One notable characteristic of this year’s presidential primaries is that many candidates have put together detailed tax plans—some of which are substantial departures from the status quo. However, no candidates would...
- The Tax Policy Blog
- No Joke. U.K. Cuts Corporate Tax Rate, U.S. Falls Further...
No Joke. U.K. Cuts Corporate Tax Rate, U.S. Falls Further Beyond
In another sign that the U.S. tax system is falling further behind the rest of the world, today, April 1, 2011, Great Britain lowers its corporate tax rate from 28 percent to 26 percent as a first step toward the goal of having a 23 percent rate in 2014. The new rate gives the U.K. a nine percentage point edge over the U.S. federal rate and is thirteen points lower than the overall U.S. rate of roughly 39 percent.
American businesses report more foreign earnings in Great Britain than any other country - roughly $150 billion in gross sales in 2007, according to the IRS. The lower rate will surely incentivize U.S. firms to keep those profits working in the U.K. rather than bring them home.
On January 1st of this year, Canada lowered its federal corporate tax rate from 18 percent to 16.5 percent. Next year the rate will fall to 15 percent. The overall Canadian rate - including the average provincial rate - is heading toward 25 percent, ten percentage points below the U.S. rate. No doubt many U.S. firms are wondering what it would take to become a Canadian company.
As is well known, Japan was scheduled to cut its overall corporate rate by 5 percent until the tragic earthquake derailed their economy. This would have left the U.S. with the highest overall corporate tax rate in the industrialized world.
All three of these countries have effectively moved toward a territorial or exemption form of taxing the foreign profits of their multination firms. The U.S. remains the only country with a world-wide system and a rate above 30 percent.
This is a case where American exceptionalism is a very bad thing.
Get Email Updates from the Tax Foundation
We will never sell or share your information with third parties.
Join the Tax Foundation's fight for sound tax policy Go
About the Tax Policy Blog
The Tax Policy Blog is the official blog 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.