Even at 15 percent, New Zealand has the 4th lowest GST rate in the OECD and contrary to global trends, corporate tax rates are trending down, according to an international survey released today by KPMG NZ.
The KPMG Corporate and Indirect Tax Rate Survey 2010 found that New Zealand’s GST rate stacks up only behind Canada and Japan (5 percent), Switzerland (7.6 percent), and Australia and Korea (10 percent) amongst OECD countries (with an OECD average of 18.28 percent). Since 2009 the average indirect tax rate for all countries with GST systems rose slightly from 15.41 percent in 2009 to 15.61 percent in 2010.
KPMG New Zealand’s GST partner Peter Scott says, “As the results show, even at 15 percent, NZ has one of the lowest GST rates when compared to other OECD nations and is under the global average.”
Governments around the world consider indirect taxes like GST as one of the more attractive ways of gaining revenue – shifting the collection burden to businesses rather than the revenue authorities.
“Businesses need to understand that the rules of the tax game are changing and they need to keep up to speed to succeed. For instance, we are finding that many businesses are still grappling with the recent GST changes. It is important that businesses think through the implications of the changes now, and upgrade their processes and systems,” says Mr Scott.
Also, unlike any other country in the world, New Zealand’s increase in GST rate is matched by personal tax rate reductions.
New Zealand currently has the 7th highest corporate tax rate in the OECD. However, New Zealand’s corporate tax rate is due to fall further in 2012, which contrasts with the rest of the world where the downward trend has halted.
Paul Dunne, Corporate Tax Partner at KPMG NZ says, “It is very encouraging that the Government announced a reduction of corporate tax rates in the May 2010 budget, which will see New Zealand comparatively more attractive than Australia on this measure. However, businesses are likely to find themselves paying for the reduced rate in other ways. For instance, companies can no longer claim depreciation on buildings.”
He says that tax rate is only part of the story. There is increasing co-ordination and sophistication among tax authorities around the globe and hence companies need to carefully plan and structure their tax.
“As governments look to recoup lost revenues from the economic downturn, the entire world is in the midst of a period of considerable change with their taxation regimes. A large number of countries are considering, or are in the process of implementing, substantial reforms of their tax systems,” says Mr Dunne.
“In this environment, there will be added pressures for New Zealand companies doing business offshore, and hence they need to have efficient tax risk management in place to succeed.”
Once the 28 percent corporate tax rate comes into effect in 2012, New Zealand will have the 10th highest corporate tax rate in the OECD, behind Japan (40.69 percent), US (40 percent), Belgium (33.99 percent), France (33.33 percent), Italy (31.4 percent), Canada (31 percent), Spain, Mexico, Australia (30 percent), Germany (29.41 percent) and Luxembourg (28.59 percent).
KPMG International’s Corporate and Indirect Tax Survey has been run every year since 1993. It now covers 114 countries. This year’s survey compares corporate income tax rates as at 1st July, 2010 with their equivalent each year back to 2000.
The survey also includes information on Value Added Taxes or Goods and Services Taxes in 114 countries, going back six years. Tax professionals from across KPMG’s global network of member firms have contributed to the survey.
For further information please contact:
Sneha Paul Gray, KPMG Communications, 09 363 3590 or 021 243 8997