per cent, while Hungary levies the highest at 27 per cent.
Property Taxes: Estonia stands out as the only OECD nation not levying any taxes on property except land value. In contrast, the United Kingdom and the United States have the highest property tax burdens.
Cross-Border Rules: 31 OECD nations have adopted territorial tax systems, with rates varying from zero per cent in Hungary, Latvia, and the Netherlands to 35 per cent in Chile and Switzerland.
Explore. Evaluate. Engage.
Emerging Europe, with its dynamic tax landscape, beckons eDiscovery firms to explore, evaluate, and engage.
The 2023 International Tax Competitiveness Index serves as a compass, guiding firms through the intricacies of the region’s tax systems. By leveraging the insights from the ITCI, eDiscovery businesses can strategise their expansion, ensuring their success in this promising region.
For a more detailed analysis, professionals are encouraged to access the complete ITCI report by the Tax Foundation.
This content has been produced in collaboration with a partner organisation through our Global Visibility Programme. Our programme helps companies boost their digital presence and strengthen the thought leadership of their experts. Find out more here.