The Analysis of Corporate Tax and Personal Income Tax in European Countries

Abstract

The aim of the article is to reveal the relationship between the rates of corporate tax and personal income tax and the pace of economic development. The existence of the open financial market under conditions of globalization leaves its imprint on forming the vectors of development of the tax systems in the countries. Thus, the optimal corporate taxation creates a competitive and investment-attractive climate, facilitates encouraging foreign investments and locating economic activities. The study made it possible to establish the absence of a direct link between the tax rates and economic growth. At the same time, a linear relationship between the tax rates and the tax burden is revealed. On the basis of the presented mathematical expression, it can be concluded that an increase in the personal income tax causes an increase in the tax burden, and an increase in the corporate tax — its reduction. The cluster analysis of the corporate tax and the personal income tax in European countries allowed to justify the determinants of successful economic development presenting the formation of the vector of the tax policy in the aspect of moderate taxation of individuals and the need for low taxation of corporate profits.

Keywords

• analysis
• corporate tax
• personal income tax
• economic growth
• tax system