International Comparisons of Corporate Income Tax Rates

CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

CBO

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International

Comparisons of

Corporate

Income Tax Rates

MARCH 2017

Notes

Unless otherwise indicated, all years referred to in this document are calendar years.

Numbers in the text, tables, exhibits, and figures may not sum to totals because of rounding.

The data underlying the exhibits and figures in this report are posted along with the report on CBO¡¯s website

(publication/52419).

In this report, the top statutory tax rate encompasses national and local tax rates: The top statutory rate equals the sum

of the corporate income tax rate applied to income in the top bracket at the national level and, generally, the average of

the highest rates set by subnational governments in a given country (states or provinces, for example).

CBO

publication/52419

Contents

Summary and Introduction

Table 1. Corporate Tax Rates in G20 Countries, From Highest to Lowest, 2012

Statutory Corporate Tax Rates in the United States and Other Countries

Exhibits

6

7¨C9

Average Corporate Tax Rates in G20 Countries

Exhibits

10

12¨C14

Effective Corporate Tax Rates and Key Factors Affecting Those Rates

Exhibits

15

17¨C24

Appendix A: Methodology and Data Sources

Table A-1. Tax Treatment of Depreciation for Selected Types of Assets

25

30

Appendix B: The Sensitivity of Estimates of Effective Marginal Corporate Tax Rates to Certain Analytical Choices

Figure B-1. Effective Corporate Tax Rates With Alternative Allocations of Asset Shares in G20 Countries, 2012

33

34

Figure B-2. Effective Corporate Tax Rates With Alternative Rates of Inflation in G20 Countries, 2012

35

Figure B-3. Effective Corporate Tax Rates With Uniform and Country-Specific Rates of Inflation in G20 Countries, 2012

37

Figure B-4. Effective Corporate Tax Rates in G20 Countries With Alternative Financing Mixes, 2012

38

Figure B-5. Effective Corporate Tax Rates in Certain G20 Countries With Alternative Tax Treatments for

Investments in Intangible Assets, 2012

39

About This Document

CBO

1

2

41

List of Exhibits

Exhibit

1.

Statutory Rates for U.S. Federal Corporate Income Taxes, 2012

7

2.

Top Statutory Corporate Income Tax Rates in Selected Countries, Arrayed by GDP, 2012

8

3.

Top Statutory Corporate Income Tax Rates in G20 Countries, 2003 and 2012

9

4.

Number of U.S.-Owned Foreign Corporations in Other G20 Countries, 2004 and 2012

12

5.

Average and Top Statutory Corporate Income Tax Rates in G20 Countries, 2012

13

6.

Average Corporate Tax Rates in G20 Countries, 2004 and 2012

14

7.

Effective Corporate Tax Rates and Top Statutory Corporate Income Tax Rates in G20 Countries,

Inclusive of All Types of Assets and Financing Sources, 2012

17

Effective Corporate Tax Rates in G20 Countries, Inclusive of All Types of Assets and

Financing Sources, 2003 and 2012

18

Effective Corporate Tax Rates for Buildings and Equipment in G20 Countries, Inclusive of

All Types of Financing Sources, 2012

19

Effective Corporate Tax Rates for Equity-Financed Buildings and Equipment in

G20 Countries, 2012

20

Ratio of the Present Value of Cost Recovery Allowances to the Present Value of

Economic Depreciation for Buildings in G20 Countries, 2012

21

Ratio of the Present Value of Cost Recovery Allowances to the Present Value of

Economic Depreciation for Equipment in G20 Countries, 2012

22

13.

Effective Corporate Tax Rates for Debt- or Equity-Financed Buildings in G20 Countries, 2012

23

14.

Effective Corporate Tax Rates for Debt- or Equity-Financed Equipment in G20 Countries, 2012

24

8.

9.

10.

11.

12.

CBO

Page

International Comparisons of

Corporate Income Tax Rates

Summary and Introduction

In the United States, the top federal statutory

corporate income tax rate (the rate set by law that

applies to the highest corporate income tax

bracket) has been 35 percent since 1993. Most

corporate income is taxed at that rate. With state

taxes added in, the top statutory rate is even higher;

on average, that combined rate was 39.1 percent in

2012, among the highest in the world (see

Summary Table 1).1

The statutory corporate tax rate is one of many features of the tax system that influence corporate

behavior. Companies are likely also to consider

other provisions of the tax system¡ªincluding tax

preferences, surtaxes, and noncorporate taxes¡ª

that affect the amount of taxes they owe. Among

the alternative measures of tax rates that account

for some of those provisions are the average and

effective marginal corporate tax rates.

1. At the time that the tax rates considered in this analysis

were computed, 2012 was the most recent year for which

complete data were available.

CBO

The average corporate tax rate is a measure of the

total amount of corporate taxes that a company

pays as a share of its income. The Congressional

Budget Office estimates that the U.S. average

corporate tax rate for foreign-owned companies

incorporated in the United States in 2012 was

29 percent¡ªabout 10 percentage points below the

top U.S. statutory corporate tax rate.2

The effective marginal corporate tax rate (in this

document, the effective corporate tax rate), is a

measure of a corporation¡¯s tax burden on returns

from a marginal investment (one that is expected

to earn just enough, after taxes, to attract investors). CBO estimates that the effective corporate

tax rate was 19 percent in the United States in

2. The average corporate tax rate faced by foreign-owned

companies incorporated in the United States is used as a

proxy for the measure that a U.S. corporation with

operations in several countries would consider when

comparing a new investment in a foreign country with a

new investment in the United States. See Appendix A for

further discussion of CBO¡¯s analytical methods.

2012. That rate, the fourth highest among the

Group of 20 (G20) countries, was about 20 percentage points below the top U.S. statutory corporate tax rate.3

This chart book is an update and expansion of

CBO¡¯s 2005 report that examined statutory and

effective corporate tax rates for the United States

and member countries of the Organisation for

Economic Co-operation and Development and the

Group of 7 between 1982 and 2003.4 This report

focuses mainly on the 2012 tax rates in countries

3. The G20 consists of Argentina, Australia, Brazil, Canada,

China, France, Germany, India, Indonesia, Italy, Japan,

Mexico, Russia, Saudi Arabia, South Africa, South Korea,

Turkey, the United Kingdom, the United States, and the

European Union (a group of 28 countries, including

France, Germany, Italy, and the United Kingdom).

4. Congressional Budget Office, Corporate Income Tax Rates:

International Comparisons (November 2005),

publication/17501.

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