Corporation tax is taxable annual profit from companies operating in that country, comparable to income tax that individual citizens pay. In general, it has been reported that large developed countries have higher corporate tax rates than developing countries, as business requires a stable environment to contribute to, whether it’s a business selling invoicing software or a hairdressers.
However, according to the OECD (Organisation for Economic Co-operation and Development), corporate tax has fallen across 88 countries from high rates between 40-50% in the 1980s, driven by the belief that low rates stimulate investment and enterprise in economies.
Corporation tax in Africa
Being the poorest continent in the world, Africa unsurprisingly has the highest average corporation tax at 28.45%. With the highest in this data being Zambia at 35% and the lowest being Libya and Madagascar at 20%, South Africa stands roughly in the middle at 28%, slightly above average for Africa overall. Does this mean that South Africa is the safest bet for business?
South Africa is one of Africa’s largest economies, with 54 diverse countries in terms of political stability, development, growth, and population. As South Africa has been a relatively slow growth area over the years, corporation tax dropped from 34.55% in 2012 to the current rate — but was this effective? GDP in South Africa has fluctuated quite dramatically since the 1960s. Business favours countries with political stability, which is something South Africa doesn’t currently have. Furthermore, South Africa’s government debt to GDP sits roughly in the middle of the continent’s countries — is this influencing their corporate tax rate?
Corporation tax in South America
According to data analysed, Puerto Rico has the highest corporation tax at 37.5%, followed closely by Brazil and Venezuela at 34%, Colombia at 33%, and Argentina at 30%, making South America the continent with the most countries in the top 10 who pay the highest corporation tax. On average, South America has the second highest corporate tax rate at 27.63%, whereas Europe stands the lowest at 20.27%. Does this contradict the claim that developed countries pay higher tax?
OECD explained that corporation tax plays a key part in government revenue. This is particularly true in developing countries, despite the global trend of falling rates since the 1980s. However, it is unclear whether South America, as an emerging continent, is charging higher taxes in order to raise government revenue or to benefit from businesses that are looking to expand internationally and enter new markets. According to research, South America is becoming a popular choice for business to enter, with strong trade links and an advantageous geographic location. Indeed, South America is a large continent where some countries are business friendly and others are harder to penetrate.
While corporation tax rates are influenced by the country’s definition, there’s clearly a pattern with developing countries and emerging economies paying higher rates to sustain the country. However, the top five richest countries in the world’s corporation tax are Luxemburg at 27.08%, Norway at 22%, Switzerland at 18%, Ireland at 12.5%, and Iceland at 20%, which is relatively varied. It would appear that some countries’ cultures factor into how much tax they pay. For example, Scandinavian countries are proud to pay higher taxes to contribute to social welfare.
| Country | Continent | Tax (%) |
| Puerto Rico | North America | 37.5 |
| Zambia | Africa | 35 |
| Brazil | South America | 34 |
| Venezuela | South America | 34 |
| France | Europe | 33.3 |
| Columbia | South America | 33 |
| Morocco | Africa | 31 |
| Japan | Asia Pacific | 30.62 |
| Mexico | North America | 30 |
| Argentina | South America | 30 |
| Germany | Europe | 30 |
| Australia | Asia Pacific | 30 |
| Philippines | Asia Pacific | 30 |
| Kenya | Africa | 30 |
| Nigeria | Africa | 30 |
| Congo | Africa | 30 |
| Belgium | Europe | 29 |
| Pakistan | Asia Pacific | 29 |
| Sri Lanka | Asia Pacific | 28 |
| New Zealand | Asia Pacific | 28 |
| South Africa | Africa | 28 |
| Luxembourg | Europe | 27.08 |
| Chile | South America | 27 |
| Canada | North America | 26.5 |
| Algeria | Africa | 26 |
| India | Asia Pacific | 25.17 |
| Jamaica | North America | 25 |
| Chile | South America | 25 |
| Ecuador | South America | 25 |
| Netherlands | Europe | 25 |
| Spain | Europe | 25 |
| Austria | Europe | 25 |
| South Korea | Asia Pacific | 25 |
| Bangladesh | Asia Pacific | 25 |
| China | Asia Pacific | 25 |
| Indonesia | Asia Pacific | 25 |
| Zimbabwe | Africa | 25 |
| Tunisia | Africa | 25 |
| Greece | Europe | 24 |
| Italy | Europe | 24 |
| Malaysia | Asia Pacific | 24 |
| Israel | Middle East | 23 |
| Egypt | Africa | 22.5 |
| Norway | Europe | 22 |
| Denmark | Europe | 22 |
| Turkey | Europe | 22 |
| Sweden | Europe | 21.4 |
| United States | North America | 21 |
| Portugal | Europe | 21 |
| Russia | Europe | 20 |
| Finland | Europe | 20 |
| Iceland | Europe | 20 |
| Afghanistan | Asia Pacific | 20 |
| Azerbaijan | Asia Pacific | 20 |
| Kazakhstan | Asia Pacific | 20 |
| Thailand | Asia Pacific | 20 |
| Vietnam | Asia Pacific | 20 |
| Cambodia | Asia Pacific | 20 |
| Taiwan | Asia Pacific | 20 |
| Saudi Arabia | Middle East | 20 |
| Jordan | Middle East | 20 |
| Yemen | Middle East | 20 |
| Madagascar | Africa | 20 |
| Libya | Africa | 20 |
| Slovenia | Europe | 19 |
| Czech Republic | Europe | 19 |
| Poland | Europe | 19 |
| United Kingdom | Europe | 19 |
| Belarus | Europe | 18 |
| Croatia | Europe | 18 |
| Switzerland | Europe | 18 |
| Ukraine | Europe | 18 |
| Singapore | Asia Pacific | 17 |
| Hong Kong | Asia Pacific | 16.5 |
| Lithuania | Europe | 15 |
| Georgia | Asia Pacific | 15 |
| Maldives | Asia Pacific | 15 |
| Kuwait | Middle East | 15 |
| Iraq | Middle East | 15 |
| Ireland | Europe | 12.5 |
| Cyprus | Europe | 12.5 |
| Bulgaria | Europe | 10 |
| Qatar | Middle East | 10 |
| Hungary | Europe | 9 |
| Barbados | North America | 5.5 |