Liberia: The Main Drivers of the Highest Corporation Taxes Around the World

analysis

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 continentsat 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

Bio:

Lucy Desai is a content writer at QuickBooks, a global company offering the world's leading accountancy software.

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/

By Lucy Desai

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