Corporate tax key
5 / 10 / 2011
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Spain still has one of the most competitive corporate tax rates for medium and large businesses in Europe, reveals research from UHY, the international accounting and consultancy network.

UHY tax professionals studied tax data in 21 countries across its international network, including all members of the G8 as well as key emerging economies. Tax professionals based in each country calculated post-tax profits for businesses making annual statutory pre-tax profits of US$100,000, US$1 million and US$100 million.

Spain has the tenth highest tax burden out of 21 countries for businesses with annual pre-tax profits of US$100,000, US$1 million and US$100 million. The tables (below) rank countries from highest tax burden first to the lowest tax burden last.

Table 1

Table 2

Joseph Fay, partner of UHY Fay & Co in Spain, a member of UHY comments: “Despite pressure for deficit reduction, Spain’s corporate tax rates remain in the mid-table. Corporate tax rates remain significantly lower than major competitors such as France, Germany and Italy – and Spanish businesses will want it to stay that way.”

“Companies are increasingly mobile and are able to switch tax domicile with relative ease. This has put governments in a quandary, as they seek to boost tax revenues in order to shore up public finances. Many countries have opted to resolve this problem by increasing personal taxes while reducing corporate tax rates. Once a major economy slashes corporate tax rates, however, it puts pressure on others to take similar measures to remain competitive. Whilst the Spanish government needs to cut borrowing, business confidence would be hit if corporate taxes were to rise further.”

John Wolfgang, chairman of UHY comments: “The difference between countries in the amount of tax they take from business profits is quite staggering. It will shock many commentators that, among the G8 countries, both the USA and Japan impose higher corporate taxes on many businesses than EU countries like France and Germany, which are traditionally seen as high tax economies.”

“Most non-G8 countries now impose a flat rate of tax regardless of the amount of profit generated. The majority of the G8 – with the exception of Germany, Italy and Russia – have progressive tax models with the effective tax rate increasing with profits. While this allows them to help smaller companies to grow, it does make their tax systems more complex.”

“High corporate taxes can deter business investment, which can hinder economic growth. Over the last decade many EU countries have slashed corporate taxes, leaving some of the BRIC nations, such as Brazil and India with surprisingly high tax rates in comparison.”

The UHY research reveals that (excluding Dubai and Estonia, which do not tax profits at all), for business with profits of US$100,000 per annum the difference in the amount of tax collected between the highest taxing country (Brazil) and the lowest taxing (Ireland) is US$21,500, which means that a business in Brazil would pay nearly three times more tax on its profits than the equivalent business in Ireland.

The calculations assume all exceptional gains and costs have been taken into consideration, as well as things like interest, the cost of stock options and goodwill amortisation. The tables (above) ranks countries from the highest tax burden first to the lowest tax burden last.

Article published at Expansion Economical Newspaper (04/10/11)

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