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3 October 2011
- Chance for the UK to build on this competitive advantage
- Research by UHY, the international accounting and consultancy network
The UK has one of the lowest corporate tax burdens among the G8 countries, our research reveals.
Among the G8, only Russia imposes consistently lighter corporate taxes on businesses.
Our tax professionals studied tax data in 21 countries across its international network, including all members of the G8 as well as key emerging economies. Tax professionals based in each country calculated post-tax profits for businesses making annual statutory pre-tax profits of US$100,000, US$1 million and US$100 million.
The UK has the 16th highest tax burden out of 21 countries for businesses with annual pre-tax profits of US$100,000; the 14th highest tax burden for businesses with annual pre-tax profits of US$1 million; and the 12th highest tax burden for businesses with annual pre-tax profits of US$100 million. The tables (below) rank countries from highest tax burden first to the lowest tax burden last.
The G8 countries Corporate tax payable per country in US dollars (highest to lowest)
|
Tax payable |
Tax payable |
Tax payable |
||||||||
|
(assuming pre-tax profit of US$100,000) |
(assuming pre-tax profit of US$1 million) |
(based on statutory pre-tax profit of US$100 million) |
||||||||
|
Germany |
$32,450 |
32% |
Japan |
$419,900 |
42% |
Japan |
$41,990,000 |
42% |
||
|
Italy |
$31,400 |
31% |
USA |
$340,000 |
34% |
USA |
$35,000,000 |
35% |
||
|
Japan |
$31,106 |
31% |
France |
$333,333 |
33% |
France |
$34,397,363 |
34% |
||
|
France |
$23,350 |
23% |
Germany |
$324,500 |
32% |
Germany |
$32,450,000 |
32% |
||
|
USA |
$22,250 |
22% |
Italy |
$314,000 |
31% |
Italy |
$31,400,000 |
31% |
||
|
Russia |
$20,000 |
20% |
UK |
$238,337 |
24% |
Canada |
$29,187,384 |
29% |
||
|
UK |
$20,000 |
20% |
Canada |
$223,781 |
22% |
UK |
$26,000,000 |
26% |
||
|
Canada |
$15,500 |
16% |
Russia |
$200,000 |
20% |
Russia |
$20,000,000 |
20% |
||
The UK has the lowest corporate tax rate among the major European economies. Among the European countries surveyed, only Estonia, Romania, Ireland – and occasionally the Netherlands – impose lighter corporate taxes than the UK.
The UK also compares favourably to the BRIC nations (Brazil, Russia, India and China). All the BRIC nations – apart from Russia - take more in tax from business profits than the UK.
Roy Maugham, Tax Partner in our London comments: “While the UK has relatively high personal taxes, it is very competitive on corporate tax – particularly among the G8 and the BRIC nations, who are our major competitors.”
“The perception that the UK is a high tax jurisdiction for business is now something of a myth. There has been a lot of discussion about UK-resident businesses moving overseas – and this has happened – but the reality is that the UK is a considerably more welcoming business environment than most other major economies.”
“The UK now has a competitive advantage which most businesses would like the Government to build on further.”
“What’s particularly surprising is that, among the G8 countries, both the USA and Japan impose higher corporate taxes on many businesses than EU countries like France and Germany, which are traditionally seen as high tax economies.”
He adds: “Companies are increasingly mobile and are able to switch tax residence with relative ease. This has put governments in a quandary as they seek to boost tax revenues in order to shore up public finances. The UK Government has opted to resolve this problem by increasing personal taxes while reducing corporate tax rates. Once a major economy slashes corporate tax rates, however, it puts pressure on others to take similar measures to remain competitive.”
All 21 UHY countries surveyed Corporate tax payable per country in US dollars (highest to lowest)
|
Tax payable |
Tax payable |
Tax payable |
||||||||
|
(assuming pre-tax profit of US$100,000) |
(assuming pre-tax profit of US$1 million) |
(based on statutory pre-tax profit of US$100 million) |
||||||||
|
Brazil |
$34,000 |
34% |
Japan |
$419,900 |
42% |
Japan |
$41,990,000 |
42% |
||
|
Germany |
$32,450 |
32% |
USA |
$340,000 |
34% |
USA |
$35,000,000 |
35% |
||
|
Italy |
$31,400 |
31% |
Brazil |
$340,000 |
34% |
France |
$34,397,363 |
34% |
||
|
Japan |
$31,106 |
31% |
France |
$333,333 |
33% |
Brazil |
$34,000,000 |
34% |
||
|
India |
$30,900 |
31% |
Germany |
$324,500 |
32% |
Germany |
$32,450,000 |
32% |
||
|
Mexico |
$30,000 |
30% |
India |
$324,450 |
32% |
India |
$32,445,000 |
32% |
||
|
Australia |
$30,000 |
30% |
Italy |
$314,000 |
31% |
Italy |
$31,400,000 |
31% |
||
|
China |
$25,000 |
25% |
Australia |
$300,000 |
30% |
Australia |
$30,000,000 |
30% |
||
|
Malaysia |
$25,000 |
25% |
Mexico |
$300,000 |
30% |
Mexico |
$30,000,000 |
30% |
||
|
Spain |
$25,000 |
25% |
Spain |
$278,571 |
28% |
Spain |
$30,000,000 |
30% |
||
|
Israel |
$24,000 |
24% |
China |
$250,000 |
25% |
Canada |
$29,187,384 |
29% |
||
|
France |
$23,350 |
23% |
Malaysia |
$250,000 |
25% |
UK |
$26,000,000 |
26% |
||
|
USA |
$22,250 |
22% |
Israel |
$240,000 |
24% |
China |
$25,000,000 |
25% |
||
|
Nether- |
$20,000 |
20% |
UK |
$238,337 |
24% |
Malaysia |
$25,000,000 |
25% |
||
|
Russia |
$20,000 |
20% |
Nether- |
$235,714 |
24% |
Nether- |
$24,342,857 |
24% |
||
|
UK |
$20,000 |
20% |
Canada |
$223,781 |
22% |
Israel |
$24,000,000 |
24% |
||
|
Romania |
$16,000 |
16% |
Russia |
$200,000 |
20% |
Russia |
$20,000,000 |
20% |
||
|
Canada |
$15,500 |
15.5% |
Romania |
$160,000 |
16% |
Romania |
$16,000,000 |
16% |
||
|
Ireland |
$12,500 |
12.5% |
Ireland |
$125,000 |
12.5% |
Ireland |
$12,500,000 |
12.5% |
||
|
Dubai, UAE |
$0 |
0% |
Dubai, UAE |
$0 |
0% |
Dubai, UAE |
$0 |
0% |
||
|
Estonia |
$0 |
0% |
Estonia |
$0 |
0% |
Estonia |
$0 |
0% |
||
Our research reveals that (excluding Dubai and Estonia, which do not tax profits at all), for business with profits of US$100,000 per annum the difference in the amount of tax collected between the highest taxing country (Brazil) and the lowest taxing (Ireland) is US$21,500, which means that a business in Brazil would pay nearly three times more tax on its profits than the equivalent business in Ireland.
Roy comments: “The UK is very competitive on taxes for smaller companies. While a progressive tax model adds a degree of complexity, it does have the advantage of allowing companies with just US$100,000 annual profits to retain a greater proportion of their profits to reinvest or return to shareholders. This has to be good for small business creation and growth in the UK.”
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