Focus on Tax

Focus on Tax 2016, a Competitive Alternatives special report, assesses the impact of total business tax costs in 10 countries and 111 featured study cities. This supplemental report compares total tax costs, including corporate income taxes, capital taxes, sales taxes, property taxes, and statutory labor costs.

In addition to the summary below, a Focus on Tax 2016 infographic is available and the full report can be accessed in the Download section of this website.

Ranking business taxes

The overall results for all locations are based on average results from 7 different business-to-business service sector operations and 12 different manufacturing sector operations. For calculating income taxes, net income before income tax has been standardized as a fixed dollar amount in all locations, so that income taxes paid can be realistically compared among jurisdictions in absolute dollar terms.

Among the countries studied, Canada has the lowest Total Tax Index (TTI) at 52.4. In other words, total tax costs in Canada are 47.6 percent lower than in the United States, which has a TTI of 100.0 and represents the benchmark against which all locations are scored. The United Kingdom, the Netherlands and Mexico also have TTI scores below 70.0, providing these countries with significant tax advantages relative to the other six countries compared. At the other end of the spectrum, France’s TTI of 136.6 signifies that total tax costs in France are 36.6 percent higher than in the US.

Total tax index results
2016 rank Country 2016 TTI 2014 TTI TTI change 2014 rank
2United Kingdom64.566.6-2.12
7United States100.0100.05

The TTI rankings of countries in 2016 are broadly consistent with the 2014 rankings. Key points to note when comparing the 2014 and 2016 results include the following:

  • The Netherlands has edged ahead of Mexico with a very narrow advantage in the current year. However, changes in the specific cities compared within the Netherlands in the current study may account for this marginal change in ranking between two very tax-competitive countries.
  • The United States has dropped two places in the overall results in 2016 due to the impact of the strong US dollar relative to other global currencies. For countries other than the United States, the appreciation of the US dollar means that costs for non-income taxes (i.e. other corporate taxes and statutory labor costs) are lower in 2016 than in 2014 when converted to US dollar terms. (Income taxes are not subject to the same issue, as all locations are assumed to earn a standard level of net income before tax, in US dollars.)
  • A further implication of this exchange rate-driven change is that countries (other than the US) with relatively higher tax costs experience a relatively greater decrease in their TTI in 2016 and countries where the tax system relies more heavily on labor taxes or other corporate taxes see greater reductions in their TTI than countries where the tax system has a greater reliance on corporate income taxes.
  • In this edition of Focus on Tax, the analysis of property taxes for service operations (occupying leased office space) has been enhanced to include property taxes on real estate that are levied on the landlord but which are then passed on to the tenant as additional rent. In previous editions of Competitive Alternatives, these indirect property taxes were included in facility costs but were not separately identified for inclusion in the Focus on Tax comparisons. In this study, these tax costs have now been separately identified and have been reclassified as property taxes. To the extent that countries have higher or lower tax costs on office real estate, these variations now also impact the TTI calculations.

Rankings for major cities

For the purposes of this study, we compared 111 cities from the 10 countries noted above. In the report, we highlight 51 major international cities, representing those cities used in developing the international comparisons (2-4 cities per country) plus additional cities with metro area populations of at least 2 million (primarily in the United States). We believe that this group of cities will be of most interest to companies seeking to locate international business operations. Detailed results for all cities are presented in the study report.

The results for the 51 major cities are generally consistent with the national results except among the larger number of US cities shown in the table.

High tax costs in the four US baseline cities, most notably in New York City and Los Angeles, result in the US placing behind Australia and Germany in the national rankings. However, many individual US cities have more favorable tax costs than the four largest cities, including the leading US cities: Cincinnati, Cleveland, Baltimore and Atlanta. Among the 31 US metro areas with populations over two million, at least 20 rank ahead of all the Australian cities and 28 rank ahead of Frankfurt (the city with the highest tax costs among the Australian and German cities compared.

Results for major cities
RankMajor citiesTotal Tax Index
1Toronto, CA47.4
2Vancouver, CA49.0
3Manchester, UK55.7
4Montreal, CA57.4
5Monterrey, MX66.1
6Amsterdam, NL68.2
7Rotterdam, NL68.2
8Mexico City, MX70.9
9Cincinnati, US73.2
10London, UK73.4
11Cleveland, US78.8
12Baltimore, US81.0
13Atlanta, US81.6
14Tampa, US81.6
15Orlando, US81.6
16Pittsburgh, US83.0
17Miami, US84.2
18Charlotte, US84.3
19Philadelphia, US84.6
20Detroit, US85.7
21Minneapolis, US89.2
22North Virginia, Metro DC, US89.3
23Boston, US92.0
24Portland, US92.0
25San Antonio, US92.2
26Dallas-Fort Worth, US93.6
RankMajor citiesTotal Tax Index
27Houston, US93.9
28Denver, US93.9
29Seattle, US94.4
30Melbourne, AU94.5
31Phoenix, US95.0
32Kansas City, US95.5
33Brisbane, AU95.5
34St. Louis, US96.3
35Berlin, GE96.4
36Chicago, US96.7
37Sydney, AU96.7
38San Diego, US97.5
39Sacramento, US97.7
40Riverside-San Bernardino, US97.9
41Las Vegas, US99.1
42Frankfurt, GE99.3
43Osaka, JP103.0
44New York City, US104.7
45Los Angeles, US105.1
46San Francisco, US106.3
47Milan, IT110.1
48Rome, IT110.8
49Tokyo, JP113.4
50Marseille, FR133.8
51Paris, FR139.5

The analysis is based on cost information collected primarily between July 2015 and January 2016. Taxes reflect tax rates in effect on January 1, 2016, and also incorporate any announced changes at that time to take effect at specified later dates. Tax rates and other tax-related information are also subject to further change as a result of new legislation, judicial decisions, and administrative pronouncements. Of course, exchange rates and other cost factors will change over time.

The complete Focus on Tax 2016 report is available in the Download section of this website.

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