The European Tax Analyzer
Selected Results of Tax Burdens Calculated with the European Tax Analyzer:
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Figure 1 shows the effective tax burden of a representative corporation with balance sheet and profit relations typical for a medium-sized company of the manufacturing industry in Germany. Considering a calculation period of ten years, the effective tax burden on the corporation level amounts to 2.1 mill. € in Germany. Compared to Germany, the company.s tax burden in the United Kingdom (-38,6 %) and the Netherlands (-18,8 %) is significantly lower. In contrast, a tax assessment in France causes a considerable additional tax burden of 569 thousand € (+26,5%). Only in comparison with the US (-1,5%) the tax burden is nearly equal to Germany. As a result, Germany ranks second to last in an international comparison regarding the tax burden at company level.
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Even if the shareholder level is included in the analysis, the ranking does not change from the German perspective. Nevertheless, some differences in the tax burdens result. While the disadvantages of Germany compared to Great Britain (-23,1%) and the Netherlands (-5,4%) in part are significantly reduced, so does the advantage as well compared to France (+17,1%) decrease slightly. When taking the shareholder level into account, the German disadvantage over the US (-6,3%) raises to 185 thousand €. Besides this, the ranking of the countries changes. For example the Netherlands which took second place at the company level, rank only third after the US when also considering the shareholder level.
Figure 1: Tax structures for a representative corporation of the manufacturing industry in Germany, France, United Kingdom, the Netherlands and the US (as the law stands in 2003)
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However, the differences in the tax burden are always the result of the given input data. Therefore, they should not be generalized. The effective tax burden depends on the specific economic data of a corporation which is influenced by the national tax systems, the kinds of taxes, the tax bases, and the tax rates. In consequence of the substantial differences in the countries. tax structure, the differences in the effective tax burden vary between the countries when comparing selected industries. In order to compute meaningful results and to investigate the impact of alternative weights for assets, source of financing etc. the tax burden of ten different branches of industry was calculated and compared.
Figure 2: Comparison of differences in tax burden for selected industries from German point of view
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In an international comparison the differences in the tax burden which arise in the observed industries deviate in part substantially from the base case (see Figure 2). These differences have multiple reasons. The highest proportion of profit taxes exists in Germany. That means, the worse the profit situation of a company is, the larger is the relative advantage in comparison to countries with a low level of profit taxes. As a result, the situation for the industries transport and building seems substantially more favourable from the German point of view, especially in comparison with France. This is caused by a relatively poor profitability of these companies and the structural deficits of the French tax system. In the case of the service industry, it is the high profitability that determines the deterioration in Germany. Concluding, the analysis of the industrial sector confirms the results of the base case. Considering present law, France shows the highest effective tax burdens on the company level followed by Germany, whereas the tax burdens in the United Kingdom and the Netherlands are comparatively low. In comparison with the US, the tax burdens are in part slightly higher, in part slightly lower.
tst/mgw 12.01.2005
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