Businesses in Ireland enjoy some of world’s lowest corporation taxes – study of major global economies
Headline rate well below global, G7 and European averages
USA and Japan top table for highest corporation tax rates
Businesses in Ireland are enjoying some of the lowest corporation taxes of any global economies, accounting for just an eighth of their profits, reveals a new study by UHY, a leading international accounting and consultancy network.
According to UHY, Ireland’s headline corporation tax rate was 12.5% on taxable profits of USD 1,000,000 for the financial year ending 2015*.
This is far lower than both the global average corporation tax rate of 27% and the European average of 25.3%. The G7 average is even higher at 32.3%.
UHY explains that low corporation taxes can help countries create competitive advantage and fuel growth by freeing up more profits for re-investment, discouraging domestic companies from moving investment overseas and attracting foreign companies to locate there.
UHY points out that Ireland’s corporation tax regime compares very favourably with other European economies. It is 8.5 percentage points lower than the UK (which charged 21% in 2015), and 16.3 percentage points lower than in Germany (28.8%).
UHY adds that Ireland has had its corporation tax rate at 12.5% for nearly twenty years, since 1998.
UHY tax professionals studied corporation tax data on taxable profits of USD1,000,000 in 31 countries across its international network, including all members of the G7, as well as key emerging economies.
The UAE has the lowest corporate taxes of any country in the study – charging no corporation tax at all – followed by Ireland (12.5%) and several eastern European countries including Romania, the Czech Republic and Croatia.
Comments Alan Farrelly of UHY Farrelly Dawe White Limited, a member of UHY: “Ireland is well positioned to seize competitive advantage from our comparatively much higher taxing western European neighbours such as the UK, France, and Germany, where other costs are also much higher than they are here.”
“Ireland attracts well-known and international corporations, including Intel, Microsoft, and Google, because we have one of the lowest corporate tax rates in Europe. Ireland has become an increasingly dynamic and rewarding business location.”
The USA is at the top of the table of economies with the highest corporation tax in the study, charging a headline rate of 41.1%. However, UHY points out that this is in fact mitigated by a variety of schemes and deductions which result in many businesses’ effective tax rate being far lower.
Japan is next, despite reducing corporation tax by 2.5% in a year as part of Prime Minister Shinzo Abe’s “Abenomics” policy to stimulate growth in the Japanese economy following more than two decades of stagnation.
Comments Alan Farrelly: “There is a global competition amongst countries to offer a lower corporation tax rate. It is not easy for a cash-strapped economy to do well in that competition but there are enormous advantages for those that can put themselves ahead of the pack.”
“Enabling companies to retain more of their profits encourages them to re-invest more capital back into their business, helping to drive innovation.”
“At fourteen and a half percentage points lower than the global average corporation tax rate, Ireland now has one of the most competitive regimes in the world. This is benefiting Ireland-based businesses of all sizes.”
“Ireland is looking to help its domestic business base grow, while at the same time making a play for more corporate investment from overseas.”
UHY says that of the 31 countries in the study, most (74%) have kept corporation tax rates the same over the last two years. Six (19%) lowered rates last year, while just two countries (Israel and India) raised it (see table below).
Global corporation tax rankings (by highest rate levied)
RankCountry2014-15 Tax Year data% Change since 2013-14Amount of corporation tax charged on $1,000,000Rate1USA$411,000.0041.1%0.0%2Japan$385,793.0038.6%-2.5%3France$377,748.0037.8%0.0%4Argentina$350,000.0035.0%0.0%4=Malta$350,000.0035.0%0.0%6Belgium$339,900.0034.0%0.0%7Brazil$337,029.7033.7%0.0%8India$330,630.0033.1%0.6%9Pakistan$330,000.0033.0%-1.0%–G7 Average$323,205.8632.3%-0.8%10Italy$323,200.0032.3%0.0%11Nigeria$320,000.0032.0%0.0%12Australia$300,000.0030.0%0.0%12=Mexico$300,000.0030.0%0.0%12=Spain***$300,000.0030.0%0.0%15Germany$287,700.0028.8%0.0%–BRIC Average$279,414.9327.9%0.2%–Global Average$261,534.7327.0%-0.4%16Canada$267,000.0026.7%0.0%17Israel$265,000.0026.5%1.5%–Europe Average$233,294.5725.3%-0.3%18China$250,000.0025.0%0.0%18=Uruguay$250,000.0025.0%0.0%20Jamaica$250,000.0025.0%-5.0%21Denmark$243,460.0024.4%-1.6%22Netherlands$239,116.0023.9%0.0%23Egypt$225,000.0022.5%-2.5%24UK$210,000.0021.0%-3.0%25Croatia$200,000.0020.0%0.0%25=Russia$200,000.0020.0%0.0%27Czech Republic$190,000.0019.0%0.0%27=Poland$190,000.0019.0%0.0%29Romania$160,000.0016.0%0.0%30Republic of Ireland$125,000.0012.5%0.0%31UAE$0.000.0%0.0%
*2014/15
**2013/14
*** In recent tax years, Spain has reduced the corporate tax rate from 30% to 28% in 2015 and to 25% in 2016, with start-ups paying a reduced 15% in their first year of profits.