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US Has World's Third-Highest Corporate Tax Rate

by Mike Godfrey, Tax-News.com, Washington

05 October 2015


Not only does the United States retain the dubious distinction of having the highest corporate tax rate in the Organisation for Economic Cooperation and Development country grouping, it now has the third-highest rate of corporate tax in the world, according to the Tax Foundation.

The non-partisan tax policy think tank said in an article published on October 1 that America's highest marginal corporate tax rate of 39 percent (consisting of the federal tax rate of 35 percent plus the average tax rate among the states) is equaled by Puerto Rico, and is lower than just two other countries - Chad and the United Arab Emirates, which have corporate taxes of 40 percent and 55 percent, respectively (although, in the UAE, corporate tax applies only to the oil and banking sectors).

"It is well known that the United States has the highest corporate income tax rate among the 34 industrialized nations of the Organisation for Economic Co-operation and Development. However, it is less well known how the United States stacks up against countries throughout the entire world," observed Kyle Pomerleauan, Economist for the Tax Foundation's Center for Federal Tax Policy.

While the US corporate tax rate has remained static over the last decade, with Congress unable to agree on competitiveness-enhacing tax reform, most other countries have been cutting corporate tax, leaving America with one of the highest rates in the world. The Tax Foundation says that the US tax rate is now 16 percent higher than the worldwide average of 22.8 percent and a little more than nine percentage points higher than the worldwide GDP-weighted average of 29.8 percent.

Somewhat surprisingly, the region with the lowest average corporate tax rate is Europe, at 18.7 percent (26.1 percent weighted by GDP). In Europe, nine countries have top corporate tax rates of just 10 percent. Africa has the highest simple average, at 28.77 percent.

Larger, more industrialized countries tend to have higher corporate income tax rates than developing countries, and the United States is joined by France (34.4 percent), Brazil (34 percent), and India (34 percent) in the top-twenty.

Pomerleauan concluded: "The corporate income tax rate is one of many aspects of what makes a country's tax code and economy attractive for investment. However, as the rest of the world's economies mature and their tax rates on corporate income continue to decline, the United States risks losing its competitive edge due to its exceptionally high corporate income tax rate."

TAGS: Chad | United Arab Emirates | tax | investment | India | banking | tax rates | Brazil | France | Puerto Rico | United States | tax reform | Europe | Africa | Tax

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