Fall in worldwide business taxes slowing

Without large changes in Democratic Republic of Congo global average total tax rate would have increased

Despite George Osborne’s claims that Britain must keep cutting its business taxes to remain internationally competitive, a report out today shows that the global “race to the bottom” in levies on firms is actually slowing.

The global average Total Tax Rate – a broad measure of all businesses taxes – did slip again in 2012, but at a slower rate than in previous years. The global average rate in 2012 was 44.3 per cent, down 0.3 percentage points on the previous year. But that was depressed by large changes in the Democratic Republic of Congo.

With that change stripped out, the global average total tax rate would have increased by 0.2 percentage points. That would have been the first rise in the tax burden since the survey began in 2004. The findings are contained in a report to be released today, compiled by the accounting firm PwC and the World Bank.

Andrew Packman of PwC said: “Tax rates for businesses have plateaued over the last two years, having previously been falling steadily. While some governments have stuck to plans to reduce tax rates, others have taken the opposite tack to get immediate revenues to plug debt or fund projects.”

The Coalition has sliced the rate for corporation tax from 28 per cent to 24 per cent since taking office in 2010. The rate is set to drop to 20 per cent in 2015, one of the lowest rates in the developed world. “There is still a huge amount to be done to make sure we are competitive vis-à-vis the rest of the world,” the Chancellor said earlier this month.

However, public anger has grown over tax avoidance by large multinationals, which use accounting techniques to register their profits offshore. Earlier this month Justin King, the chief executive of Sainsbury’s spoke out against the practice. “The vast majority of individuals in this country don’t get to elect where they pay their tax but some corporations do,” he said.