Monday, April 07, 2008

101 Countries Have Lower Total Tax Rate than U.S.

From the World Bank and PricewaterhouseCoopers study "Paying Taxes 2008: The Global Picture:"

The Paying Taxes Study involves gathering information on the tax affairs of a standard case study company in 178 countries, by reviewing the financial statements and a list of transactions of a standard modest-sized firm. This information is used to generate three indicators related to the number of tax payments, the time taken to comply with its tax affairs, and the tax cost. These are equally weighted to produce an overall ranking for each country for the ease of paying taxes.

From the Executive Summary: The results show that tax reform is widespread. This year 31 countries improved their tax system and 65 have done so over the past three years.

Reducing corporate income tax was the most popular reform.

However, many countries have made changes to reduce the compliance burden by simplifying or eliminating other business taxes.

Total tax rates have been in a downward trend during the period in which Paying Taxes data has been collected.

Rankings for the United States:

Total Tax Payments: Rank #21/178 (10 different tax payments)

Total Tax Rate: #102/178 (46.2% total tax rate)

Time to Comply: #122/178 (325 hours)

Overall Ranking for the Ease of Paying Taxes: #76/178

Comment: Before American politicians consider imposing higher taxes on U.S. corporations, they should keep in mind that there are 101 countries that have a lower total tax rate than the U.S., 121 countries with a lower time to comply for corporate taxes, and 75 countries have a lower overall ranking for "ease of paying taxes."

Further, the global trend is towards LOWER total tax rates. In today's highly globalized economy, the mobility of capital, talent, investment and production is greater than ever, and they will move to where they receive the best tax treatment. As the NCPA points out "Despite the popular perception of America as a land of laissez-faire," this World Bank study tells a much different story of an economy with an uncompetitive, high corporate tax burden.


At 4/07/2008 11:42 PM, Blogger Unknown said...

Now Perry, I know you know better than that.

That the corporate tax rate in Ireland is less than it is in America does not mean that in the long run 100% of all business will be conducted in Ireland.

Markets will adjust to maximize the use of scarce resources. There are not enough people in Ireland to put all the jobs there. Wages will rise a little in Ireland, they will fall a little in America, and boom: the relative strength of Ireland's tax rates are now a relative weakness in wages. If the reduced corporate tax rates were paid for by increasing income taxes then it is possible the people of Ireland are no better off.

Yes, I would prefer lower tax rates everywhere and under all circumstances. But this is an economics blog, not the Senate floor, and the "competitive" argument in my opinion both misses the point and does more harm than good.

It creates a false association: the reduction of regulatory burden is just as beneficial in country #1 on the list as it is in #122. Less time spent filling out paperwork means more productivity and higher living standards, regardless of how globalized the economy is. And such talk can be quite harmful: politicians can perceive your vision of companies going overseas in persuit of lower taxes as a threat. Politicians might start making threats of their own to either raise tariffs or restrict corporate freedom, both of which would be quite destructive.

At 4/08/2008 10:30 AM, Blogger James R Ament said...


A massive exit of companies going overseas is unlikely, as most politicians bank on, but your point is well taken. Remember Hillary's diatribe when Halliburton announced their move of only some corporate offices to the Middle East? How unpatriotic!

I'd actually like to see some companies pack up and go if it made financial sense to to so, for the longevity and strength of the firm - to push the issue a bit - and force the public debate.

At 4/08/2008 2:29 PM, Anonymous Anonymous said...


Regulatory burden represents a significant cost to businesses.

When you spend as much time as I do making remittances, getting statutory declarations, administering GST input credits, calculating 5 different payroll taxes, ensuring that one is in full compliance with the employees standards act, you understand the burden that is represented by regulation. This is to say nothing of licensing, insurance and education requirements for our architectural practice.

I don't agree that these discussions do "more harm than good". Allowing important economic issues to be sidelined in favor of populism seems to be of far greater danger.

It has often been said that one gets the leaders that one deserves. One has an obligation as a citizen to ask the occasional tough question so that we get more than just a used car salesman for president.

At 4/08/2008 5:41 PM, Blogger juandos said...

populism = theft

Hmmm, I think some people are missing the point...

"However, many countries have made changes to reduce the compliance burden by simplifying or eliminating other business taxes"...

From Ten Thousand Commandments 2007

Extrapolations from an estimate of the federal regulatory enterprise by economist Mark Crain show that regulatory costs hit $1.14 trillion in 2006.

Given that 2006 government spending reached $2.654 trillion, the hidden tax of regulation now approaches half the level of federal spending itself.

Regulatory costs are more than quadruple the $248 billion budget deficit.

Regulatory costs exceed 2004 corporate pretax profits of $1.059 trillion. (there is more)

I see trillions of reason for companies to move off of American shores...

Professor Crain also shows that compliance costs hit small businesses even harder than larger companies...

At 4/09/2008 2:19 AM, Blogger Sam Less said...

Hi Perry,

I think Gregory's perspective has a proper logical solution. Anyways thanks everybody for sharing this wonderful information.
Save On Taxes


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