THE TAX COMPETITION AMONG EUROPEAN COUNTRIES

Abstract

Background: Taxes are and form the necessary basis for any form of organization in human society. Aims: The aim of the paper is to quantify the outputs of the tax competition among European countries. Specifically, we focus on studying the International Tax Competitiveness Index (ITCI) in the European area and on assessing how this aspect is time dependent. First, we try to find out whether there is a statistically significant relationship in the overall ranking within the ITCI of the surveyed European countries in time. Besides that, we try to confirm whether if the country is at the forefront within the GDP per capita, this country will also be at the forefront of the ITCI. Sample: The research sample consists of 27 European countries, for which the overall ranking of the ITCI and GDP per capita (by purchasing power parity (PPP)) were available from 2014 to 2020. Methods: We use the  Spearman correlation coefficient, Sign test, and Wilcoxon Matched Pairs Test to verify the hypotheses. Results: The results show that variations in the country's level of ITCI change only slowly over time, and it is hard to modify them significantly. Moreover, we present the ranking of European countries within ITCI in 2014-2020 and the ranking within the level of GDP per capita (by PPP). Conclusions: We can confirm the assumption that if the country is at the forefront of the ITCI, this country will be located at the forefront of the GDP per capita (by PPP) indicator. Implications: The country's tax system is an important determinant of the country's economic performance.