International tax was once a veritable jungle of exotic regimes, but now many jurisdictions seem to have settled on a natural equilibrium of around 25 per cent, says Tim Sarson

An interesting piece and rather consequential piece of tax policy from the new German coalition government might have slipped under your radar recently – they are proposing cutting their federal corporation tax rate by five per cent, in phases starting from 2028. By 2032 companies in Germany will be paying roughly 25 per cent in federal and regional taxes on their earnings. “Germany is back”, says the country’s finance minister.

Sound familiar? We have a 25 per cent corporation tax rate too. Only we recently rose back up to that level, while the Germans are heading down to meet us. But whichever direction you’re coming from, 25 per cent seems a rather popular place to be. File your company tax return in Belgium, China, France or Spain and you’re paying 25 per cent. Italy, the Netherlands and South Korea, all within a percentage point or two above or below 25 per cent. The United States, with its federal rate of 21 per cent? Add on state income taxes and it’s in the same range.

So we’ve all converged around a similar headline rate, but maybe the way the tax is calculated is different? For example, here in the UK we have the generous R&D tax credit and the patent box. So do most large, developed economies. There are versions of a patent box in the Netherlands, France, Belgium, Spain and several other locations; most of them also have R&D credit regimes, each with its own quirks........

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