Tax revenues play a vital role in funding public services. In 2023, the overall tax-to-gross domestic product (GDP) ratio within the EU was 40.0%, according to Eurostat.
However, tax policies and rates vary widely among European countries due to their differing economic priorities and social models.
The Tax Foundation’s International Tax Competitiveness Index (ITCI) compares how different countries design their tax systems, and the two main factors it looks at are competitiveness and neutrality.
A competitive tax system keeps marginal tax rates low to encourage investment and economic growth, while a neutral system aims to raise the most revenue with the fewest economic distortions.
Better ranking does not always go hand in hand with lower tax rates.
“Countries can improve their tax structure without losin
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