Businesses in the U.S. are paying among the highest corporation taxes in the world, at a rate well above the global average, reveals a new study by UHY, an international accounting and consultancy network.
According to UHY, the U.S.’s corporation tax rate was 41.1 percent (with a combined federal and assumed state tax rate of 7.1 percent) on taxable profits of $1,000,000 for the financial year ending 2015*.
This is far higher than the global average corporation tax rate of 27 percent. For European economies, the average is 25.3 percent and the G7 average is even higher at 32.3 percent.
However, UHY points out that the U.S.’s high corporate tax rate is, in fact, mitigated by a variety of tax planning opportunities and deductions, which result in many businesses’ effective tax rate being far lower than 41 percent.
UHY explains that low corporation taxes can help countries create competitive advantage and fuel growth by freeing up more profits for reinvestment, discouraging domestic companies from moving investment overseas and attracting foreign companies to locate there.
UHY tax professionals studied corporation tax data on taxable profits of $1,000,000 in 31 countries across its international network, including all members of the G7, as well as key emerging economies.
The USA is at the top of the table of economies with the highest corporation tax in the study, charging a stated rate of 41.1 percent. By comparison, its North American neighbor Canada (which charges 26.7 percent) has a much lower rate and fellow G7 member, the UK (which charged 21 percent in 2015) has almost half the corporate tax rate of the U.S.
Japan is next, despite reducing corporation tax by 2.5 percent in a year as part of Prime Minister Shinzo Abe’s Abenomics policy to stimulate growth in the Japanese economy following more than two decades of stagnation.
Dennis Petri of UHY LLP, a member of UHY, who also sits on UHY’s board of directors, commented: “There is a global competition amongst countries to offer a lower corporation tax rate and there are enormous advantages for those countries that can put themselves ahead of the pack. Enabling companies to retain more of their profits encourages them to reinvest more capital back into their business, helping to drive innovation. The U.S. could see significant benefits by simplifying and reducing the corporate tax burden across the board in order to better support the domestic business base and attract more corporate investment from overseas.”
UHY points out that businesses in the UK and Russia are enjoying the lowest corporation taxes of the major global economies, accounting for just 21 percent and 20 percent of their profits respectively.
UHY says that of the 31 countries in the study, most (74 percent) kept corporation tax rates the same over the last two years. Six (19 percent) lowered rates last year, while just two countries (Israel and India) raised it.
Petri said, “Clearly, there is not much appetite for governments to raise corporation tax rates in the current climate, but there is little interest to lower them either. Tinkering around the edges with a variety of reliefs and exemptions can create far more complicated systems, which are then far more open to abuse and error. Simply cutting the stated rate sends a very clear message that an economy is very much on the side of business growth, expansion and continued investment.”
UHY adds that the UAE has the lowest corporate taxes of any country in the study—charging no corporation tax at all—followed by Ireland (12.5 percent) and several eastern European countries including Romania, the Czech Republic and Croatia
Global Corporation Tax Rankings (by highest rate levied)
|
Rank |
Country |
2014-15 Tax Year data |
% Change since 2013-14 |
|
|
Amount of corporation tax charged on $1,000,000 |
Rate |
|||
|
1 |
USA |
$411,000.00 |
41.1% |
0.0% |
|
2 |
Japan |
$385,793.00 |
38.6% |
-2.5% |
|
3 |
France |
$377,748.00 |
37.8% |
0.0% |
|
4 |
Argentina |
$350,000.00 |
35.0% |
0.0% |
|
4= |
Malta |
$350,000.00 |
35.0% |
0.0% |
|
6 |
Belgium |
$339,900.00 |
34.0% |
0.0% |
|
7 |
Brazil |
$337,029.70 |
33.7% |
0.0% |
|
8 |
India |
$330,630.00 |
33.1% |
0.6% |
|
9 |
Pakistan |
$330,000.00 |
33.0% |
-1.0% |
|
- |
G7 Average |
$323,205.86 |
32.3% |
-0.8% |
|
10 |
Italy |
$323,200.00 |
32.3% |
0.0% |
|
11 |
Nigeria |
$320,000.00 |
32.0% |
0.0% |
|
12 |
Australia |
$300,000.00 |
30.0% |
0.0% |
|
12= |
Mexico |
$300,000.00 |
30.0% |
0.0% |
|
12= |
Spain*** |
$300,000.00 |
30.0% |
0.0% |
|
15 |
Germany |
$287,700.00 |
28.8% |
0.0% |
|
- |
BRIC Average |
$279,414.93 |
27.9% |
0.2% |
|
- |
Global Average |
$261,534.73 |
27.0% |
-0.4% |
|
16 |
Canada |
$267,000.00 |
26.7% |
0.0% |
|
17 |
Israel |
$265,000.00 |
26.5% |
1.5% |
|
- |
Europe Average |
$233,294.57 |
25.3% |
-0.3% |
|
18 |
China |
$250,000.00 |
25.0% |
0.0% |
|
18= |
Uruguay |
$250,000.00 |
25.0% |
0.0% |
|
20 |
Jamaica |
$250,000.00 |
25.0% |
-5.0% |
|
21 |
Denmark |
$243,460.00 |
24.4% |
-1.6% |
|
22 |
Netherlands |
$239,116.00 |
23.9% |
0.0% |
|
23 |
Egypt |
$225,000.00 |
22.5% |
-2.5% |
|
24 |
UK |
$210,000.00 |
21.0% |
-3.0% |
|
25 |
Croatia |
$200,000.00 |
20.0% |
0.0% |
|
25= |
Russia |
$200,000.00 |
20.0% |
0.0% |
|
27 |
Czech Republic |
$190,000.00 |
19.0% |
0.0% |
|
27= |
Poland |
$190,000.00 |
19.0% |
0.0% |
|
29 |
Romania |
$160,000.00 |
16.0% |
0.0% |
|
30 |
Republic of Ireland |
$125,000.00 |
12.5% |
0.0% |
|
31 |
UAE |
$0.00 |
0.0% |
0.0% |
*2014/15
**2013/14
***In recent tax years, Spain reduced the corporate tax rate from 30 to 28 percent in 2015 and to 25 percent in 2016, with startups paying a reduced 15 percent in their first year of profits.
