Many America corporations complain about their high rate of taxation. It should be noted that most American corporations don’t pay the full 40% rate. Why? Clever tax accountants find ways to reduce the burden through legal loopholes and by parking money overseas in low tax rate nations.
The U.S. however, is not alone in having lofty corporate tax rates. Below we list the top corporate tax rates among major economies around the world, as compiled by the consultancy KPMG (you can see the full list here). Is it merely a coincidence that, with the exception of the U.S., the countries with the highest corporate tax rates are struggling economically?
1. United States – 40%
America has the highest corporate tax rate in the world among major economies. Its top rate of 40% has encouraged a number of companies to “invert.” In an inversion, a U.S. company buys a foreign subsidiary and moves its headquarters (on paper, at least) to that country to enjoy a lower tax rate—a practice that Fortune has called positively un-American.
2. Japan – 35.64%
Japan’s economy has struggled for decades with deflation and slow growth. As part of the country’s broad revival strategy, dubbed “Abenomics” after Prime Minister Shinzo Abe, Japan plans to cut the corporate tax rate to below 30%. The first rate reductions will be made in fiscal year 2015.
3. Argentina – 35%
Although Argentina’s government reported some positive statistics in the most recent quarter, the nation’s lofty 35% corporate tax rate can’t be helping its struggling economy get back on track. High taxes combined with a free-falling peso and a chronic debt dispute with global creditors only increase the pressure on companies operating in Latin America’s third-largest economy.
4. (tie) Pakistan – 34%
The GDP of this nation of 189 million is growing 4.2% annually. Security, however, remains fragile as Pakistan plays a strategic role in the West’s confrontation with Islamist terror groups. The country will need to attract investors through privatization and regulatory reform, which would include, one hopes, its high corporate tax rate.
4. (tie) Venezuela – 34%
A high corporate tax rate is the least of Venezuela’s problems. The South American nation has the highest inflation rate in the world at 64%. And falling oil prices haven’t helped the nation’s crushing debt load; the fossil fuel accounts for 95% of its exports.