Corporate Income Tax Rates Around the World

 
 
May 05, 2006

We've posted a new "Fiscal Fact" to the website this morning comparing statutory corporate income tax rates of the OECD countries. By this measure, the U.S. average statutory rate of 39.3 ranks second-highest, just behind Japan's 39.5 and well above the OECD average of 28.7.

Here's the full table of average statutory rates:

Country Corporate Tax Rate in 2000[1] Rank in 2000 Corporate Tax Rate in 2006 Rank in March 2006
Japan 40.9 3 39.5 1
United States[2] 39.4 6 39.3 2
Germany 52 1 38.9 3
Canada 44.6 2 36.1 4
France 37.8 7 35 5
Spain 35 11 35 5
Belgium 40.2 4 34 7
Italy 37 9 33 8
New Zealand 33 16 33 8
Greece 40 5 32 10
Netherlands 35 11 31.5 11
Luxembourg 37.5 8 30.4 12
Mexico 35 11 30 13
Australia 34 14 30 13
Turkey 33 16 30 13
United Kingdom 30 21 30 13
Denmark 32 18 28 17
Norway 28 26 28 17
Sweden 28 26 28 17
Portugal 35.2 10 27.5 20
Korea 30.8 20 27.5 20
Czech Republic 31 19 26 22
Finland 29 24 26 22
Austria 34 14 25 24
Switzerland 24.9 28 21.3 25
Poland 30 21 19 26
Slovak Republic 29 24 19 26
Iceland 30 21 18 28
Hungary 18 30 16 29
Ireland 24 29 12.5 30
OECD Average[3] 33.6 28.7
Note: Small changes are usually attributable to changes in sub-national rates.
[1] Rates for 2000 and 2006 are combined central and sub-central tax rates. Where sub-central income tax is deductible against central government tax, this is reflected in the net rate of the central government.
[2] The sub-central tax rate for the U.S. is calculated as a weighted average of state corporate income marginal income tax rates, 6.7 percent in 2000 and 6.6 percent in 2006, deductible in both years from federal taxable income.
[3] Unweighted average.

A cautionary note about comparisons. Within countries, some industries and corporate activities are penalized much more heavily than others—a fact that's masked by overall statutory averages. Average statutory rates can differ dramatically from average effective tax rates. And thanks to various tax preferences, both may differ sharply from marginal tax rates, which exert the most powerful influence on day-to-day investment decisions of companies.

For example, a recent KPMG study ranked the United Arab Emirates as having the highest average statutory tax rate of 55 percent among the 86 countries it studied. However, it turns out the UAE has no federal corporate tax, only provincial ones. The top rate for any industry may by 55 percent, but in practice it applies only to oil companies, and sometimes lawmakers "negotiate" special rates with individual companies as high at 85 percent. In contrast, foreign banks are taxed at just 20 percent, and some industries aren't taxed at all.

Here in the U.S., while the top federal corporate tax rate is 35 percent, state corporate tax rates add anywhere from less than 1 percent to 12 percent to that figure, resulting in vastly different statutory tax rates based on a company's location. U.S. companies unlucky enough to be headquartered in Iowa face a top statutory corporate tax rate of 47 percent, while Washington State corporations face only the 35 percent federal rate.

The lesson? Statutory average tax rates often differ substantially from effective rates. Even within countries, companies commonly face widely disparate effective tax rates based on location, industry, income—and whether lawmakers view them as worthy of special preferences or deserving of penalties.

Buy this blogger a cup of coffee!

Sizes

Follow Us

About the Tax Policy Blog

Subscribe to Tax Foundation - Tax Foundation's Tax Policy Blog The Tax Policy Blog is the official weblog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.

Monthly Archive

Privacy Policy