How does the tax system in Great Britain differ from the US tax system?

It is no surprise that the majority of American’s think that the U.S. tax system stinks. Our corporate tax, local tax, and state tax systems’ unconventional structure leaves a lot to be desired. With that said, the United Kingdom’s tax system has some of the same fundamentals, but it seems like they are moving in the right direction. In reference to corporate taxes, the United States is one of 34 countries that belong to an international economic organization called the Organisation for Economic Co-Operation and Development (OECD). Among the 34 member countries, the U.S. has the highest permitted corporate tax rate of anywhere from 39%-54%, taking into account federal and state taxes. According to The Tax Foundation, the U.S. METR (marginal effective tax rate) on corporate investment is 35.3%, which has resulted in reduced corporate tax revenues and a shrinking U.S. corporate sector (take for instance Chaquita Company). On the other hand, the U.K.’s METR is much less at 21% (and supposedly 20% in 2015), but there are very few tax loopholes in comparison to the U.S.

In regards to both individual and corporate income, the U.K. uses a territorial tax system in which corporate and individual income is only taxed when earned domestically. The U.S. uses a hybrid system in which corporations and individuals are required to pay taxes on all income upon repatriation, regardless of where it was earned. The max individual tax rate for U.S. taxpayers is 55.9% (max of fed, state, and local), and 45% for U.K. taxpayers.

References:

UK Dropping Corporate Rate to 20 Percent, Half the US Rate. (2013, March 21). Retrieved October 22, 2014, from http://taxfoundation.org/blog/uk-dropping-corporate-rate-20-percent-half-us-rate

Julius, D. (2011, October 5). The U.K. and the U.S. Are Different. Retrieved October 22, 2014, from http://www.nytimes.com/roomfordebate/2011/10/05/britain-taxed-the-rich-then-what/the-uk-and-the-us-are-different

List of countries by tax rates. (2014, October 18). Retrieved October 22, 2014, from http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates