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Mapped: International Tax Competitiveness by Country

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This infographic is available as a poster.

International Tax Competitiveness

International Tax Competitiveness

This infographic is available as a poster.

Mapped: International Tax Competitiveness by Country

Many multinational companies, such as Google and Facebook, have their European headquarters in Ireland. Why? Ireland has low corporate taxes.

In fact, a country’s tax structure can have a significant impact on its economic performance. Countries with low marginal tax rates encourage business investment, while countries with high taxes may drive investment elsewhere.

This Markets in a Minute from New York life Investments looks at international tax competitiveness among countries within the Organization for Economic Co-operation and Development (OECD).

How is Tax Competitiveness Measured?

The Tax Foundation measured international tax competitiveness using two aspects of tax policy: competitiveness and neutrality.

Competitiveness measures how low a country’s marginal tax rates are. On the other hand, a neutral tax code raises the most revenue with the fewest economic distortions. This means that it doesn’t favor consumption over savings, which is what happens with investment or wealth taxes. It also means there are few or no tax breaks for specific business or individual activities.

With these two aspects in mind, the Tax Foundation looked at five types of taxes:

  • Corporate taxes
  • Individual income taxes
  • Consumption taxes
  • Property taxes
  • Cross-border taxes

According to research from the OECD, corporate taxes are most harmful for economic growth while taxes on immovable property (real estate) have the smallest impact.

International Tax Competitiveness, Ranked

Here is how the OECD countries rank on their international tax competitiveness. A low score means the country’s taxes are relatively less competitive, while a score of 100 indicates the most competitive tax code among OECD countries.

CountryOverall RankOverall Score
🇪🇪 Estonia1100.0
🇱🇻 Latvia285.1
🇳🇿 New Zealand381.3
🇨🇭 Switzerland478.4
🇱🇺 Luxembourg576.5
🇱🇹 Lithuania676.5
🇨🇿 Czech Republic775.5
🇸🇪 Sweden872.9
🇦🇺 Australia971.3
🇳🇴 Norway1070.6
🇸🇰 Slovak Republic1169.3
🇳🇱 Netherlands1269.2
🇭🇺 Hungary1369.0
🇮🇱 Israel1467.6
🇫🇮 Finland1567.4
🇩🇪 Germany1667.2
🇹🇷 Turkey1766.7
🇦🇹 Austria1865.7
🇮🇪 Ireland1964.7
🇨🇦 Canada2064.6
🇺🇸 United States2162.4
🇬🇧 United Kingdom2261.8
🇧🇪 Belgium2361.6
🇯🇵 Japan2461.5
🇸🇮 Slovenia2561.3
🇰🇷 Korea2660.6
🇨🇱 Chile2758.2
🇩🇰 Denmark2857.9
🇬🇷 Greece2957.5
🇪🇸 Spain3057.1
🇨🇴 Colombia3155.0
🇮🇸 Iceland3253.7
🇲🇽 Mexico3352.5
🇵🇹 Portugal3449.0
🇫🇷 France3548.7
🇵🇱 Poland3645.7
🇮🇹 Italy3744.6

Costa Rica joined the OECD in 2021 and was not included in the ranking due to data availability.

For the eighth year in a row, Estonia has the most competitive taxes. The country has a 20% corporate tax that only applies to profits when they are distributed to shareholders, and property tax that only applies to the land value. Switzerland, one of the world’s biggest tax havens, ranks fourth. It boasts a low, broad-based consumption tax of 7.7% and an individual income tax that partially excludes capital gains from taxation.

Meanwhile, the U.S. falls in the middle of the pack for international tax competitiveness. It allows for full expensing for business investments in machinery. However, a weakness is that the states’ sales taxes apply to only a third of the potential tax base on average. This is largely due to the fact that most personal services are exempt from sales tax.

Italy has the least competitive taxes. The country has a wealth tax on financial assets and real estate assets held abroad, and a financial transaction tax on assets when they are sold. Not only that, it takes businesses an estimated 169 hours to comply with the individual income tax.

Balancing Budget and Competition

While many factors contribute to economic performance, tax structure does play a role. Governments face the task of collecting sufficient revenue to meet their budgetary requirements, while also maximizing their international tax competitiveness. These tax structures are constantly evolving.

Starting in 2023, 137 countries—including Ireland—have agreed to a global minimum tax rate of 15% on large multinational firms. The agreement aims to stop a “race to the bottom” on corporate taxation in order to attract foreign investment. Notably, the OECD estimates this could raise $150 billion in additional global tax revenues every year.

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How Small Investments Make a Big Impact Over Time

Compound interest is a powerful force in building wealth. Here’s how it impacts even the most modest portfolio over the long-term.

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This bar chart shows the power of compound interest and regular contributions over time.

How Small Investments Make a Big Impact Over Time

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

Time is an investor’s biggest ally, even if they start with just a modest portfolio.

The reason behind this is compounding interest, of course, thanks to its ability to magnify returns as interest earns interest on itself. With a fortune of $159 billion, Warren Buffett largely credits compound interest as a vital ingredient to his success—describing it like a snowball collecting snow as it rolls down a very long hill.

This graphic shows how compound interest can dramatically impact the value of an investor’s portfolio over longer periods of time, based on data from Investor.gov.

Why Compound Interest is a Powerful Force

Below, we show how investing $100 each month, with a 10% annual return starting at the age of 25 can generate outsized returns by simply staying the course:

AgeTotal ContributionsInterestPortfolio Value
25$1,300$10$1,310
30$7,300$2,136$9,436
35$13,300$9,223$22,523
40$19,300$24,299$43,599
45$25,300$52,243$77,543
50$31,300$100,910$132,210
55$37,300$182,952$220,252
60$43,300$318,743$362,043
65$49,300$541,101$590,401
70$55,300$902,872$958,172
75$61,300$1,489,172$1,550,472

Portfolio value is at end of each time period. All time periods are five years except for the first year (Age 25) which includes a $100 initial contribution. Interest is computed annually.

As we can see, the portfolio grows at a relatively slow pace over the first five years.

But as the portfolio continues to grow, the interest earned begins to exceed the contributions in under 15 years. That’s because interest is earned not only on the total contributions but on the accumulated interest itself. So by the age of 40, the total contributions are valued at $19,300 while the interest earned soars to $24,299.

Not only that, the interest earned soars to double the value of the investor’s contributions over the next five years—reaching $52,243 compared to the $25,300 in principal.

By the time the investor is 75, the power of compound interest becomes even more eye-opening. While the investor’s lifetime contributions totaled $61,300, the interest earned ballooned to 25 times that value, reaching $1,489,172.

In this way, it shows that investing consistently over time can benefit investors who stick it through stock market ups and downs.

The Two Key Ingredients to Growing Money

Generally speaking, building wealth involves two key pillars: time and rate of return.

Below, we show how these key factors can impact portfolios based on varying time horizons using a hypothetical example. Importantly, just a small difference in returns can make a huge impact on a portfolio’s end value:

Annual ReturnPortfolio Value
25 Year Investment Horizon
Portfolio Value
75 Year Investment Horizon
5%$57,611$911,868
8%$88,412$4,835,188
12%$161,701$49,611,684

With this in mind, it’s important to take into account investment fees which can erode the value of your investments.

Even the difference of 1% in investment fees adds up over time, especially over the long run. Say an investor paid 1% in fees, and had an after-fee return of 9%. If they had a $100 starting investment, contributed monthly over a 25-year time span, their portfolio would be worth over $102,000 at the end of the period.

By comparison, a 10% return would have made over $119,000. In other words, they lost roughly $17,000 on their investment because of fees.

Another important factor to keep in mind is inflation. In order to preserve the value of your portfolio, its important to choose investments that beat inflation, which has historically averaged around 3.3%.

For perspective, since 1974 the S&P 500 has returned 12.5% on average annually (including reinvested dividends), 10-Year U.S. Treasury bonds have returned 6.6%, while real estate has averaged 5.6%. As we can see, each of these have outperformed inflation over longer horizons, with varying degrees of risk and return.

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What Were the Top Performing Investment Themes of 2023?

In 2023, several investment themes outperformed the S&P 500 by a wide margin. Here are the top performers—from blockchain to AI.

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The Top Performing Investment Themes in 2023

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

While the S&P 500 rebounded over 24% in 2023, many investment themes soared even higher.

In many ways, the year was defined by breakthrough announcements in AI and the resurgence of Bitcoin. At the same time, investors looked to nuclear energy ETFs thanks to nuclear’s growing role as a low carbon energy source and the war in Ukraine.

This graphic shows the best performing investment themes last year, based on data from Trackinsight.

Blockchain ETFs Lead the Pack

With 82% returns, blockchain ETFs outperformed all other themes in the U.S. due to the sharp rise in the bitcoin price over the year.

These ETFs hold mainly bitcoin mining firms, since ETFs investing directly in bitcoin were not yet approved by regulators in 2023. However, as of January 2024, U.S. regulators have approved 11 spot bitcoin ETFs for trading, which drew in $10 billion in assets in their first 20 days alone.

Below, we show the top performing themes across U.S. ETFs in 2023:

Theme2023 Performance
Blockchain82%
Next Generation Internet80%
Metaverse59%
FinTech54%
Nuclear Energy50%
Cloud Computing49%
AI/Big Data49%
Gig Economy48%
Digital Infrastructure & Connectivity43%

As we can see, next generation internet ETFs—which include companies focused on the internet of things and new payment methods—also boomed.

Meanwhile, nuclear energy ETFs had a banner year as uranium prices hit 15-year highs. Investor optimism for nuclear power is part of a wider trend of reactivating nuclear power plants globally in the push towards decarbonizing the energy supply. In fact, 63 new reactors across countries including Japan, Türkiye, and China are planned for construction amid higher global demand.

With 49% returns, AI and big data ETFs were another top performing investment theme. Driving these returns were companies like chipmaker Nvidia, whose share price jumped by 239% in 2023 thanks to its technology being fundamental to powering AI models.

Top Investment Themes, by Net Flows

Here are the the investment themes that saw the highest net flows over the year:

Theme2023 Net Flows
Robotics & Automation$1,303M
Nuclear Energy$997M
AI/Big Data$987M
Global Infrastructure$734M
Net Zero 2050$716M
Blockchain$357M
Cannabis & Psychedelics$270M
Emerging Markets Consumer Growth$203M

Overall, ETFs focused on robotics and automation saw the greatest net flows amid wider deployment of these technologies across factories, healthcare, and transportation actvities.

The success of AI large language models over the year is another key factor in powering robotics capabilities. For instance, Microsoft is planning to build a robot powered by ChatGPT that provides it with higher context awareness of certain tasks.

Like robotics and automation, AI and big data, along with blockchain ETFs attracted high inflows.

Interestingly, ETFs surrounding emerging markets consumer growth saw strong inflows thanks to an expanding middle class across countries like India and China spurring potential growth opportunities. In 2024, 113 million people are projected to join the global middle class, seen mainly across countries in Asia.

Will Current Trends Continue in 2024?

So far, many of these investment themes have continued to see positive momentum including blockchain and next generation internet ETFs.

In many cases, these investment themes cover broad, underlying trends that have the potential to reshape sectors and industries. Going further, select investment themes have often defined each decade thanks to factors like technological disruption, geopolitics, and the economic environment.

While several factors could impact their performance—such as a global downturn or a second wave of inflation—it remains to be seen if investor demand will carry through the year and beyond.

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