Companies pay taxes on profits and capital. Also, under competitive labour markets for highly skilled employees, companies have to compensate these employees for international differences in labour tax burdens. Both elements thus constitute a tax burden on companies and influence the attractiveness of a particular region as a location for investment. This study presented estimates of the effective level of taxation in 143 regions of eight European countries and the United States. It built on a previous study on company taxation that had been presented at the International Benchmark Forum in 2001; moreover, it was complementary to a study on the tax burden on highly skilled manpower. The scope of the study was threefold: First, the analysis quantified meaningful estimates of the effective tax burdens. Effective tax burdens may differ significantly from statutory tax burdens, since they consider the statutory tax rates as well as the most important rules for the definition of the tax base, e.g. depreciation allowances and rules relating to the deductibility of interest. Second, the study compared the effective tax burdens inter-regionally and internationally in order to compare the attractiveness of different locations from a tax perspective. Third, the study examined the impact of important tax provisions on effective tax burdens. The results of the study indicated a considerable dispersion of the tax burdens between the assessed countries. The effective average tax rates ranged over 23.5 percentage points, from 13.8 percentage points in Zug, Switzerland, to 37.3 percentage points in Frankfurt, Germany. Whereas Ireland and Switzerland displayed comparatively low effective tax burdens, locations in France, Germany, and the United States showed the highest effective average tax rates. This finding suggested that the attractiveness of particular locations from a tax perspective differed dramatically between 2001 and 2003, with Switzerland and Ireland as especially attractive countries. The study was prepared for the «IBC BAK International Benchmark Club»®, which evaluates and compares economic performance and location factors across European regions. The headline figures represented the IBC Taxation Index.
Monographs, Contributions to Edited Volumes
Lammersen, Lothar and Robert Schwager (2005), The Effective Tax Burden of Companies in European Regions, LLL:citation.label.volume 28, Physica Verlag, Heidelberg.
Lammersen, Lothar and Robert Schwager (2003), The Effective Tax Burden of Companies in the Extended Alpine Space, IBC BAK International Benchmark Club von BAK Basel Economics, Mannheim.
Elschner, Christina, Lothar Lammersen and Robert Schwager (2003), Der IBC Taxation Index - Die effektive Steuerbelastung von Unternehmen und hoch qualifizierten Arbeitskräften / The IBC Taxation Index - An International Comparison of the Effective Tax Burden of Companies and on Highly Skilled Manpower, Studie im Auftrag des IBC BAK International Benchmark Club von BAK Basel Economics, Mannheim. Download