G7 Corporate tax rates and international competitiveness

Corporate tax rates across the G7, Q1 2012 GDP and change from Q4 2011

I’ve gotten some interesting data from The World Bank recently and merged it with other datasets I had; the chart above shows corporate tax rates across the G7, and I’ve augmented each nation with its most recent GDP (Q1 2012) as well as the directional change in GDP from Q4 2011 (up, down, flat).

I think the chart speaks for itself but obviously the higher the corporate tax rate the lower the competitiveness of that nation. That is reflected in GDP. Businesses can choose where they’d like to base their operations, and given a choice between paying the highest corporate tax rates on the planet (e.g., America) or the lowest, their obligation to shareholders – and choice – is clear. And yes, I’m aware that the effective tax rate is often lower, but American CFOs are tired of playing the “lets find a loophole game” with the US tax authorities and want a simpler, more transparent tax system. In other words, the cost of compliance is too high. I’m not sure I’d go so far as to suggest the corporate tax rate should be zero, but America currently has a higher corporate tax rate than France. A nation many Americans regard as “socialist”, by the way.

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