October 21, 2018 /
For around 20 years, countries around the world have been competing to keep taxes low in order to attract companies and increase the attractiveness of new investments.
At the beginning of the year, the United States cut corporate income taxes from 35% to 21% and reduced the tax rate on profits repatriated from abroad to the US to between 8% and 15.5% compared to the previous 35%. The business-friendly policies of US President Donald Trump have made the USA a quasi-low-tax country. One effect is already being felt. The economy is booming, the labor market is empty and the stock markets are trading at record levels. However, these are only the short-term consequences of the tax reform. Over the next few years, the annual budget deficit will rise from four to six percent of gross domestic product. The tax shortfalls will hardly be compensated by the high economic growth and the good situation on the labor market.
Germany leads the world in tax burden for companies
Tax reforms are not only to be expected in the USA. British Prime Minister Theresa May has indicated that she wants to offset the burdens for companies that Brexit will bring with it through low taxes. The UK in particular set tax competition in motion in the mid-1980s. Since then, Ireland has drastically reduced the corporate tax rate in several steps from 40 percent to 12.5 percent.
According to the management consultancy KPMG, the average corporate tax rate worldwide has fallen from an average of 32.7% to 23.6% over the last 20 years, but in Germany it is significantly higher. With corporation tax, trade tax and the solidarity surcharge, the burden on companies in Germany adds up to a good 30 percent.
Nevertheless, German Chancellor Angela Merkel recently announced that she would at least consider a possible tax cut.
Source: www.n-tv.de