Chris Etherington

Written by: Chris Etherington

Chris Etherington

Partner

Who wins the World Cup of tax?

As the men’s World Cup brings football nations together, we look at which of the nations would be victorious if their tax regimes, as well as their football skills, were put to the test.

So what methodology have we used to judge the competition? Just as FIFA is the governing world body for football nations, for the purposes of this experiment, we have turned to membership of the Organisation for Economic Co-operation and Development (OECD) to assess the nations’ tax systems. Many of the 38 OECD member nations are also competing but there are a number of exceptions, in particular from South American countries. Brazil are however on the roadmap to OECD membership so they have made the cut for this competition and as the host nation, it seems only right to include Qatar’s tax regime for consideration as well.

For the purposes of judging the tax regimes, we have looked to the International Tax Competitiveness Index (ITCI), published by the not-for-profit organisation Tax Foundation on 17 October 2022. This is an annual report which assesses various nations’ tax policy based on its competitiveness and neutrality. It takes into account 40 different tax factors including tax rates for individuals, businesses, and consumption taxes like VAT.

For the purposes of the group stage, we have assessed these scores, estimating the ITCI score for non-OECD members Brazil and Qatar, comparing these countries’ tax regimes to similar nations and attributing an estimated score to them. Given there are two home nations competing in Group B with broadly identical tax policy at the moment, England and Wales have combined forces to create a United Kingdom team.

Using the group stage format of the World Cup, the winners of the various groups are as follows. The nation with the highest ITCI score has determined their group position.

   Winner Runner-up
Group A Qatar Netherlands
Group B USA United Kingdom
Group C Poland Mexico
Group D Australia Denmark
Group E Germany Costa Rica
Group F Canada Belgium
Group G Switzerland Brazil
Group H South Korea Portugal

Now these results have helped set up the round of 16 fixtures but this would be a pretty obvious competition if we continued to simply use the ITCI statistics. Given this is a football tournament after all, we have also multiplied these scores by the nation’s points allocated to them by FIFA for the men’s teams to mix things up.

Unfortunately, this leads to the United Kingdom falling at the first hurdle, hopefully not reflective of what lies ahead for England and Wales in the real thing. The quarter-final stage is set though with the following fixtures:

Quarter-final 1 Qatar vs Denmark
Quarter-final 2 Netherlands vs Australia
Quarter-final 3 Belgium vs Switzerland
Quarter-final 4 Canada vs Brazil

Many of these fixtures are evenly matched and a key fixture is Australia vs Netherlands. Australia scores highly for its tax regime in the ITCI statistics, in part due to its integrated corporate and personal tax treatment of dividends and its relatively low goods and services tax rate. On the other hand, the Netherlands fares well in both metrics and its footballing prowess sees it through to the semi-finals.

Semi-final 1 Qatar vs Switzerland
Semi-final 2 Brazil vs Netherlands

Having seen off other major nations beforehand, Qatar enter the semi-final as strong favourites. It may be the lowest ranked nation according to FIFA in the tournament but its tax regime, or rather, lack of one, ensures it benefits from a high score for tax competitiveness. However, Switzerland’s wide-ranging tax treaty network gives it a high-ranking ITCI score which, combined with its footballing prowess, sees them through to the final.

The second semi-final sees a pair of footballing heavyweights line up against each other as Brazil, the world’s number one men’s football side, up against the Oranje of the Netherlands. In a tightly fought contest, the Netherlands’ higher ITCI score clinches success for them.

The clash of the titans between the Netherlands and Switzerland, with both nations scoring high on the ITCI statistics, results in this being one of the most closely matched clashes of the contest. Ultimately, with both nations reasonably well matched from a football perspective, Switzerland’s preferential personal tax regime and comparatively low VAT rates sees it win out.

Whilst unscientific, and with a model that’s undoubtedly flawed, a competitive tax regime is an area that the UK needs to be increasingly aware of. The reality is that many individuals see countries like Switzerland and territories in the Middle East as attractive destinations due to their tax regimes and the UK is in competition to retain its talent and businesses.

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