While the lower corporate guideline has reduced the incentive to shift profits, the shift to a territorial system that excludes certain income of U.S. multinational corporations from tax, coupled with the minimum tax structure of the TCJA, has created a compensatory incentive to shift profits outside the U.S. [5] EY, “Corporate Income Tax and introduce Carbon Tax”, 18 November 2021, www.ey.com/en_gl/tax-alerts/austrian-ministry-of-finance-publishes-draft-bill-to-reduce-corporate-income-tax-and-introduce-carbon-tax The methodology for calculating TEIs is described in detail in the OECD Working Paper on Taxation, Corporate Effective Tax Rates: Model Description and Results from 36 OECD and Non-OECD Countries, based on the theoretical model developed by Devereux and Griffith (1999, 2003). Built. Further methodological information can be found in the Explanatory Annex to effective corporate tax rates. According to the OECD, a global minimum corporate tax rate of 15% could bring $150 billion a year into government coffers. One hundred and forty-one of the 225 separate jurisdictions reviewed for 2021 have corporate tax rates equal to or less than 25%. One hundred and fifteen have tax rates above 20 and equal to or less than 30%. The average tax rate among the 225 jurisdictions is 23.54%.
[10] The United States has the 85th highest corporate tax rate with a combined federal-state legal rate of 25.77%. [11] President Biden`s “Made in America” tax plan, released in April, anticipated the changes needed to implement the OECD agreement and proposed strengthening corporate taxes in the United States and increasing revenues to finance essential investments. The reforms included in the “Build Back Better” framework announced by the White House on October 28 reflect these goals and would force multinationals to pay more for their fair share; cracking down on profit shifting and the abuse of tax havens; and a level playing field for American workers and small businesses. They are also in line with the second pillar of the OECD agreement and would encourage other countries to introduce their own versions of the minimum corporate tax. Congress is expected to enact these changes as part of the Build Back Better Act: Very few tax jurisdictions levy corporate tax at statutory rates of more than 35%. The chart below shows a distribution of corporate tax rates across 225 jurisdictions in 2021. Several countries (115 in total) set rates equal to or greater than 20% and less than 30%. Twenty-two jurisdictions have a legal corporate tax rate equal to or greater than 30% and less than 35%. Only three jurisdictions have a rate of more than 35%. Eighty-five jurisdictions have a legal corporate tax rate of less than 20% and 200 jurisdictions have a corporate tax rate of less than 30%. Among the countries of the Organisation for Economic Co-operation and Development (OECD), Austria, France, the Netherlands and the United Kingdom have announced that they will make changes to their statutory corporate tax rate in the coming years. ** Some of the erosion is due to the increase in non-corporate forms of ownership.
As noted by the former chairman of the Council of Economic Advisers, Jason Furman, corporate tax would remain low both in the historical context and compared to other countries, even if this change is taken into account, and the change cannot explain the sharp decline in corporate revenues from 2018 to 2020. While the absolute loss of revenue is lower due to the lower corporate tax rate of the TCJA, recent research suggests that profit shifting has continued since the Tax Act of 2017. A discussion of the factors that contribute to erosion can be found here. [11] Similar combinations of national and subnational rates can be included in this dataset. For example, the combined German corporate tax rate is 29.94%, which includes both the federal rate of 15% and municipal business taxes between 14 and 17%. In addition, the dataset includes historical official corporate tax rates for the period 1980 to 2021. However, these years cover the tax rates of fewer than 225 jurisdictions due to the lack of data points. Please inform the Tax Foundation if you are aware of any sources of historical corporate tax rates that are not mentioned in this report, as we are constantly striving to improve our data sets. Today, most countries have corporate tax rates below 30%. Notes: Continent abbreviations are: “AF” is Africa, “AS” is Asia, “EU” is Europe, “OC” is Oceania, “NO” is North America and “SA” is South America. Countries are assigned to continents based on ISO standards; see DataHub.io, “Complete country codes: ISO 3166, ITU, ISO 4217 currency codes and many more”, datahub.io/core/country-codes#resource-country-codes_zip.
. . .