Africa-Press – South-Africa. Corporate taxes in countries around the world vary dramatically, with a difference of over R720,000 being charged for the same small business in the lowest vs the highest tax regions.
A new study by BusinessFinancing.co.uk calculated how small businesses are taxed in different countries worldwide.
By setting up a hypothetical small business in the tech sector, researchers at BusinessFinancing.co.uk applied each country’s tax rates and regulations to calculate the annual tax liability of the model business in each African nation.
“Corporate or corporation tax is a percentage of a company’s profits that it pays to the government,” they explained.
“It is a major source of the cash that states and countries use to fund education, social services, defence, emergency units and much more.”
However, corporate tax rates vary widely around the world and even within countries. For example, most American states impose a local corporation tax in addition to the federal rate of 21%.
In the United Kingdom, the main rate is 25%, but small businesses with profits under £50,000 (around R1.04 million) pay just 19%.
To assess small business tax rates around the world, BusinessFinancing sourced tax rates and rules by country from Deloitte and PricewaterhouseCoopers (PwC) and applied these rates to a model company with the following parameters:
Type: Public
Sector: Tech
Revenue: $1 million (around R18.05 million)
Profit: $100,000/year (around R1.81 million)
Profit Margin: 10%
Employees: 5 to 9
Owner Salary: $59,000 (around R1.06 million)
Owned by a resident of the country or state in question
Earns the majority of revenue from business operations within the region.
Considering these parameters, we calculated the total amount of tax that would be paid by the model company in each country.
Using these parameters, they calculated the total amount of corporate tax the model company in each country would pay.
They repeated this process for American states, combining the federal tax rate (21%) with state-specific corporation taxes.
The highest and lowest taxes in the world
BusinessFinancing found that Guyana had the highest tax rate for small businesses, with a rate of 40% on the profits of commercial companies.
Guyana defines commercial companies as those that derive at least 75% of their gross income from goods that they didn’t manufacture. The model business paid $40,000 (R721,768) on profits of $100,000 (R1.81 million).
While this is the highest figure globally, small manufacturing and construction businesses may be eligible for a lower 25% rate.
Countries like Malta, Venezuela, Colombia, Equatorial Guinea, and Morocco also had some of the highest tax rates in the world.
On the other end of the spectrum, the model companies in the Bahamas, Bahrain, and the United Arab Emirates owed zero corporate tax on profits of R1.81 million.
Countries like Barbados, Montenegro, South Korea, Poland, and China’s model companies all paid under $10,000 (approximately R180,981).
In Africa, Chad had the highest corporate tax rate on all domestic businesses at 35%, among the highest in the world.
“The country has recently suffered through tight austerity measures following the economic crisis a decade ago,” BusinessFinancing said. “Corporate tax now accounts for around 61% of Chad’s entire tax revenue.”
At 15%, Tunisia and Mauritius had the joint lowest corporate tax applicable to the model company in Africa.
Some industries in Tunisia are subject to a 20% or 35% tax rate, while certain companies engaging in community or socially responsible activities may be eligible for a rate of just 10%.
South Africa had the seventh-lowest corporate tax rate in Africa, at 22.12%. This means that the model company paid $22,116 (R399,405) on a profit of R1.81 million.
This means that there is a R322,363 difference between the corporate tax paid in the South African model company compared to the model company in Guyana, the highest tax region in the world.
On the other hand, there is a difference of nearly R400,000 between South Africa and the lowest tax regions in the world, where zero corporate tax on profits is charged.
For More News And Analysis About South-Africa Follow Africa-Press
