International Tax Competitiveness Index 2024 – South Korea ranks #1

Consumption Tax Top3

1. Korea
2. New Zealand
3. Switzerland

• Consumption Tax Overview:
  Consumption taxes, primarily VAT, are levied on goods and services. They’re efficient if they exclude business inputs or allow credits for taxes paid.
• Tax Base Inefficiencies:
  Many countries have inefficient tax bases, with exemptions requiring higher rates. Some, like the US, tax business inputs, increasing costs.
• Tax Rate and Structure:
  Lower consumption tax rates are more favorable as they minimize economic distortions. The OECD average rate is 19.1%, with Hungary highest at 27%.
• Exemption Thresholds:
  VAT/sales tax exemption thresholds vary; lower thresholds are better. The average OECD threshold is around $62,000, with some countries having none.
• Tax Base Ratios:
  New Zealand has the broadest tax base, covering nearly 100% of consumption. The OECD average tax base ratio is 0.58, indicating room for improvement.