The ITCI, which is published annually by the Tax Foundation’s Center for Global Tax Policy (CGTP), measures the extent to which a country’s tax system is competitive and neutral. A competitive tax system has low marginal tax rates and a neutral tax system has fewer tax breaks for specific activities.  

The CGTP believes that competitive and neutral tax systems are “easy for taxpayers to comply with and can promote economic development”. In contrast, a tax system that scores poorly on competitiveness and neutrality “can be costly, distort economic decision-making, and harm domestic economies”. 

The UK is ranked 32nd of the 38 OECD-member countries in the 2025 ITCI, the same as for 2024.  Estonia has the ‘best’ tax system, for the 12th year in a row, and France has the ‘worst’.  

UK ranking: 

The CGTP has identified a number of weaknesses with the UK’s tax system, including:

• Top rates of capital gains tax, and income tax on dividends, that are significantly higher than the OECD average.
• The highest “real property tax burden”, a measure of property tax revenues as a percentage of private capital stock, in the OECD. Countries that tax the value of structures and buildings, rather than just the value of land, perform poorly in the ITCI as such an approach is said “to create an incentive against property improvements”.
• A narrow VAT base. In the UK, the standard rate of VAT of 20% applies to less than half of the potential VAT base and the registration threshold is 2.8 times higher than the OECD average.  

Strengths of the UK tax system identified by the CGTP include: 

• Corporation tax incentives, including full expensing for investments in plant and machinery and above-average cost recovery for investments in intangible assets. 
• Having a territorial tax system that exempts foreign dividends and capital gains income without any country limitations. 
• Operating the broadest tax treaty network in the OECD, with 132 countries.