Revenues from corporate income tax in Europe: Which countries collect the most?

A government's levy taxes connected nan nett income, profits, and superior gains of enterprises are called firm income taxation (CIT). On average, firm income taxation makes up astir 4% of GDP successful OECD countries.

According to nan OECD, among 27 European countries (22 EU members positive nan UK, Switzerland, Norway, Iceland, and Turkey), nan stock of firm income taxation successful full taxation revenues successful 2023 ranged from 4.2% successful Latvia to 28.3% successful Norway, based connected nan astir caller data. 

How important is firm income taxation for European countries and what stock does it correspond successful GDP crossed Europe?

Norway and Ireland are outliers

Following Norway, Ireland collects nan 2nd highest stock of full taxation from CIT pinch 21.7%, while Czechia ranks 3rd astatine 13.9%. Turkey (12.8%), and nan Netherlands (12.7%) complete nan apical five.

Norway and Ireland guidelines retired arsenic important outliers, since nan figures for astir different countries are overmuch lower. Despite Norway dominating nan rankings, nan different Nordic countries are overmuch person to nan European average: Iceland (9.4%), Denmark (8.7%), Sweden (8.6%), and Finland (6.8%). The elemental mean crossed nan 27 European countries is 9.8%.

“Norway, which has a much mean firm taxation rate, compared to different European countries, has notably precocious CIT revenues owed to nan beingness of profitable sectors specified arsenic lipid and gas, wherever companies make important taxable income,” Cristina Enache, economist astatine Tax Foundation Europe, told Euronews Business. 

Ireland besides benefits from being a hub for multinational corporations.

UK has highest, France lowest stock among apical economies

Among Europe’s 5 largest economies, nan UK has nan highest stock of firm income taxation successful full taxation revenues astatine 10.1%, while France has nan lowest astatine 5.3%, placing it 2nd from nan bottommost overall. The different 3 are Spain (7.9%), Italy (6.5%), and Germany (6.1%), each beneath nan European average. This indicates that CIT accounts for a mean information of full taxation revenue. 

“This reflects nan diversified quality of their economies, which trust connected aggregate gross sources—such arsenic income taxes and VAT—so that CIT does not predominate wide taxation collections,” Enache said. 

Why does firm income taxation alteration truthful overmuch crossed Europe?

Cristina Enache noted that cross-country differences successful nan stock of firm income taxation are chiefly driven by nan building of each country's economy, nan level of profitability wrong its firm sector, and nan circumstantial taxation policies successful place—particularly those concerning nan firm taxation guidelines and statutory rates.

“Some countries connection extended taxation incentives, deductions, aliases exemptions that trim effective CIT collections,” she said.  For instance, countries aiming to pull firm investments whitethorn person little CIT rates (like Ireland and Lithuania), aliases generous superior allowances for illustration nan UK and Germany, thereby lowering CIT revenues arsenic a percent of GDP and full revenues.

Enache explained that nan wide taxation operation besides plays a role. Countries that dangle much connected depletion aliases labour taxes thin to person a little stock of firm income taxation successful their full revenue, moreover if firm sectors are large.

On nan different hand, successful Estonia and Latvia (5.3%, ranking 3rd from nan bottom), only distributed net are taxed, allowing companies to defer firm taxation liabilities by retaining and reinvesting earnings.

“This argumentation encourages finance and entrepreneurship, but results successful little contiguous CIT revenues,” she said. 

Corporate taxation arsenic a stock of GDP

In position of firm income taxation revenues arsenic a stock of GDP, Norway is again an outlier astatine 11.7%, compared pinch a elemental mean of conscionable 3.5% crossed nan 27 countries. Luxembourg (5.0%), nan Netherlands (4.9%), Czechia (4.7%), and Ireland (4.7%) subordinate Norway to dress up nan apical five.

The lowest shares are successful Latvia (1.3%) and Estonia (1.9%), some beneath 2%. Hungary (2.2%), on pinch Germany and France (both 2.2%), complete nan bottommost five.

What little aliases higher firm taxation shares indicate?

CIT shares alteration wide crossed Europe, some arsenic a stock of full taxation gross and arsenic a stock of GDP. But what does a little aliases higher stock really suggest? Enache of Tax Foundation Europe explained that a higher CIT stock whitethorn bespeak a important beingness of large, profitable companies and capital-intensive industries for illustration Norway’s lipid companies. It besides reflects a taxation argumentation prime wherever nan taxation strategy is much reliant connected firm taxes.

“These argumentation differences bespeak different priorities: Norway capitalises connected assets rents done CIT, while Estonia prioritises investment-friendly policies pinch deferred firm taxation,” she added. 

Corporate income taxation rates successful Europe successful 2024 mostly cluster betwixt 20% and 25%, according to nan OECD and nan Tax Foundation. Rates scope from a debased of 9% successful Hungary to a precocious of 35% successful Malta. About half of nan 32 countries (the erstwhile 27 positive Bulgaria, Croatia, Cyprus, Malta and Romania) autumn wrong nan 20–25% range.

While Norway is an outlier successful position of gross shares, its firm taxation complaint is 22%.