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I have frequently heard claims that US companies pay significantly less taxes than European ones (based on tax rates). The last time I saw this claim (and what caused me to ask this question) was Lagerbaer's comment on "Do rich companies really pay little/no corporate income taxes in the United States?" question:

By European standards, they'd pay "next to no taxes" even if they'd pay their taxes :-P

However, I'm skeptical of that claim since US has a fairly high top rate of 35% (IIRC) and I have a feeling that the claim I outlined above is mistakenly projected from personal income tax rates.

Could someone please indicate if I'm correct in my skepticism of the claim above?

Please note that I'm asking about standard tax rates, NOT effective taxes paid based on all sorts of accounting gimmicks/loopholes/etc...

17

You are correct in your skepticism: USA has one of the highest top corporate tax rates, as well as taxes as percentage of income.

For proof,

  1. Please observe this graphs as illustration (from Wikimedia):

    Income Tax rates by Country based on OECD 2005 data.

    enter image description here

    As you can see - USA's is higher than ALL save Japan and Germany which are about the same).

    Purple bars denote corporate (and you can see the green bars for personal income taxes that show USA's relatively low ones, which is as you noted a possible source of confusion).

  2. Please see the graph in Figure 2-1 (page 36) of Congressional Budget office's "Corporate Income Tax Rates: International Comparisons". That graph is based 2003 OECD data as well. Please note that CBO is (theoretically) bipartisan/apolitical branch of congress.

    enter image description here

  3. For more up-to-date, here's a graph based on 2010 OECD data (Graph source is Republican party white paper; but I checked its accuracy off of actual OECD source data):

    enter image description here

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    While the corporate tax rates are quite high, this does not necessarily mean that companies pay that much in taxes, e.g., the taxes can be offset by creative accounting and special tax credits/incentives. – ESultanik Apr 14 '11 at 14:33
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    @ESultanik - I meant before the GE-style accounting gimmics that render the "standard" rates irrelevant. If you look at Lagerbaer's comment, he specifically said "...even if they'd pay their taxes". I updated the question – Alice Apr 14 '11 at 14:52
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    "As you can see - USA's is higher than ALL save Japan and France which are about the same)." Did you mean Japan and Germany? France appears to be slightly lower. – Jason Plank Apr 14 '11 at 14:59
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    @Jason - indeed. Read the wrong label. Though, ironically, in 2010 France was actually #3 and Germany #5 as can be seen on the 3rd graph. Fixed – user5341 Apr 14 '11 at 15:11
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    @horatio - graph #2 is actual top rates on the books as opposed to mean. As far as mean vs. median, I think mean is more useful in the context of how this data is used (e.g. total amount of money taxed) which is why you see that data more readily. I would be curious to see the median graph as well. – user5341 Apr 14 '11 at 15:24
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While DVK's answer is true in theory, it's based on comparing nominal tax rates. In practice most companies don't pay that rate. In case of US based international companies there are few tricks to avoid most of the taxation:

For example Google uses double Irish with Dutch sandwich, effectively paying as low as 2.4%, Facebook also uses double Irish with Dutch sandwich. So are companies like Apple, Microsoft, IBM and Oracle and many others.

While question ask explicitly for "standard tax rates" w/o gimmicks and loopholes, above schema has became standard (as in most commonly used).

Example:

enter image description here

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    While all these clever tax tricks (or legitimate exploitation of badly formulated international rules) do work, they are not that effective for US earnings. Apple's latest effective tax rate is ~25%, lower than the standard US rate but not small see here. Moreover, when profits are changing quickly rates can be misleading as tax lags income. – matt_black May 13 '16 at 12:19
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    True, but question is about “US companies”, rather than “companies in US” – vartec May 13 '16 at 14:12
  • But it excluded all the international shenanigans that can be used to minimise foreign earnings for US firms. – matt_black May 13 '16 at 14:15
  • True, but for comparison US citizens have to pay taxes on international income regardless. Also these shenanigans are possible specifically when company is US based, due tax treaties that US government has signed. – vartec May 13 '16 at 16:24
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Some very famous US companies are famous for paying little tax. GE, Google and twitter are good example (see this summary on slashdot). Also, online sales company like Amazon avoid paying taxes to a very significant degree. So, there are some very famous examples in tech world of US companies not paying taxes.

I don't know about Europe, but they might have stricter laws there (There was recently news about some similar proposals in the US).

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    Many US firms are good at avoiding tax on their foreign earnings (google famously paid less than 3% in the UK. But even Google pays ~22% to the US government on declared income. This is much less than the full US corporate rate (mostly due to those foreign loopholes) but is hardly "little". – matt_black May 13 '16 at 12:24
  • The effective tax rate for any multinational company, in Denmark, is not greater than 0%. – Clearer Jun 25 '18 at 6:59

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