U.S. displacing Japan as No. 1 for highest corp taxes

WASHINGTON Fri Mar 30, 2012 4:16pm EDT

A flag is seen in front of the New York Stock Exchange building in New York August 12, 2011. REUTERS/Jessica Rinaldi

A flag is seen in front of the New York Stock Exchange building in New York August 12, 2011.

Credit: Reuters/Jessica Rinaldi

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WASHINGTON (Reuters) - The United States will hold the dubious distinction starting on Sunday of having the developed world's highest corporate tax rate after Japan's drops to 38.01 percent, setting the stage for much political posturing but probably little tax reform.

Japan and the United States have been tied for the top combined, statutory corporate rate, with levies of 39.5 percent and 39.2 percent, respectively. These rates include central government, regional and local taxes.

Japan's reduction , prompted by years of pressure from Japanese politicians hoping to spur economic growth, will give that country the world's second-highest rate.

This has triggered complaints from U.S. politicians and business groups.

"This isn't an April Fool's Day joke," said Senator Orrin Hatch, the leading Republican on the Senate Finance Committee.

"Every industrialized country around the globe understands that tax rates can determine whether or not businesses succeed or fail," Hatch said in a statement.

Across most of the political spectrum there is broad agreement that the U.S. corporate tax rate is too high, though few corporations actually pay that rate because the loophole-riddled tax code gives them lower "effective" rates.

Republicans and Democrats agree that the tax code needs work. It has not been thoroughly overhauled in 25 years.

In February, President Barack Obama proposed a corporate tax reform blueprint that included a 28 percent top rate.

Republican presidential hopeful Mitt Romney has said he wants to cut the corporate rate to 25 percent.

COMPETITIVE EDGE

The average 2012 corporate tax rate for the 34 developed countries is 25.4 percent, according to the Organization for Economic Co-operation and Development.

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Corporate taxes worldwide, link.reuters.

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"As countries such as Canada and the United Kingdom have moved to reform their tax systems and lower rates to encourage economic growth, America's inaction puts American worldwide companies at a competitive disadvantage and threatens our economic recovery," said Bruce Josten, an official at the U.S. Chamber of Commerce.

Some U.S. companies pay close to the 35 percent top corporate tax rate; some pay nowhere near that, thanks to tax breaks that let them lower their "effective" tax rates.

Of the 30 companies in the Dow Jones industrial average, 19 told shareholders their effective rate for their 2011 fiscal years, mostly ending December 31, was below Obama's proposed new tax rate, according to a Reuters analysis of securities filings.

Of these companies, three - telecom company AT&T, Bank of America, and insurance company Travelers - posted a tax gain.

For the index's other 27 companies, effective rates reported ranged from 2.7 percent for telecom giant Verizon Communications to 43.3 percent for energy group Chevron Corp.

These figures are taxes for shareholder accounting but not necessarily what was paid last year because Congress lets companies defer parts of their income tax for future years.

(Reporting by Patrick Temple-West and Kim Dixon; Editing by Kevin Drawbaugh)

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Comments (3)
robb1 wrote:
To create new jobs in the US we must create a more friendly tax code for small business and start-ups.

If you add Federal and State tax, combined, they produce for sure the highest fiscal corporate pressure in the world.

You have seen how JP lost more than a decade, let’s try to avoid that.

Mar 30, 2012 4:56pm EDT  --  Report as abuse
DDavid wrote:
What else is new. We strive be No.1, don’t we? We are number 43 in producing educated people, when will we be No.1 ?
We going down the slippery slope of individual freedoms, rather than striving to the best in the world. Something is definitely wrong and Orwell’s predictions are coming true.

Well to be factual, it doesn’t matter if corporate rates were 100% since most don’t pay close to the highest legal rate as is. And ones that do are mostly small businesses because they can’t afford those high price CPA’s and tax attorneys.

Mar 30, 2012 5:48pm EDT  --  Report as abuse
DDavid wrote:
What else is new. We strive be No.1, don’t we? We are number 43 in producing educated people, when will we be No.1 ?
We going down the slippery slope of individual freedoms, rather than striving to the best in the world. Something is definitely wrong and Orwell’s predictions are coming true.

Well to be factual, it doesn’t matter if corporate rates were 100% since most don’t pay close to the highest legal rate as is. And ones that do are mostly small businesses because they can’t afford those high price CPA’s and tax attorneys.

Mar 30, 2012 5:48pm EDT  --  Report as abuse
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