OECD Released Corporate Tax Statistics Report, Lets Zoom in on Indonesia
Last week, the Organisation for Economic Co-operation and Development (OECD) released its Corporate Tax Statistics report. Several interesting conclusions were made in the report. Firstly, (corporate) taxes that are paid by legal entities (specifically companies) remain a key source of government revenues, particularly in developing nations. Secondly, over the past two decades there is a clear worldwide trend visible, namely: falling corporate tax rates.
While in the year 2000 the average corporate tax rate was 28.6 percent (based on 94 jurisdictions), the number had fallen to 21.4 percent in 2018. Only some 20 percent of jurisdictions (covered by the report) had a corporate tax rate that was over 30 percent in 2018. This is in stark contrast to the 60 percent of jurisdictions that had corporate tax rates above 30 percent in 2000.
The reason behind declining corporate tax rates is simple: tax is a factor that drives cross-jurisdiction competitiveness for investment. In other words, by offering lower tax rates, governments aim to attract (foreign and domestic) investment within their borders.
It is also interesting to note that, despite cutting these tax rates, governments have become increasingly dependent on tax revenues from corporate taxes. While in 2000 corporate taxes contributed 12 percent to governments' total tax revenues, the number rose to 13.1 percent in 2018. It is a sign that there has been an increase in business across the world. Moreover, this share of corporate tax revenues is even more significant in developing countries (where the contribution of corporate tax revenues toward total tax income tends to be above the worldwide average).
Corporate Tax Rates in a Selection of Countries:
| Jurisdiction | 2000 | 2018 |
| United States | 35.0% | 21.0% |
| United Kingdom | 30.0% | 19.0% |
| Singapore | 26.0% | 17.0% |
| China | 33.0% | 25.0% |
| Netherlands | 35.0% | 25.0% |
| Switzerland | 8.5% | 8.5% |
| Indonesia | 30.0% | 25.0% |
| Hong Kong | 16.0% | 16.5% |
| Vietnam | 32.5% | 20.0% |
| Thailand | 30.0% | 20.0% |
Source: OECD, Corporate Tax Statistics
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This articles discusses:
• developments related to trends in global corporate tax rates
• the use of the corporate tax rate as a tool to attract foreign investment
• Indonesia's plan to cut its corporate tax rate
• the contribution of corporate income tax to Indonesia's total tax revenues
Read the full article in the January 2019 edition of our monthly research report. This report is scheduled to be released in early February 2019. You can purchase the report by sending an email to info@indonesia-investments.com or a WhatsApp message to the following number: +62(0)8788.410.6944
