Corporate Income Tax Rates Around the World May 5, 2006 Andrew Chamberlain Andrew Chamberlain 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. Stay informed on the tax policies impacting you. Subscribe to get insights from our trusted experts delivered straight to your inbox. Subscribe Share Tweet Share Email Topics Center for Federal Tax Policy Corporate Income Taxes Corporate Tax Rates Around the World International Taxes
