"General corporate income tax rates are important but they are only one factor in comparing country-to-country tax burdens," said Elio Luongo, Canadian Managing Partner, Tax, KPMG in Canada. "Sales tax, property tax, capital tax and other local business taxes are all considerations. International companies should analyze all of these costs carefully and how they interact."
Canada's corporate tax rate has dropped by 2 percent to 26 percent in 2012 (from 28 percent in 2011) but the decline in most regions of the world in 2012 was much smaller at less than 1 percent. Based on these results, the survey says the global trend towards falling rates will continue in 2013, albeit at a slower pace than in the past. No further cuts are scheduled for Canada after 2012.
The survey compares corporate and indirect tax rates from more than 125 countries. Canada's general corporate tax rate of 26 percent for 2012, which includes federal and provincial tax, compares favourably with the U.S. corporate rate of 40 percent but is still higher than the U.K. rate of 24 percent and the European Region average of 20.5 percent.
The survey also compares value-added type indirect taxes (Goods and Services Tax (GST) or Value-Added Tax (VAT)) in 111 jurisdictions around the world that have such indirect taxes. While corporate tax rates have been declining around the world, GST and VAT regimes have proliferated, with rates rising to an average of 15.5 percent in 2012. These increases are expected to continue in 2013.
Canada has bucked this trend by not raising its federal GST rate. Also, in the provincial context, British Columbia is moving from a harmonized sales tax back to its former provincial sales tax regime.
"As the survey points out, businesses in Canada have to contend with the harmonized sales tax or retail sales tax imposed by all of the provinces except Alberta," said John Bain, Partner, Indirect Tax, KPMG in Canada. "For example, HST is 13 percent in Ontario and GST and Quebec Sales Tax (QST) together are almost 15 percent in Quebec. Businesses also have to contend with many changes recently made to the GST rules and provincial rules, such as harmonizing the QST more closely with the GST."
While it is possible to compare Canada's corporate income tax rate with the U.S., it's not easy to compare indirect tax rates because the U.S. does not impose a national value-added tax. Instead, businesses have a complex system of "sales and use" taxes imposed by most states and many local governments at various rates.
Visit www.kpmg.com/taxrates for an interactive online tax rate tool. The online tool allows users to view and compare the latest corporate and indirect tax rates from across the globe. With the new tool, users can:
- Compare a particular tax rate (e.g., corporate tax) between up to five countries
- Choose the years they want to compare
- View the corporate and indirect tax rates for a particular country.
Follow @KPMG_Canada on Twitter and linkedin.com/company/kpmg-canada on LinkedIn for more information about corporate and indirect tax rates.
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National Coordinator, Media Relations
KPMG in Canada