Spain?s Socialist Government Proposes Reduction in Corporate Income Tax Rate from 35 to 30 percent

January 24, 2006

The Spanish Ministry of Finance just announced that they will propose a reduction in Spain’s corporate income tax rate starting this year. The rate is currently 35 percent (identical to the U.S. federal rate) and the proposal would reduce the rate by 1 percentage point each year until the rate equals 30 percent. Spain is the latest country to follow the trend of corporate rate reduction, a trend which is ignoring traditional political boundaries.

Spain currently has the fifth-highest statutory corporate income tax rate among countries in the Organisation for Economic Co-operation and Development (OECD) (see table below). Spain’s reduction to 30 percent would (assuming no other changes in OECD corporate income tax rates) move it closer to the OECD average rate of 29.2 percent, and tie Spain with Australia, Denmark, Mexico, Turkey, and the United Kingdom for the thirteenth-highest rate.

The table above also shows that the U.S. currently has the highest statutory corporate income tax rate in the world: 39.3 percent when the federal and state rates are combined. The U.S. would have to reduce the federal rate from 35 to 24.9 percent just to move to the OECD average. With countries like Spain moving to reduce their corporate income tax rates, the cost of U.S. inaction continues to climb.


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