Comparison of Corporation Tax Around the World

Corporation tax is taxable annual profit from companies operating in that country, comparable to income tax that individual citizens pay. In general, it has been reported that large developed countries have higher corporate tax rates than developing countries, as business requires a stable environment to contribute to, whether it’s a business selling software for accountants or a beauty salon.

However, according to the OECD (Organisation for Economic Co-operation and Development), corporate tax has fallen across 88 countries from high rates between 40-50% in the 1980s, driven by the belief that low rates stimulate investment and enterprise in economies.

South America’s corporation tax

According to data analysed, Puerto Rico has the highest corporation tax at 37.5%, followed closely by Brazil and Venezuela at 34%, Colombia at 33%, and Argentina at 30%, making South America the continent with the most countries in the top 10 who pay the highest corporation tax. On average, South America has the second highest corporate tax rate at 27.63%, whereas Europe stands the lowest at 20.27%. Does this contradict the claim that developed countries pay higher tax?

OECD explained that corporation tax plays a key part in government revenue. This is particularly true in developing countries, despite the global trend of falling rates since the 1980s. However, it is unclear whether South America, as an emerging continent, is charging higher taxes in order to raise government revenue or to benefit from businesses that are looking to expand internationally and enter new markets. According to research, South America is becoming a popular choice for business to enter, with strong trade links and an advantageous geographic location. Indeed, South America is a large continent where some countries are business friendly and others are harder to penetrate.

Africa’s corporation tax

Being the poorest continent in the world, Africa unsurprisingly has the highest average corporation tax at 28.45%. With the highest in this data being Zambia at 35% and the lowest being Libya and Madagascar at 20%, South Africa stands roughly in the middle at 28%, slightly above average for Africa overall. Does this mean that South Africa is the safest bet for business?

South Africa is one of Africa’s largest economies, with 54 diverse countries in terms of political stability, development, growth, and population. As South Africa has been a relatively slow growth area over the years, corporation tax dropped from 34.55% in 2012 to the current rate — but was this effective? GDP in South Africa has fluctuated quite dramatically since the 1960s. Business favours countries with political stability, which is something South Africa doesn’t currently have. Furthermore, South Africa’s government debt to GDP sits roughly in the middle of the continent’s countries — is this influencing their corporate tax rate?

While corporation tax rates are influenced by the country’s definition, there’s clearly a pattern with developing countries and emerging economies paying higher rates to sustain the country. However, the top five richest countries in the world’s corporation tax are Luxemburg at 27.08%, Norway at 22%, Switzerland at 18%, Ireland at 12.5%, and Iceland at 20%, which is relatively varied. It would appear that some countries’ cultures factor into how much tax they pay. For example, Scandinavian countries are proud to pay higher taxes to contribute to social welfare.

 

CountryContinentTax (%)
Puerto RicoNorth America37.5
ZambiaAfrica35
BrazilSouth America34
VenezuelaSouth America34
FranceEurope33.3
ColumbiaSouth America33
MoroccoAfrica31
JapanAsia Pacific30.62
MexicoNorth America30
ArgentinaSouth America30
GermanyEurope30
AustraliaAsia Pacific30
PhilippinesAsia Pacific30
KenyaAfrica30
NigeriaAfrica30
CongoAfrica30
BelgiumEurope29
PakistanAsia Pacific29
Sri LankaAsia Pacific28
New ZealandAsia Pacific28
South AfricaAfrica28
LuxembourgEurope27.08
ChileSouth America27
CanadaNorth America26.5
AlgeriaAfrica26
IndiaAsia Pacific25.17
JamaicaNorth America25
ChileSouth America25
EcuadorSouth America25
NetherlandsEurope25
SpainEurope25
AustriaEurope25
South KoreaAsia Pacific25
BangladeshAsia Pacific25
ChinaAsia Pacific25
IndonesiaAsia Pacific25
ZimbabweAfrica25
TunisiaAfrica25
GreeceEurope24
ItalyEurope24
MalaysiaAsia Pacific24
IsraelMiddle East23
EgyptAfrica22.5
NorwayEurope22
DenmarkEurope22
TurkeyEurope22
SwedenEurope21.4
United StatesNorth America21
PortugalEurope21
RussiaEurope20
FinlandEurope20
IcelandEurope20
AfghanistanAsia Pacific20
AzerbaijanAsia Pacific20
KazakhstanAsia Pacific20
ThailandAsia Pacific20
VietnamAsia Pacific20
CambodiaAsia Pacific20
TaiwanAsia Pacific20
Saudi ArabiaMiddle East20
JordanMiddle East20
YemenMiddle East20
MadagascarAfrica20
LibyaAfrica20
SloveniaEurope19
Czech RepublicEurope19
PolandEurope19
United KingdomEurope19
BelarusEurope18
CroatiaEurope18
SwitzerlandEurope18
UkraineEurope18
SingaporeAsia Pacific17
Hong KongAsia Pacific16.5
LithuaniaEurope15
GeorgiaAsia Pacific15
MaldivesAsia Pacific15
KuwaitMiddle East15
IraqMiddle East15
IrelandEurope12.5
CyprusEurope12.5
BulgariaEurope10
QatarMiddle East10
HungaryEurope9
BarbadosNorth America5.5

Sources

https://tradingeconomics.com/country-list/corporate-tax-rate

https://taxfoundation.org/corporate-tax-rates-around-the-world-2019/

https://www.weforum.org/agenda/2020/01/corporation-tax-good-or-bad-for-growth/

https://www.oecd.org/tax/corporate-tax-remains-a-key-revenue-source-despite-falling-rates-worldwide.htm

https://www.bizlatinhub.com/ease-doing-business-latin-america-summary/

https://www.worldbank.org/en/region/afr/overview

https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=ZA

https://www.bbc.co.uk/news/world-africa-14094760

http://worldpopulationreview.com/countries/richest-countries-in-the-world/

About the author

Lucy Desai is a content writer based in Newcastle upon Tyne, specialising in current affairs, business and lifestyle pieces.

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