U2's Bono backs Ireland over corporation tax: How does the UK compare?

Billy Ehrenberg
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Ireland's corporation tax, at 12.5 per cent, is one of the lowest rates going (Data: KPMG)

In an interview with the Observer, Bono, the lead singer of U2 defended Ireland's corporation tax approach, even as the war with the EU intensifies.

Ireland's corporation tax, at 12.5 per cent, is one of the lowest rates going. Companies like Apple and Google have been quick to identify the benefits of operating out of the Irish republic rather than the UK, where the rate is 21 per cent.

Bono thinks that Ireland's rates help the small nation to become more affluent. He told the Observer:

We are a tiny little country, we don’t have scale, and our version of scale is to be innovative and to be clever, and tax competitiveness has brought our country the only prosperity we’ve known.

Europe’s Competition Commissioner Joaquin Almunia wrote to Dublin that tax deals agreed in 1991 and 2007 amounted to state aid and might have broken EU laws. Ireland and Apple deny this. Brussels is putting pressure on Ireland to change its system or face a fuller investigation.

The so-called Double-Irish loophole allows companies to move income from a company in Ireland to a second Irish-registered company in a tax haven. Despite the $5.6bn (£3.4bn) revenue Google made in the UK last year, it paid corporation tax of £20.4m.

The UK and Ireland in the world

The UK’s corporation tax rate is 21 per cent, but is being reduced to 20 per cent next year. This is low compared to many countries, such as the US (40 per cent) but is not the lowest. The UK is actually above the European average of 19.68, according to KPMG.

Here is a map showing corporation tax rates in Europe, using data complied by KPMG:

As we can see, the UK is fairly competitive and will become more so next year when rates are lowered to 20 per cent. Ireland, however, has the joint-lowest 2014 rate.

Globally the UK stands out, as we can see from the map at the top of the page. The OECD average is 24.1 and the global average 23.6.

But where do businesses pay the most corporation tax? Here are the top 10 rates; bear in mind that these are approximations: for example in the states the rate may vary by state and by company income.

There are some havens where companies are required to pay no corporation tax at all (including Bahamas, Bahrain, Bermuda, Cayman Is., Guernsey, Isle of Man, Jersey, Vanuatu). Of the countries on KPMG's list where there is a rate, these are the lowest 11:

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