I have often written on the urgent need for the US to address its uncompetitive corporate tax rate if it really wants to grow its economy and employment, and therefore over time correct its budget deficit (THE URGENT NEED TO CUT US CORPORATE TAX RATES (II). Canada did exactly that in the late 1990’s:


From Barron’s:

THE CHART ON THIS PAGE, summarizing the results, is taken from a National Bureau of Economic Research working paper, “Cross-Country Comparisons of Corporate Income Taxes,” published in February. (…)

Among major industrial nations or regions, the U.S. imposes the second-highest effective tax rate on corporations. (…)


“The Effect of Corporate Taxes on Investment and Entrepreneurship,” a study published last year by the American Economic Association, found a “large adverse impact” from high corporate tax rates on aggregate investment and entrepreneurial activity. In any case, even if the U.S. trimmed its corporate rate a bit more, it still wouldn’t be low, relative to other countries’. Japan, whose economy has been stagnant for years, might want to ponder this.

Well, they are actually pondering exactly that: Japan May Seek Further Cuts in Corporate Tax. And so is the UK: UK WANTS LOWER CORPORATE TAXES. And Canada which continues to trim corporate taxes.

Contrary to popular perception, multinationals often pay a higher effective tax rate than domestic corporations. Companies based in Japan and France are the major exceptions, with the ETR for domestic corporations running higher by a percentage point or two.

But in the U.S, the gap has run about five percentage points higher for multinationals, and in Sweden, by as much as eight percentage points. While multinationals have flexibility to reduce their effective tax rate—by, say, basing their headquarters in low-tax nations—they still must contend with multiple claims on their earnings. (…)



  1. Dennis, c’mom be serious. US corporations are happy in the US because they know how to play the game. (GE comes to mind). The issue is; the tax base, and in the US most corporations can reduce it so it doesn’t reflect the 35% rate. And for the other stuff, there are ways to keep taxes paid low, really low. The real issue is that tax system encourages corporations to focus their activities offshore for tax reasons. The overall tax rate is a red herring. Once the US govt figures that out and does something about it, real life can go on.

  2. What misstatement of reality. The “effective tax rate” may be the highest but no corporation worth it’s weight in tax lawyers pays that, and you know it. As a % of GNP the USA has nearly the lowest corporate tax burden. The big issue is corporate tax breaks , some call them loopholes, allow corporations to shirk their fair share.

    • Thanks Richard and sorry for the delay. I was away all of last week. The “effective” tax rate is calculated on what corporations actually pay in taxes, contrary to the “statutory” rate which takes no account of deductions and “loopholes”. A 2010 World Bank study pegged the U.S. effective tax rate at 27.9 percent, far higher than the average of 16.8 percent among developed countries. Here is what PriceWaterhouseCoopers said of the study:

      “The World Bank approach has several advantages for international comparisons. First it is
      based on the actual tax liability for the representative company for the tax year rather than the
      provision for taxes determined for financial accounting purposes. Second, because the study
      uses the same income and financial statements in every country, the results are not distorted by
      cross-country differences in accounting methods or firm characteristics.
      According to the World Bank’s 2010 Doing Business report, the U.S. effective corporate tax rate
      in 2009 (27.9 percent) was quite high by global standards, ranking 21st highest out of 183
      countries (top 12th percentile). Among the more highly developed countries within the OECD,
      the United State had the third highest corporate effective tax rate out of 30 countries following
      Japan and New Zealand.

  3. You’re showing Canada at 16%, thats federal… but you’re forgetting provincial which puts canada around 30%… might want to add those two up

    • Thanks for the comment and sorry for the delay. These are “effective” rates and not statutory rates. As such, they should, for all countries, include taxes

      paid at all levels. This calculation incorporates all corporate deductions, loopholes and other strategies to minimize taxes.

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