Corporation tax is taxable annual profit
from companies operating in that country, comparable to income tax that
individual citizens pay. In general, it has been reported that large developed
countries have higher corporate tax rates than developing countries, as
business requires a stable environment to contribute to, whether it’s a
business selling invoicing
software or a hairdressers.
However, according to the OECD
(Organisation for Economic Co-operation and Development), corporate tax has
fallen across 88 countries from high rates between 40-50% in the 1980s, driven
by the belief that low rates stimulate investment and enterprise in economies.
<h2 Corporation tax in Africa
Being the poorest continent in the world,
Africa unsurprisingly has the highest average corporation tax at 28.45%. With
the highest in this data being Zambia at 35% and the lowest being Libya and
Madagascar at 20%, South Africa stands roughly in the middle at 28%, slightly
above average for Africa overall. Does this mean that South Africa is the
safest bet for business?
South Africa is one of Africa’s largest
economies, with 54 diverse countries in terms of political stability, development,
growth, and population. As South Africa has been a relatively slow growth area
over the years, corporation tax dropped from 34.55% in 2012 to the current rate
— but was this effective? GDP in South Africa has fluctuated quite dramatically
since the 1960s. Business favours countries with political stability, which is something
South Africa doesn’t currently have. Furthermore, South
Africa’s government debt to GDP sits roughly in the middle of the
continent’s countries — is this influencing their corporate tax rate?
<h2 Corporation tax in South America
According to data analysed, Puerto Rico has
the highest corporation tax at 37.5%, followed closely by Brazil and Venezuela
at 34%, Colombia at 33%, and Argentina at 30%, making South America the
continent with the most countries in the top 10 who pay the highest corporation
tax. On average, South America has the second highest corporate tax rate at
27.63%, whereas Europe stands the lowest at 20.27%. Does this contradict the
claim that developed countries pay higher tax?
OECD explained that corporation tax plays a
key part in government revenue. This is particularly true in developing
countries, despite the global trend of falling rates since the 1980s. However,
it is unclear whether South America, as an emerging continent, is charging
higher taxes in order to raise government revenue or to benefit from businesses
that are looking to expand internationally and enter new markets. According to
research, South America is becoming a popular choice for business to enter,
with strong trade links and an advantageous geographic location. Indeed, South
America is a large continent where some countries are business friendly and
others are harder to penetrate.
While corporation tax rates are influenced
by the country’s definition, there’s clearly a pattern with developing
countries and emerging economies paying higher rates to sustain the country. However,
the top five richest countries in the world’s corporation tax are Luxemburg at
27.08%, Norway at 22%, Switzerland at 18%, Ireland at 12.5%, and Iceland at 20%,
which is relatively varied. It would appear that some countries’ cultures
factor into how much tax they pay. For example, Scandinavian
countries are proud to pay higher taxes to contribute to social welfare.
<table
Country
Continent
Tax (%)
Puerto Rico
North America
37.5
Zambia
Africa
35
Brazil
South America
34
Venezuela
South America
34
France
Europe
33.3
Columbia
South America
33
Morocco
Africa
31
Japan
Asia Pacific
30.62
Mexico
North America
30
Argentina
South America
30
Germany
Europe
30
Australia
Asia Pacific
30
Philippines
Asia Pacific
30
Kenya
Africa
30
Nigeria
Africa
30
Congo
Africa
30
Belgium
Europe
29
Pakistan
Asia Pacific
29
Sri Lanka
Asia Pacific
28
New Zealand
Asia Pacific
28
South Africa
Africa
28
Luxembourg
Europe
27.08
Chile
South America
27
Canada
North America
26.5
Algeria
Africa
26
India
Asia Pacific
25.17
Jamaica
North America
25
Chile
South America
25
Ecuador
South America
25
Netherlands
Europe
25
Spain
Europe
25
Austria
Europe
25
South Korea
Asia Pacific
25
Bangladesh
Asia Pacific
25
China
Asia Pacific
25
Indonesia
Asia Pacific
25
Zimbabwe
Africa
25
Tunisia
Africa
25
Greece
Europe
24
Italy
Europe
24
Malaysia
Asia Pacific
24
Israel
Middle East
23
Egypt
Africa
22.5
Norway
Europe
22
Denmark
Europe
22
Turkey
Europe
22
Sweden
Europe
21.4
United States
North America
21
Portugal
Europe
21
Russia
Europe
20
Finland
Europe
20
Iceland
Europe
20
Afghanistan
Asia Pacific
20
Azerbaijan
Asia Pacific
20
Kazakhstan
Asia Pacific
20
Thailand
Asia Pacific
20
Vietnam
Asia Pacific
20
Cambodia
Asia Pacific
20
Taiwan
Asia Pacific
20
Saudi Arabia
Middle East
20
Jordan
Middle East
20
Yemen
Middle East
20
Madagascar
Africa
20
Libya
Africa
20
Slovenia
Europe
19
Czech Republic
Europe
19
Poland
Europe
19
United Kingdom
Europe
19
Belarus
Europe
18
Croatia
Europe
18
Switzerland
Europe
18
Ukraine
Europe
18
Singapore
Asia Pacific
17
Hong Kong
Asia Pacific
16.5
Lithuania
Europe
15
Georgia
Asia Pacific
15
Maldives
Asia Pacific
15
Kuwait
Middle East
15
Iraq
Middle East
15
Ireland
Europe
12.5
Cyprus
Europe
12.5
Bulgaria
Europe
10
Qatar
Middle East
10
Hungary
Europe
9
Barbados
North America
5.5
