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The Highest Corporation Taxes Around the World and the Main Drivers Behind them

21 October 2020 Lucy Desai, Content Writer at QuickBooks

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.

The top five richest countries in the world’s corporation tax are relatively varied, with Luxemburg standing at 27.08%, Norway at 22%, Iceland at 20%, Switzerland at 18% and Ireland at 12.5%. 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.

On average, Africa has the highest corporation tax rate throughout the world’s continents at 28.45% and South America, the second highest with an average rate of 27.63%. However, Europe stands at the lowest rate of 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. Let’s take a closer look at two continents, South America and Africa, paying the highest corporation tax rates in the world.

South America has most countries in highest corporation tax top 10
According to data analysed, Brazil and Venezuela have the highest corporation tax at 34%, followed closely by 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.

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.

Africa: the continent with the highest average corporation tax
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?

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


Sources:

https://tradingeconomics.com/country-list/corporate-tax-rate
https://taxfoundation.org/corporate-tax-rates-around-the-world-2019/
https://www.weforum.org/agenda/2020/01/corporation-tax-good-or-bad-for-growth/
https://www.oecd.org/tax/corporate-tax-remains-a-key-revenue-source-despite-falling-rates-worldwide.htm
https://www.bizlatinhub.com/ease-doing-business-latin-america-summary/
https://www.worldbank.org/en/region/afr/overview
https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=ZA
https://www.bbc.co.uk/news/world-africa-14094760
http://worldpopulationreview.com/countries/richest-countries-in-the-world/

 

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