Spain lags behind the OECD in terms of tax competitiveness.

Spain ranks last in tax competitiveness among the countries of the Organisation for Economic Co-operation and Development (OECD).

According to the 2023 International Tax Competitiveness Index (ITCI) compiled by the American Tax Foundation, Spain ranks 31st out of 38 analyzed countries, and among European OECD members, it is the sixth least competitive country in terms of taxes. Following Spain are Italy, France, Portugal, Poland, and Iceland.

According to this year's analysis, Estonia has ranked first in the OECD for tax competitiveness for ten consecutive years. This achievement, according to the Tax Foundation, is explained firstly by Estonia's corporate income tax rate of 20%, which is applied only to distributed profits. Secondly, this Baltic country has a fixed personal income tax rate of 20%, which does not apply to dividends. Additionally, property tax in Estonia is levied only on land value, not on the value of real estate or capital. Finally, as the study notes, "this country has a territorial tax system that exempts 100% of foreign income earned by national corporations from domestic taxes, with few restrictions."

Although Estonia's tax system is the most competitive in the OECD, the systems of other leading countries also receive high marks due to "excellence" in one or more key tax categories (corporate taxes, personal income taxes, consumption taxes, property taxes, and treatment of foreign income). For example, Spain ranks 33rd in corporate taxes, 17th in personal income taxes, 19th in consumption taxes, and 37th in property taxes. Following Estonia in the rankings is Latvia, which recently adopted the Estonian corporate tax system and also has a relatively efficient system for taxing labor income. New Zealand applies a relatively low and flat personal income tax and largely exempts capital gains from taxation (with a maximum combined rate of 39%), has a broad VAT base, and does not impose taxes on inheritance, real estate transactions, or assets and finances, explains the Tax Foundation.

The research from this specialized center on international taxation also highlights Switzerland as one of the most competitive tax countries, as it has a relatively low corporate tax rate (19.7%), a narrow tax base, and partially exempts personal income tax from capital gains taxation. Luxembourg has a broad tax base and a competitive international tax system. At the other end of the list is Colombia, with the least competitive tax system, as it imposes a tax on net wealth, financial transactions, and the highest corporate tax rate of 35%.

The five countries at the bottom of the ranking have combined corporate tax rates above average. Ireland ranks low in the ITCI despite its low corporate tax rate. This is due to high personal income and dividend taxes, as well as a relatively narrow VAT base. Additionally, the five countries with the least competitive ratings have unusually high corporate income tax rates, ranging from 25.8% to 35%. Four out of the five countries with the least competitive ratings have very high income tax thresholds, from 13 to 21 times above the average income.

The report from the Institute of Economic Research on tax competitiveness indicates that over the past five years, the Spanish government has implemented 54 measures aimed at increasing tax and social contribution revenues. "The increase in tax revenues has been so significant that when comparing 2017 with the projected revenues for 2022, one can see a growth of 50.121 billion euros in the income flowing into the state treasury. However, Spain still has the highest primary deficit in the European Union, as the growth in expenditures is occurring at an even faster pace," the text states.

The Institute of Economic Research warns that Spain's tax model is becoming increasingly uncompetitive, and its assessment is particularly negative in two key areas for growth: corporate taxation and taxes on property, inheritance, assets, or corporate assets. "The performance of our personal income tax system is also unsatisfactory, with a poorly rated personal income tax in the rankings. VAT has an average level of tax competitiveness, as does the treatment of international income, but measures to increase revenue in recent years have also affected our position in both categories," the report states.

The IEE concludes that "when comparing the growth of real GDP between 2018 and 2023, which is only 1%, with the growth of state revenues, whose share in economic production is increasing by more than 4 percentage points, a serious problem of tax pressure actually experienced by taxpayers becomes evident." It adds: "It should not be forgotten that, considering the impact of unemployment and the shadow economy, tax pressure in Spain is above the average levels of the OECD and the EU, and furthermore, this tax pressure continues to grow."

To improve tax competitiveness, the IEA calls for "reforming the tax model in line with the best international practices."