Radar | Jun 24,2023
Dec 19 , 2020
By Lucy Desai
While corporation tax rates are influenced by a country’s policies, there is clearly a pattern with developing countries and emerging economies paying higher rates to sustain the country.
Some of the wealthiest countries in the world’s corporation tax are relatively varied, with Luxemburg standing at 27.08pc, Norway at 22pc, Iceland at 20pc, Switzerland at 18pc and Ireland at 12.5pc. It would appear that some countries’ cultures factor into how much tax they pay.
For instance, Scandinavian countries are proud to pay higher taxes to contribute to social welfare. In fact, Norway, Denmark and Iceland, the top three happiest countries, are all among the highest taxed countries in the Organisation for Economic Cooperation & Development (OECD). This is in terms of total tax revenue as a percentage of gross domestic product (GDP).
On average, Africa has the highest corporation tax rate throughout the world’s continents at 28.45pc and South America, the second highest with an average rate of 27.63pc. However, Europe stands at the lowest rate of 20.27pc.
Does this contradict the claim that developed countries pay higher tax?
Corporation tax plays a key part in government revenue, according to the OECD. This is particularly true in developing countries, despite the global trend of falling rates since the 1980s. This is not true of two continents, South America and Africa, which pay the highest corporation tax rates in the world.
South America has the most countries in the top 10 with the highest corporate taxes. Brazil and Venezuela have the most formidable, at 34pc, followed closely by Colombia at 33pc, and Argentina at 30pc. This makes South America the continent with the most countries in the top 10 that pay the highest corporation tax.
It is unclear whether South America, as an emerging continent, is charging higher taxes to raise government revenue or to benefit from businesses that are looking to expand internationally and enter new markets. But it is true that the continent is becoming a popular choice for business to enter, with strong trade links and an advantageous geographic location. Indeed, South America is a large continent where some countries are business-friendly, and others are harder to penetrate.
Africa leads the world as the continent with the highest average corporation tax. Being the poorest region in the world, Africa has the highest average corporation tax at 28.45pc, with the highest being that of Zambia’s at 35pc. The lowest is that of Libya and Madagascar at 20pc. South Africa stands roughly in the middle at 28pc, slightly above average for Africa overall.
Let us take the South African case a little further. It is one of Africa’s largest economies, among the 54 diverse countries, in terms of political stability, development, growth and population. South Africa has nonetheless been a relatively slow growth nation. It was one of the reasons that its government dropped corporation tax from 34.55pc in 2012 to the current rate.
Was this effective?
It is hard to say. GDP in South Africa has fluctuated quite dramatically since the 1960s. Business favours countries with political stability, which is something South Africa does not currently have.
Between 1996 to 2019, the Political Stability and Absence of Violence/Terrorism index by the World Bank rated South Africa at an average of -0.15 points. The latest value from 2019 is -0.22 points. For comparison, the world average in 2019 based on 195 countries is -0.05 points.
It is thus hard to say that any single factor influenced the trajectory of growth of the country, but it is indicated that the country’s GDP growth rate has not changed in any significant way since the corporate tax rate was lowered.
PUBLISHED ON
Dec 19,2020 [ VOL
21 , NO
1077]
Radar | Jun 24,2023
Viewpoints | Jan 27,2024
Fortune News | Apr 03,2023
Agenda | Feb 29,2020
Radar | Aug 21,2021
Fortune News | Mar 11,2023
Commentaries | Jan 07,2023
Radar | Jun 12,2021
Radar | Aug 17,2019
Fortune News | Jan 11,2020
Photo Gallery | 97422 Views | May 06,2019
Photo Gallery | 89641 Views | Apr 26,2019
My Opinion | 67397 Views | Aug 14,2021
Commentaries | 65839 Views | Oct 02,2021
Editorial | May 02,2024
Feb 24 , 2024 . By MUNIR SHEMSU
Abel Yeshitila, a real estate developer with a 12-year track record, finds himself unable to sell homes in his latest venture. Despite slash...
Feb 10 , 2024 . By MUNIR SHEMSU
In his last week's address to Parliament, Prime Minister Abiy Ahmed (PhD) painted a picture of an economy...
Jan 7 , 2024
In the realm of international finance and diplomacy, few cities hold the distinction that Addis Abeba doe...
Sep 30 , 2023 . By AKSAH ITALO
On a chilly morning outside Ke'Geberew Market, Yeshi Chane, a 35-year-old mother cradling her seven-month-old baby, stands amidst the throng...
May 2 , 2024
For successive generations of Ethiopia's tax authorities, the chore of tax collection...
Apr 27 , 2024
The Prosperity Party (PP) - Prosperitians - is charting a course through treacherous...
Apr 20 , 2024
In a departure from its traditionally opaque practices, the National Bank of Ethiopia...
Apr 13 , 2024
In the hushed corridors of the legislative house on Lorenzo Te'azaz Road (Arat Kilo)...
Apr 28 , 2024
A dire situation unfolds across public universities, where students face the harsh re...
Apr 28 , 2024 . By MUNIR SHEMSU
A European business lobby in Ethiopia issued a scathing review of the tax system last...
Apr 28 , 2024
The Federal Supreme Court has recently ruled in the prolonged commercial dispute surr...
Apr 28 , 2024 . By MUNIR SHEMSU
Transport authorities placed blame on driving schools and vehicle inspection centres...