Corporate and individual income taxes combined are typically one of the three largest sources of tax revenue, particularly in developed nations. Together, these three forms of taxation typically account for 80 percent to 90 percent of the total tax revenue of most OECD nations. Corporate and individual income taxes will typically generate 30 percent to 60 percent of this 80 percent to 90 percent. U.S. companies embarking upon international investment must understand the tax implications of their decision in both the U.S. and in the foreign jurisdiction or jurisdictions. Since income taxes are a large part of the tax cost of doing business in most countries, a key issue is often to compare the tax costs of operations in alternative jurisdictions.
Most analyses begin and unfortunately end with a comparison of income tax rates.
However, analysis of comparative tax rates does not tell the whole story. Stated rates are certainly important, but can constructively be compared only in context. A 15 percent tax rate on gross income is the equivalent of a 30 percent tax rate on net income if deductions allowable equal approximately 50 percent of gross income. Countries vary widely in the means by which they implement their income taxes, and therefore, in their effective rates of income tax. Global versus territorial tax base 2.