A ranking of 34 OECD members shows that the world's largest economy, the US, is among the least competitive in terms of tax, while nations such as Estonia and New Zealand are at the top.

While the Organisation for Economic Co-operation and Development tries to stamp out what is alleged to be harmful tax competition between countries, a ranking of OECD member states highlights the stark contrasts between countries’ tax regimes.

According to the Tax Foundation, a US-based organisation, of the 34 OECD member states (not including well-known low-tax jurisdictions Hong Kong and Singapore), the most competitive country in tax terms is the Baltic state of Estonia. New Zealand and Switzerland are in second and third place in the rankings, respectively. At the other end of the scale, the US is in a lowly 32nd space, ahead of Portugal (33rd) and France right at the very bottom, in 34th.

The countries in the list are industrialised nations in the OECD; if Singapore and Hong Kong, both prominent wealth management centres, had been included, they might have been near, or at the top, of the ratings, Kyle Pomerleau, one of the authors of the report, told this publication.

The fact that the US is in such a lowly position will be seized upon by opponents of president Barack Obama who will claim that under his presidency, the US has lost some of its free market edge.

Interestingly, Sweden, sometimes held up as a poster child of the high-tax welfare state model, is in fourth place, ahead of Australia, in fifth. Luxembourg is in sixth, Netherlands in seventh, Slovak Republic in eighth; Turkey in ninth and Slovenia in 10th. Germany is ahead of the UK at 20th, which is 21st.

The Tax Foundation’s International Tax Competitiveness Index “measures the degree to which the 34 OECD countries’ tax systems promote competitiveness through low tax burdens on business investment and neutrality through a well-structured tax code”.

The index considers more than 40 variables across five categories: corporate taxes, consumption taxes, property taxes, individual taxes, and international tax rules.

Explaining its rankings, the organisation said that in general, countries that fared badly in competitiveness terms had high corporate taxes; the US corporate tax rate is more than 39 per cent, way above OECD averages. That has, for example, been cited as a reason why US corporations such as Starbucks, Google and Amazon have sought to domicile key functions in low-tax jurisdictions in recent years.