Earlier this week, Tax Foundation released a comprehensive study on corporate tax rates across the globe.
Looking into corporate tax rates in 208 jurisdictions, this study reveals that corporate tax has significantly dropped since 1980, moving from an average of “46.63 percent and 38.84 percent when weighted by GDP” to “26.47 percent and 23.03” in 2018.
According to Tax Foundation, this decline is the result of the negative impact corporate taxes have on “business investment decisions” and has led most corporate tax rates throughout the world to fall below the 30 percent threshold.
For instance, following the recent tax reform passed by the Trump administration, the US, which in the past had one of the highest corporate tax rates in the world, dropped its own to somewhere in the middle of the pack.
Furthermore, writes Tax Foundation’s Daniel Bunn, “all regions saw a net decline in average statutory rates between 1980 and 2018. The average declined the most in Europe, with the 1980 average of 40.5 percent dropping to 18.38 percent, representing almost a 55 percent rate reduction. South America has seen the smallest decline, with the average only decreasing by 29 percent from 39.66 percent in 1980 to 28.08 percent in 2018.”
The study also reveals “the largest shift occurred between 2000 and 2010, with 77 percent of countries imposing a statutory rate below 30 percent in 2010 and only 42 percent of countries imposing a statutory rate below 30 percent in 2000.”
Some of the other major findings of this in-depth study include:
- Overall, the developed world has higher corporate income tax rates than the developing one.
- Africa has the highest average corporate tax rate “at 28.81 percent (28.39 percent weighted by GDP),” while Europe falls at the other end of the spectrum with a rate of “18.38 percent (25.43 percent when weighted by GDP).”
- Finally, “the average top corporate rate among EU countries is 21.68 percent, 23.69 percent in OECD countries, and 63 percent in the G7.”
Africa Leads the Way With Highest Corporate Tax Rates
When discussing the highest corporate tax rates in the world, Africa sets the pace.
Even though the UAE comes in first with a corporate tax rate of 55 percent, seven of the top fifteen countries with the highest corporate tax rates originate in Africa.
Comoros comes in second at 50 percent and is followed by Chad, the Democratic Republic of Congo, Equatorial Guinea, Guinea, Sudan and Zambia at 35 percent.
Asia & Europe Have World's Lowest Corporate Tax Rates
At the other end of the spectrum and without including those jurisdictions where there is no corporate tax, several European and Asian countries rank in with the lowest rates.
Uzbekistan tops the list at 7.5 percent and is followed by Turkmenistan at 8 percent, Hungary and Montenegro at 9 percent, and then a slew of countries including Andorra, Bosnia and Herzegovina, Bulgaria, Gibraltar and Qatar at 10 percent.
Twelve of the 208 jurisdictions studied do not have a proper corporate tax rate.
Do you think this downward trend will continue? Let us know your thoughts below!