Do business taxes matter? Britain plans sharp cut; Germany declines to follow. U.S. business tax rate among world’s highest.

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In the wake of Brexit, Britain has announced plans to cut the corporate tax rate

Treasury chief George Osborne says the cut is meant to underscore that Britain is “still open for business,” despite the referendum results. A cut of about 5 percentage points brings Britain in line with Ireland’s 12.5 percent rate.

While not disputing that taxes matter, the German finance minister says he sees no “race to the bottom” in tax policy.

German Finance Minister Wolfgang Schaeuble said Wednesday that Britain’s move would have little influence on German policy.

“We have no intention in Europe of starting a race to the bottom,” Schaeuble told reporters in Berlin. He added that “we are not against tax competition, but we favor public budgets in all member countries being fairly and appropriately financed.”

While it’s not clear where all this is headed, one consequence of the Brexit vote appears to be a renewed focus on global competition and business costs. The Tax Foundation has reported that the U.S. has one of the world’s highest corporate tax rates.

It is well known that the United States has the highest corporate income tax rate among the 34 industrialized nations of the Organisation for Economic Co-operation and Development (OECD).[1] However, it is less well known how the United States stacks up against countries throughout the entire world.

Expanding the sample of countries and tax jurisdictions to 173, the U.S.’s corporate tax rate of 39 percent is the third highest in the world, tied with Puerto Rico and lower only than the United Arab Emirates and Chad, which have rates of 55 and 40 percent, respectively. The U.S. tax rate is 16 percentage points higher than the worldwide average of 22.8 percent and a little more than 9 percentage points higher than the worldwide GDP-weighted average of 29.8 percent. 

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