Will Corporate Income Tax Rate Dictate the Ease of Doing Business?

Abstract

In today’s competitive world, efficiency plays a significant role in weighing business opportunities. There have been various global assessment tools used to rate and rank countries against one another which may influence important political and economic policies. The Ease of Doing Business ranking is a developed index by the World Bank, a tool primary used to attract investment. One of the indicators of the Ease of Doing Business Index is paying taxes. Although there were many criticisms on the paying of taxes as an indicator, its significance is recognized by the global tax community. This paper aims to find out if corporate income tax rates dictate the Ease of Doing Business ranking. The data analysis employed data mining strategy. The 114 countries listed in the tradingeconomics.com report are analyzed using the concept of ethnocentrism. Findings showed that lower corporate income tax rate does not result to a better ranking in the ease of doing business and the income level of a country does not influence the ease of doing business. An investor is not so much concerned about how much tax he is going to pay in a particular country but on how simple the processes are in doing businesses. Therefore, government’s tax reform does not necessarily lead to a better ranking in the ease of doing business. Should a country contemplate on improving its ease of doing business, its priorities should be on streamlining processes and not decreasing corporate income tax rates.