See where rates are high, low and non-existent

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As our world becomes more interconnected and doing business across borders becomes more common, corporate tax rates have become a hot topic – the deciding factor when it comes to foreign investment. Some of the world’s biggest companies, including tech giants like Apple, Amazon and Google, have turned to countries with lower rates to save big on taxes, rewarding those that bring them the biggest profits.

Minimal international coordination regarding corporate taxes led the leaders of the world’s 20 largest economies (G-20) to endorse a 15% global minimum tax rate last October. “We call on the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting to rapidly develop model rules and multilateral instruments as agreed in the Detailed Implementation Plan, with a view to ensuring that the new rules come into force globally in 2023,” states the draft conclusions, seen by Reuters.

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The agreement was signed by 136 countries, representing 90% of the world economy, according to the World Economic Forum. The new rate applies to the foreign earnings of multinational companies with $868 million in sales globally and allows local governments to set a tax rate of their choosing, although a company’s home government could raise its taxes to meet the 15% minimum threshold and avoid the earnings gap. .

To get an idea of ​​how widely corporate tax rates vary from country to country, small business loan company OnDeck charted it. OnDeck pulled corporate tax rate data from KPMG, Tax Foundation, Trading Economics, PricewaterhouseCoopers, Deloitte, and various government websites, applying each country’s tax laws to “a model company with revenues of $1 million, profits of $100,000 at year, five to nine employees, is owned by a resident of the country in question and derives the majority of its income from business operations within the country in question”.

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The OnDeck study did not include companies in the oil, gas and mining sectors, or publicly traded companies.

This is what the study found.

North American tax rates for business owners are comparable to the world average

The average corporate tax rate for North American countries is 21.5%, almost in line with the world average. In the US, businesses are subject to a 21% federal tax rate in addition to state corporate taxes, ranging from 0% in South Dakota and Wyoming to more than 9% in Alaska, Illinois, Iowa, Minnesota and Pennsylvania, and a high of 11.5% in New Jersey, according to the Tax Foundation. Canada is very close to the US, imposing a tax of $27,125 per $100,000 in annual earnings.

But tax rates in nearby island nations vary more significantly, with St. Kitts and Nevis taxing $33,000 per $100,000 of annual earnings; $30,000 in Santa Lucia and several others; $15,000 in Cuba; and $0 in the Bahamas, the only remaining tax haven associated with the mainland.

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South America has the second highest average tax rate, plus barriers for business owners

Small businesses in South America are subject to an average tax rate of 26.1%, the second highest among all continents. Still, there is quite a bit of variation, with a tax of $36,000 per $100,000 in annual earnings in Suriname (the highest corporate tax rate anywhere in the world); $25,000 in Ecuador, Chile and various other countries; and only $10,000 in Paraguay. In addition, it takes an average of 42.1 days to start a business in South America, considerably longer than a day and a half in Canada, a day in Georgia or half a day in New Zealand.

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Africa has the highest corporate tax rate, on average

Africa has the highest average tax rate of any region, at 27.5%. According to the Organization for Economic Co-operation and Development (OECD), developing countries are more dependent on corporate income tax; in Malaysia, for example, corporate tax accounts for 66% of the country’s total tax revenue compared to just 9% in France and the UK. Chad, Comoros, Equatorial Guinea, Guinea, Sudan and Zambia have a tax rate of 35%, tied for the second highest in the world. The process of starting a business is also expensive and difficult; in Equatorial Guinea, for example, approximately 16 procedures are required to start a new business.

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Eastern Europe has some of the lowest corporate tax rates

The average corporate tax rate for European countries is 17.9%, notably lower than that of Africa, South America, or North America. Malta imposes the highest taxes at $35,000 per $100,000 of annual earnings, but the range is wide across the continent, dropping to just $15,000 in Georgia, $12,500 in Cyprus, and even as low as $0 in Monaco (depending on earn a minimum of 75% of income within the country) and Vatican City. Starting a business is also relatively convenient, taking just 12.7 days on average.

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The Middle East and Central Asia have the lowest average tax rate

Small businesses in the Middle East and Central Asia pay taxes at the lowest average rate, just 16.7%. Many governments in the region receive the majority of their revenue from domestic oil and gas companies (not included in this study), which lowers tax rates for small businesses outside of those sectors. Case in point: Qatar imposes a general corporate tax rate of $10,000 per $100,000 in annual profits and more than triples that figure to $35,000 (or even higher) for oil companies. Similarly, Bahrain serves as a tax haven for most companies, charging $0, but can impose a 46% tax rate on the net profits of oil and gas companies.

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Corporate tax rates vary significantly in the rest of Asia and Oceania

As we have already seen on various continents, tax rates can differ substantially from one country to another. For example, Japan has the highest rate in the region: $33,580 per $100,000 of annual earnings, while South Korea has one of the lowest in the region at just $11,000. Bangladesh, with a tax rate of $ 32,500 per $100,000 in annual earnings, is another notable high tax in the region, while island nations Nauru and Vanuatu round out tax havens around the world.

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