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Decades-long decline in FG500 companies headquartered in US has reversed

In 2023, the US surpassed China as the country with the highest number of headquarters for the world's 500 largest companies by revenue.

In brief
  • In 2023, the US surpassed China as the country with the highest number of headquarters for the world's 500 largest companies by revenue (FG500).
  • The United States' long-term downward trend in the number of FG500 company headquarters located in the country reversed beginning in 2021.
  • Many factors like a country’s economic growth and stability are considered on where to headquarter but data suggest that tax policy may have a role.

The decades-long decline in the number of the world's largest companies headquartered in the US has begun to reverse. In 2021, the US began gaining back some of these headquarters, and in 2023, the US surpassed China as the country with the highest number of headquarters for the world's 500 largest companies by revenue (Fortune Global 500 or FG500).

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Changes over time

The United States' long-term downward trend in the number of FG500 company headquarters located in the country stabilized in 2019 and reversed beginning in 2021 (see Figure 1). Even with this recent reversal, however, the US has seen the number of companies headquartered there decline nearly 25% (from 179 to 136) between 2000 and 2023. In contrast, the number of FG500 companies headquartered in China increased more than ten-fold (from 10 to 135) over this same period. That growth, however, has appeared to level out with China's numbers holding relatively steady since 2021, and even dropping by one in 2023.

 

Looking at the numbers through a broader lens, the United States, China, Japan, Germany, France, and the United Kingdom have consistently ranked as the countries with the most FG500 company headquarters; that is, until 2023 when South Korea surpassed the United Kingdom. The UK has experienced its own reshuffling, with the number of FG500 company headquarters located there declining more than 60% (from 38 to 15) since 2000.

 

Collectively, the top 10 countries (by the number of FG500 company headquarters located in the country) hosted 434 (87%) of FG500 company headquarters in 2023, up from 411 (82%) in 2010, but down slightly from 451 (90%) in 2000. Many factors can affect a company's choice of headquarters location, such as a country's regional economic growth and stability, local infrastructure, regulatory environment, labor availability and productivity, transportation and other input costs, and tax policies.

 

Figure 1. Number of FG500 companies headquartered by country over time

Figure 1. Number of FG500 companies headquartered by country over time

Tax policy and headquarters locations

As shown in Table 1, each of the top 10 countries for FG500 company headquarters have reduced their top statutory corporate income tax rates significantly between 2000 and 2023. The largest decreases in the top statutory corporate income tax rate were in Germany (22.1 percentage points), Canada (17.1 percentage points), Japan (13.6 percentage points), France (12.0 percentage points) and the Netherlands (9.2 percentage points ).

Figure 2. US-Headquartered FG500 companies and the US corporate income tax rate

Figure 2. US-Headquartered FG500 companies and the US corporate income tax rate

During the decade ending in 2020, the number of FG500 headquartered companies in the US either declined or remained steady (except for a one-time uptick in 2016 associated with an increase in companies in the wholesale and health care industries headquartered in the US and declining oil prices).

Before Congress enacted the Tax Cuts and Jobs Act (TCJA) in December 2017, the top US statutory corporate income tax rate had remained essentially unchanged since 1993 at approximately 39% (including both the federal rate and a weighted average state corporate income tax rate). The TCJA lowered the top federal corporate income tax rate to 21% and the combined US federal-state rate to 25.8%, and made a number of other changes to the US tax system. This is suggestive that the TCJA's tax changes, including the rate reductions, may have been contributing factors to the increased number of FG500 companies headquartered in the US.

Figure 3

Each year's FG500 list is based on revenue from each company's most recent fiscal year ended on or before March 31 of the current calendar year. Corporate tax rates reflect the rate in effect during the calendar year of the published list. Before the TCJA was enacted at the end of 2017, the top US statutory corporate income tax rate had remained essentially unchanged since 2000 at approximately 39% (including both the federal rate and a weighted average state corporate income tax rate). Enactment of the TCJA reduced the top federal rate to 21% and the top combined federal-state rate to 25.8% and also put in place additional anti-inversion rules. Many factors can affect a company's choice of headquarters location, such as a country's regional economic growth and stability, local infrastructure, regulatory environment, labor availability and productivity, transportation and other input costs, and tax policies.

Summary 

While several factors go into a company's decision on where to headquarter, the data suggests that tax policy may have a role to play when countries are looking to increase investment in their jurisdictions.

The dynamic nature of the Fortune 500 Global companies and the changing headquarters location of global companies are instructive for policymakers. As tax and economic policy debates continue, companies need to consider engaging with policymakers to illustrate how their operations across the globe could be impacted by proposed changes.

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