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OECD Says Worldwide Corporate Tax Rates are Decreasing

OECD Says Worldwide Corporate Tax Rates are Decreasing

Database looks at corporate tax rates and incentives in Canada and nearly 100 other jurisdictions

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Corporate income tax rates have fallen significantly across the world over the last 18 years, according to the OECD's Global Revenue Statistics Database. A new OECD report shows statutory corporate tax rates were lower in 2018 than they were in 2000 in the majority of the jurisdictions it looked at, even though those jurisdictions often relied on corporate taxes as a key source of revenue. Canada's average statutory corporate income tax rate fell to approximately 26.8% in 2018 (from 42.4% in 2000)—a significant decrease but still a higher corporate tax rate than most of the OECD jurisdictions in the study, (whose average rate declined to 23.7% in 2018, down from 32.2% in 2000).

This OECD database is a publicly available resource, it shows detailed and comparable information on corporate tax revenues, statutory corporate income tax rates, corporate effective tax rates and tax incentives related to innovation for nearly 100 countries around the world.

Statutory corporate income tax rates
The OECD analysis shows that, of the 94 jurisdictions studied (OECD and non-OECD countries):

  • The average statutory corporate income tax rates decreased to approximately 21.4% in 2018 (from 28.6% in 2000)
  • 76 jurisdictions (approximately 80%) had lower tax rates in 2018, in comparison to 2000
  • 12 had the same tax rate as in 2000 and only six had higher rates
  • 18 jurisdictions had statutory tax rates greater than or equal to 30% in 2018 (compared to 58 jurisdictions in 2000).

However, the analysis points out that just looking at a country's statutory tax rate can be misleading. For example, corporations may be able to access lower tax rates within a jurisdiction by:

  • Accessing progressive rate structures
  • Qualifying for different tax regimes applicable to small and medium-sized companies or companies operating in certain industries (such as Canada's small business deduction)
  • Accessing lower tax rates available for firms active in special or designated economic zones
  • Qualifying for preferential tax regimes offering lower rates to certain corporations or income types.

Corporate effective tax rates
The study notes that a jurisdiction's definition of the corporate tax base (including depreciation and other allowances) influences corporate income tax revenues. For example, the report notes that for jurisdictions that provide accelerated depreciation, the effective average tax rate in 2017 was, on average 1.8% lower than the statutory rate.

The publication finds that the effective average rate across the 74 jurisdictions reviewed for 2017 was 20.5% (lower than the year's average statutory corporate tax rate of 21.6%); Canada's average effective corporate tax rate in 2017 was slightly higher than average at 24.7% (2% less than its statutory corporate tax rate of 26.7% in the same year).

The report also considers that the corporate effective tax rate varies among asset categories, and on average is lowest for investments in buildings and machinery.

Tax incentives related to innovation
The study also notes that research and development (R&D) incentives have increased since 2000. For example, 30 of the OECD's 36 jurisdictions offer tax relief on R&D expenditures, up from 19 in 2000.

The database and report also provide a summary of the intellectual property (IP) regimes reviewed or under review by the Forum on Harmful Tax Practices.

Corporate tax revenues
The report finds that corporate tax revenues remain a significant source of tax revenues for governments across the world. In 2016, the report finds that corporate tax revenues accounted for 13.3% of total tax revenues on average for the 88 jurisdictions included in the review, and 9% for OECD countries. In Canada, the report finds that corporate tax revenues accounted for approximately 10.5% of total tax revenues in 2016.

For more information, contact your KPMG adviser.

Information is current to January 22, 2019. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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