Northampton accountants Harris & Co, report that high corporation taxes in developed nations compared to emerging economies are putting their future economic growth at risk, according to research by UHY.
Tax professionals in UHY member firms looked at tax data in 26 countries across its international network, including all members of the G7, as well as key emerging economies.
The findings show that on taxable profits of $1m (£650,000), the G7 group of developed economies takes an average 32.6% of corporate profits in tax, compared to an average of 30.3% in the Brazil, Russia, India and China (BRIC) economies.
The average global tax on profits of $100,000 is 25.6%, while the BRIC average is 27.8%, and the G7 average is 30.2%.
The study shows Japan tops the table, with charges of 43% on corporate profits of $1m. The UAE charges no tax on corporate profits, while the Irish government takes just 12.5% of corporate profits in tax.
Ladislav Hornan, chairman of UHY, said:
‘Corporation taxes are a significant burden for businesses, and that burden is far higher in developed economies than in emerging markets. High corporation taxes mean businesses in developed economies cannot compete on a level playing field, suppressing growth in economies that are already struggling.’
The UK has the sixth lowest rate of corporation tax according to UHY research, with the government taking 22.7% in tax from taxable profits of $1m. The average tax rate for all the countries in the study is 26.9%.
Aileen Scott, tax partner with Campbell Dallas, the only Scottish member of UHY, said:
‘Cutting corporation tax has been one of this government’s most successful pro-business policies. Ministers should press home the advantage they have created for the UK by cutting corporate taxes further than has already been announced.’
Hornan added that all G7 governments should consider cutting the headline corporation tax rate rather than trying to boost competitiveness through introducing new reliefs, as this is simpler for businesses to understand and creates less of an administrative burden.