Effective Corporate Tax Rates in G20 Countries │ 2003 and 2012

It is common to think of the US as the rip-roaring home of market capitalism, at least as compared to most other high-income countries round the world. But this belief sits uncomfortably with the fact that US corporate tax rates are among the highest in the world. The Congressional Budget Office has published "International Comparisons of Corporate Income Tax Rates" (March 2017). It's a short just-the-facts report, with lots of tables and figures.

In most G20 countries, effective corporate tax rates declined from 2003 to 2012 — mainly because of reductions in top statutory rates. The decline in the U.S. rate was relatively small. As a result of small reductions, on average, in state tax rates, it dropped by less than half a percentage point between 2003 and 2012. By 2012, the U.S. rate was the fourthhighest among G20 countries. The largest declines were driven by a combination of changes. Italy’s rate dropped by 36 percentage points because of a reduction in the top statutory rate and the introduction of a tax allowance for corporate equity. In Canada, the 12 percentage-point decline was caused by a reduction in the top statutory rate and an acceleration of cost recovery allowances for equipment. Reductions in four countries’ top statutory corporate tax rates were accompanied by a deceleration of cost recovery allowances. In Germany and Turkey, the effect of the reduction in the statutory rate was greater than the effect of the change in the allowances, leading to reductions in the effective corporate tax rates. The opposite was true in India and the United Kingdom, where effective corporate tax rates rose.

In Argentina and Brazil, two of the three countries whose top statutory tax rates were unchanged from 2003 to 2012, effective corporate tax rates remained the same. Australia’s effective corporate tax rate declined because of an acceleration of its cost recovery allowances.