For the first time, the most attractive European business location as regards taxation is Montenegro, where corporations pay only 9 per cent tax on their profits, followed by other countries in South-Eastern Europe where the tax stands at 10 per cent - Bulgaria, Cyprus, Serbia, Albania, and Bosnia and Herzegovina. This is what emerges from the latest survey on taxes on profit and sales around the world, following analyses conducted by KPMG in over 100 countries.
Switzerland becomes an even more favorable location
The international comparison of corporate tax rates in 2008 again showed Switzerland significantly improving its position. While the median rate for tax on profit (the average of all 26 cantons) was 20.6 per cent in 2007, it is now 19.2 per cent, a reduction of 1.4 percentage points are showing a significant downward trend, sinking to between 12.7 and 24.2 per cent, with the two cantons with the lowest rate - Obwalden and Appenzell-Ausserrhoden, both at 12.7 per cent - almost catching up with Ireland, which has the lowest rate in Western Europe (12.5 per cent).
Far and away the most substantial cuts in corporate tax have been implemented this year by Grisons (-10.2 percentage points), Schaffhausen (-6.8 percentage points), Appenzell-Ausserrhoden (-5.3 percentage points) and Basel-Land (-5.0 percentage points). Grisons has thus leaped from its former position at the bottom of the table to 12th in the inter-cantonal ranking.
Global developments in corporate tax rates
For the first time since 1994, none of the 106 countries covered by the survey raised its corporate tax rate. The study also shows that corporate tax rates around the world are coming under everincreasing pressure. Last year, the median corporate tax rate (the average of all countries) was 26.9 per cent, but it now stands at 25.9 per cent - down 1 percentage point.
Moreover, comparison of economic areas around the world (as an average of the countries in each area) shows that companies looking for the lowest corporate tax rates will still find them in the Member States of the European Union, where rates have gone down by one per cent to 23.2 per cent from 2007 to 2008. By comparison, companies in the Asia-Pacific region currently reckon with a 28.4 per cent average across the countries there. Even though the rates have been cut by 0.8 percentage points in the last year, they are still the highest among the global economic areas.
Taxes increasingly falling on consumers
"In a world in which companies and their profits are constantly becoming more mobile, more and more states are changing over from taxing company profits, preferring instead to put the taxation of sales - and hence of goods and services - at the heart of their budget planning. The result of this is that tax falls, not on companies' profits, but on consumption, and it is the consumers in the various countries who end up footing the bill", says Jörg Walker, Head of Tax at KPMG Switzerland.
Jörg continues: "Switzerland is still resisting this trend, and is one of the few countries to do so. Our country is succeeding in attracting capital imports by means of constant cuts in corporate tax rates and nothing else - without relying on cross-subsidization by raising VAT rates in the way some of our neighbors do."
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