U.S. companies are paying among the highest corporation taxes in the world at a rate well above the global average, according to a new study by the accounting and consulting firm network UHY.

UHY calculated that the U.S. corporation tax rate was 41.1 percent when combining federal and assumed state tax rate of 7.1 percent on taxable profits of $1 million for fiscal year 2015. Officially, however, the top federal corporate income tax rate is 35 percent.

The study found the U.S. corporate tax rate is far higher than the global average corporation tax rate of 27 percent. For European economies the average is 25.3 percent and the G7 average is even higher at 32.3 percent.

However, UHY acknowledged that the effective corporate tax rate for U.S. companies is often far lower than the statutory rate and is usually mitigated by a variety of tax-planning opportunities and tax deductions.

Low corporate taxes can help countries create competitive advantage and fuel growth by freeing up more profits for re-investment, discouraging domestic companies from moving investment overseas and attracting foreign companies to locate there, according to UHY.

UHY tax professionals studied corporation tax data on taxable profits of $1 million in 31 countries across its international network, including all members of the G7, along with key emerging economies.

The U.S. is at the top of the table of economies with the highest corporation tax in the study, charging a combined rate of 41.1 percent. In comparison, Canada (which charges 26.7 percent) has a much lower rate and fellow G7 member, the United Kingdom (which charged 21 percent in 2015) has almost half the corporate tax rate of the U.S.

Japan comes next, despite reducing corporation tax by 2.5 percent in a year as part of Prime Minister Shinzo Abe’s “Abenomics” policy to stimulate growth in the Japanese economy following more than two decades of stagnation.

“There is a global competition amongst countries to offer a lower corporation tax rate, and there are enormous advantages for those countries that can put themselves ahead of the pack,” said UHY LLP partner Dennis Petri, who sits on UHY’s board of directors. “Enabling companies to retain more of their profits encourages them to re-invest more capital back into their business, helping to drive innovation. The U.S. could see significant benefits by simplifying and reducing the corporate tax burden across the board, in order to better support the domestic business base and attract more corporate investment from overseas.”

UHY found that businesses in the UK and Russia are enjoying the lowest corporation taxes of the major global economies, accounting for just 21 percent and 20 percent of their profits respectively.

Of the 31 countries in the study, most (74 percent) have kept corporation tax rates the same over the last two years. Six (19 percent) lowered rates last year, while just two countries (Israel and India) raised it (see table below).

“Clearly there is not much appetite for governments to raise corporation tax rates in the current climate but there is little interest to lower them either,” Petri said in a statement. “Tinkering around the edges with a variety of reliefs and exemptions can create far more complicated systems which are then far more open to abuse and error. Simply cutting the stated rate sends a very clear message that an economy is very much on the side of business growth, expansion and continued investment. ”

UHY found the United Arab Emirates has the lowest corporate taxes of any country in the study—charging no corporation tax at all—followed by Ireland (12.5 percent) and several eastern European countries including Romania, the Czech Republic and Croatia.

Global corporation tax rankings (by highest rate levied)

Rank

Country

2014-15 Tax Year data

% Change since 2013-14

Amount of corporation tax charged on $1,000,000

Rate

1

USA

$411,000.00

41.1%

0.0%

2

Japan

$385,793.00

38.6%

-2.5%

3

France

$377,748.00

37.8%

0.0%

4

Argentina

$350,000.00

35.0%

0.0%

4=

Malta

$350,000.00

35.0%

0.0%

6

Belgium

$339,900.00

34.0%

0.0%

7

Brazil

$337,029.70

33.7%

0.0%

8

India

$330,630.00

33.1%

0.6%

9

Pakistan

$330,000.00

33.0%

-1.0%

-

G7 Average

$323,205.86

32.3%

-0.8%

10

Italy

$323,200.00

32.3%

0.0%

11

Nigeria

$320,000.00

32.0%

0.0%

12

Australia

$300,000.00

30.0%

0.0%

12=

Mexico

$300,000.00

30.0%

0.0%

12=

Spain*

$300,000.00

30.0%

0.0%

15

Germany

$287,700.00

28.8%

0.0%

-

BRIC Average

$279,414.93

27.9%

0.2%

-

Global Average

$261,534.73

27.0%

-0.4%

16

Canada

$267,000.00

26.7%

0.0%

17

Israel

$265,000.00

26.5%

1.5%

-

Europe Average

$233,294.57

25.3%

-0.3%

18

China

$250,000.00

25.0%

0.0%

18=

Uruguay

$250,000.00

25.0%

0.0%

20

Jamaica

$250,000.00

25.0%

-5.0%

21

Denmark

$243,460.00

24.4%

-1.6%

22

Netherlands

$239,116.00

23.9%

0.0%

23

Egypt

$225,000.00

22.5%

-2.5%

24

UK

$210,000.00

21.0%

-3.0%

25

Croatia

$200,000.00

20.0%

0.0%

25=

Russia

$200,000.00

20.0%

0.0%

27

Czech Republic

$190,000.00

19.0%

0.0%

27=

Poland

$190,000.00

19.0%

0.0%

29

Romania

$160,000.00

16.0%

0.0%

30

Republic of Ireland

$125,000.00

12.5%

0.0%

31

UAE

$0.00

0.0%

0.0%

* In recent tax years, Spain has reduced the corporate tax rate from 30 to 28 percent in 2015 and to 25 percent in 2016, with startups paying a reduced 15 percent in their first year of profits.

 

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