The five countries with the highest corporate tax rates


Next year, President Obama wants to reinstate the 20% R&D tax credit and make it permanent, adjust the alternative minimum tax for inflation, and reduce the corporate income tax rate to 28% from 35%. On the flip side, he has pledged to phase out the George W. Bush tax cuts on upper income Americans. This would increase personal income, capital gains, death and dividend taxes, especially for those in the top income bracket making $250,000 or more a year. Governor Romney is advocating for tax reform that would lower the corporate income tax rate to 25% from 35%, reduce personal and capital gains and dividends taxes, while eliminating the death and individual alternative minimum tax. He has also stated plans to extend 100% expensing for all businesses for a year, so entrepreneurs are able to immediately recover their costs and reinvest in their business in 2013. He too, wants to make a 20% R&D tax credit permanent. Most importantly, he would not phase out the George W. Bush tax cuts. Reality Check: Taxmageddon is coming to Main Street. Among the tax provisions scheduled to dramatically increase at the end of 2012 are marginal tax rates for individuals, the estate tax, capital gains, and dividend rates. These add up to an almost-$500 billion tax increase for 2013 alone. According to Chris Whitcomb at the National Federation of Independent Business, "Small business owners will be hit hardest because 75% of these concerns are pass through entities [i.e., LLCs, partnerships, sole proprietorships] that are taxed at the individual rate." Here's how the uptick in tax rates play out: Obama's proposed personal income tax rate for the top bracket (approximately 24% of small business employers, according to a 2011 Treasury Department report based on 2007 tax data) in 2013 is 39.6%. If you add in the Medicare tax, the top rate hits 43.4%. On top of this, there are plans to raise the capital gains tax next year from 5% to 20% (23.8% with the Medicare tax), the death tax to 45% from 35% (with an exemption level of $3.5 million), and the dividends tax to a top rate of 20% from 15%.
Photograph by Andrew Harrer — Bloomberg/Getty Images

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%

Buenos Aires at night

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%

Traffic in Karachi

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%

An oil refinery in Venezuela

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.

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