How competitive global corporate taxation entices economic development

by Alex Shchukin

Contrary to popular belief, ecosystems are not only exclusive to nature. Take corporations, for example: rather than incorporating internationally based solely on favourable tax breaks, corporations evaluate an entire ecosystem of laws, markets, and institutions. Corporate taxation is one of the most visible elements of that ecosystem, and it is an important consideration for businesses deciding where to plant their roots.

In 2025, Estonia led the International Tax Competitiveness Index, in part due to its tax law system that only taxes corporations on distributions. Incorporating or expanding into jurisdictions like Estonia not only benefits corporations, but also local economies like Estonia’s which receives the income gathered from taxes, fees, and the injection of labour. That being said, corporate taxation is not a silo that removes the need for other taxation mechanisms to entice corporations. A property tax system, for example, can physically bring in corporations with manufacturing or office space needs. Otherwise, tax law itself can create compliance regimes that reduce the complexity of taxation systems, making the jurisdiction friendly to new corporations.

The United States, while being a social hub for entrepreneurship and economic expanse, does not provide nearly as distinct a tax law advantage for corporations on paper, yet still attracts Fortune 500 companies. This highlights an unspoken reality – the practical difficulties of incorporating in jurisdictions such as Estonia often outweigh the value gained on the corporate taxation front. Hence, competitive global corporate taxation is not a purely numerical endeavour, but also one that takes into consideration the nuances of a digitised world.

While countries like Estonia may theoretically be an attractive destination for corporations, other countries such as Ireland or the Netherlands are often preferred by international corporations. The key for economic development is understanding the niches within which systems such as tax law operate. An English-speaking workforce or membership within the European Union and its accompanying treaties, for example, might be the decision-makers for a corporation choosing where to incorporate, even if the taxation systems are less favourable. Similarly, employment law and property law intermingle with tax law to create drivers of migration and settlement in jurisdictions that may otherwise not seem that attractive on paper.

Global competition in corporate taxation is less a numerical endeavour of undercutting percentages across jurisdictions to entice the most corporations, and more an add-on to existing legal and non-legal ecosystems in which businesses operate. Effective policy lies not in simply lowering taxes, but rather in cultivating a stable economic environment where taxation works symbiotically with legal, regulatory, and market conditions that allow businesses to take root and grow.

Alex Shchukin is a commercial litigation and tax planning associate with Devry Smith Frank LLP, with a JD from Osgoode Hall Law School in Toronto, Canada. He handles high-value debt recovery and business tax planning matters, focusing on files with defaulting borrowers, insolvent entities, and/or small businesses.