Many governments still believe that increasing taxes on corporations will allow them to fill up the state’s treasury. In this difficult period for state budgets, some countries practice this tactic wholeheartedly. Below, an analysis of the weight of corporate tax receipts with respect to the GDP shows that
a reduction in corporate taxes associated with a policy favorable to businesses allows for a greater increase in the tax dollars collected.
The ratio, corporate taxes/GDP ameliorates with a decline in taxes
It may seem paradoxical, but tax earnings as a percentage of the country’s Gross Domestic Product were highest in countries where corporate taxation was lowest. Leading the pack, with a large advantage, Luxembourg, Cyprus, Ireland … At the tail end of this classification, countries where the fiscal pressure on companies is heaviest and the ratio corporate taxes / GDP is the worst: France, Sweden, Italy … With corporate tax rates three times less, some states are earning a lot more.
Become attractive by encouraging entrepreneurship
These figures demonstrate how much entrepreneurs take into account the framework that is offered to them. Of course, tax optimization is crucial to keep the company up and running and making a profit, but it is also evidence of a country’s political will and perspective. A company must be seen as an engine of the economy and not, as it may appear in some jurisdictions, as a source of income for the state.
Reducing corporate taxes encourages greater tax receipts from a broader tax base since corporations are always on the lookout for a land that offers a favorable reception for their activity.