UHY Reports: US Businesses Face Corporate Tax Rates Well Above World Average - Study of Major Global Economies

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Headline rate above global, G7 and European averages; UK and Russia have lowest corporation tax rates of major global economies

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Businesses in the US are paying among the highest corporation taxes in the world at a rate well above the global average, reveals a new study by UHY, a leading international accounting and consultancy network.

According to UHY, the US’ corporation tax rate was 41.1 percent (combined federal and assumed state tax rate of 7.1 percent) on taxable profits of $1,000,000 for the financial year ending 2015*.

This 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 points out that the US’ high corporate tax rate is in fact mitigated by a variety of tax planning opportunities and deductions which result in many businesses’ effective tax rate being far lower than 41 percent.

UHY explains that low corporation 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.

UHY tax professionals studied corporation tax data on taxable profits of $1,000,000 in 31 countries across its international network, including all members of the G7, as well as key emerging economies.

The USA is at the top of the table of economies with the highest corporation tax in the study, charging a stated rate of 41.1 percent. By comparison, its North American neighbor Canada (which charges 26.7 percent) has a much lower rate and fellow G7 member, the UK (which charged 21 percent in 2015) has almost half the corporate tax rate of the US.

Japan is 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.

Comments Dennis Petri of UHY LLP, a member of UHY, who also sits on UHY’s board of directors: “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.”

“Enabling companies to retain more of their profits encourages them to re-invest more capital back into their business, helping to drive innovation.”

“The US 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 points out 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.

UHY says that 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).

Dennis Petri says, “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.”

“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 adds that the UAE 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%

*2014/15    **2013/14
***In recent tax years, Spain has reduced the corporate tax rate from 30% to 28% in 2015 and to 25% in 2016, with start-ups paying a reduced 15% in their first year of profits.

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About UHY LLP
UHY LLP, a licensed CPA firm, provides audit and other attest services to publicly traded, privately owned and nonprofit organizations in a number of industry sectors. UHY Advisors provides tax and advisory services to entrepreneurial and other organizations, principally those enterprises in the dynamic middle market.

UHY LLP, operating in an alternative practice structure with UHY Advisors, forms one of the largest professional services firms in the US. While that scale might provide confidence for some clients, others tell us our greatest value is the way we bring these resources to bear to help address today’s evolving business challenges. It’s a philosophy we call “The Next Level of Service”. To learn more visit http://www.uhy-us.com.

All of the above entities are members of UHY International (“UHYI”), a worldwide network of independent professional services firms that provide audit, tax and advisory services around the globe. UHYI is ranked among the top international accountancy networks and a proud member in good standing of the Forum of Firms. Collectively, our US operating entities (UHY LLP and UHY Advisors) are the largest independent members of UHYI with significant participation, bringing the power of our international network to serve the individualized needs of our clients.

About UHY, the network
Established in 1986 and based in London, UK, UHY is a network of independent audit, accounting, tax and consulting firms with offices in over 296 major business centres across more than 89 countries. Our staff members, over 7,660 strong, are proud to be part of the 16th largest international accounting and consultancy network. Each member of UHY is a legally separate and independent firm. For further information on UHY please go to http://www.uhy.com.

UHY press contact: Dominique Maeremans on +44 20 7767 2621 Email: d.maeremans(at)uhy(dot)com

UHY is a full member of the Forum of Firms, an association of international networks of accounting firms. For additional information on the Forum of Firms, visit http://www.forumoffirms.org.

UHY is an international association of independent accounting and consultancy firms, whose organizing body is Urbach Hacker Young International Limited, a UK company. Each member of UHY is a separate and independent firm. Services to clients are provided by the UHY member firms and not by Urbach Hacker Young International Limited. Neither Urbach Hacker Young International Limited nor any member of UHY has any liability for services provided by other members.

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Chris Clark
UHY LLP
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