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.
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?
Corporation tax in South Americ
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.
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 |
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