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Indirect taxes rise while corporate tax rates stabilise 

Singapore, 28 April 2014
Tax transparency and morality are key issues driving changes in global tax landscape

Since the last KPMG’s Corporate and Indirect Tax Rate Survey was published in January 2013, some 24 countries have lowered corporate tax rates while nine others have raised them.

In terms of indirect tax rates, 13 countries have pushed up indirect taxes and none decreased.

These are the key findings of the latest edition of the survey, which compares corporate and indirect tax rates from more than 130 countries, including Singapore. Said Mr Tay Hong Beng, Head of Tax, KPMG in Singapore: "Although corporate tax rates in many countries have stabilised after years of decline, there are still multiple factors that will influence corporate tax rates in the future. We expect dramatic changes in the global tax landscape to continue."

Within ASEAN, Mr Tay has observed the trend of decreasing corporate taxes.

"Corporate tax rates in the ASEAN region have fallen over the past 15 years. In particular, there was an obvious fall in rates in 2007 on the signing of the ASEAN Economic Community (AEC) Blueprint.

"The reduction in corporate tax rates has continued, with Thailand and Vietnam reducing their corporate tax rates by three percent. Singapore continues to have the lowest corporate tax rate in the region," he said.

Tax morality and transparency drive corporate tax fluctuations

The issue of tax transparency and morality – or whether companies are paying their 'fair share' of corporate tax – remain one of the most prominent areas scrutinised by governments, the general public, media and investors globally.

Meanwhile, tax authorities are also under pressure to increase revenues from their tax base with fewer resources.

This has led to more tax audits and investigations. Tax authorities are also looking for coordinated solutions in the European Union (EU), the Organisation for Economic Co-operation and Development (OECD) and G20 contexts.

Added Mr Tay: "Besides actions pursued at the OECD or EU levels, countries have to independently adjust their legislation while maintaining their competitiveness. The cross-border interaction of these new measures remains to be seen, and corporate tax rates look set to go on a roller coaster ride.

"The issues at play will also translate into challenges for companies. They must look into putting solid tax strategies in place, identify and manage tax risks, and invest in external communications around tax."

Indirect tax becoming 'tax of choice'

The increases in indirect tax rates globally are arguably evidence of it becoming the choice tax for governments around the world seeking to raise much needed income.

Japan is a recent example. The Japan consumption rate rose from five to eight percent effective 1 April 2014, and a further increase to 10 percent may take place in 2015, depending on the economic situation.

Standard, Reduced and Intermediary rate increases at the end of 2014 are also expected in Luxembourg.

"Indirect tax and its application changes almost daily in any number of countries. This variety comes with numerous complexities," said Mr Tay.

"Businesses must recognise that indirect taxes are here to stay, and should think carefully about where they put their tax time, effort and dollars. They must also ensure that they embrace technology so that their accounting and reporting systems can handle the increasing complexities of indirect tax."

Tax rates in a nutshell

For countries that impose an indirect tax, Hungary is the country imposing the highest rate at 27 percent. The lowest is Aruba at 1.5 percent.

In Asia, Singapore has the second lowest indirect tax rate at seven percent, just behind Taiwan at five percent.

Among countries that impose a corporate tax, the United Arab Emirates holds the top spot with the highest rate at 55 percent*. The lowest is Montenegro at nine percent.

Singapore, at 17 percent, has the ninth lowest corporate tax rate with Slovenia and Taiwan. Hong Kong at 16.5 percent is ranked just above Singapore, while Macau and Oman take the third lowest corporate tax rate position at 12 percent.

Said Mr Tay: "Singapore's headline corporate tax rate at 17 percent is still competitive in the region. In fact, if we were to take into consideration the tax incentives that are offered to targeted industries and activities, the effective tax rates could possibly be much lower.

"With the establishment of the AEC in the horizon, it is important that Singapore remains relevant not only on corporate tax rates, but also in terms of tax administration and business regulations. Doing so will attract and facilitate the entry of international businesses into Singapore and the region."

Users can compare corporate and indirect tax rates for more than 130 countries using KPMG’s online tax rate tool: www.kpmg.com/taxrates.

Please see the annex for detailed tables covering the various tax rates and changes.

ANNEX

Changes to Corporate Tax Rates

Increases
Country Previous rate Current rate Difference %change
Albania 10% 15% 5.00% 50.00%
Chile 18.50% 20% 1.50% 8.11%
Cyprus 10% 12.50% 2.50% 25.00%
Greece 20% 26% 6.00% 30.00%
India 32.45% 33.99% 1.54% 4.75%
Israel 25% 26.50% 1.50% 6.00%
Luxembourg 28.80% 29.22% 0.42% 1.46%
Serbia 10% 15% 5.00% 50.00%
Slovak Republic 19% 22% 3.00% 15.79%

Decreases
Country Previous rate Current rate Difference %change
Columbia 33% 25% -8.00% -24.24%
Denmark 25% 24.50% -0.50% -2.00%
Dominican Republic 29% 28% -1.00% -3.45%
Ecuador 23% 22% -1.00% -4.35%
Fiji 28% 20% -8.00% -28.57%
Finland 24.50% 20% -4.50% -18.37%
Guatemala 31% 28% -3.00% -9.68%
Honduras 35% 30% -5.00% -14.29%
Jamaica 33.33% 25% -8.33% -24.99%
Japan 38.01% 35.64% -2.37 -6.24%
Namibia 34% 33% -1.00% -2.94%
Norway 28% 27% -1.00% -3.57%
Pakistan 35% 34% -1.00% -2.86%
Portugal 25% 23% -2.00% -8.00%
Slovenia 18% 17% -1.00% -5.56%
South Africa 34.55% 28% -6.55% -18.96%
Sweden 26.30% 22% -4.30% -16.35%
Switzerland 18.06% ** 17.92% -0.14% -0.78%
Syria 28% 22% -6.00% -21.43%
Thailand 23% 20% -3.00% -13.04%
Tunisia 30% 25% -5.00% -16.67%
Ukraine 21% 18% -3.00% -14.29%
United Kingdom 24% 21% -3.00% -12.50%
Vietnam 25% 22% -3.00% -12.00%

Changes to Indirect Tax Rates


Increases
Country Previous rate Current rate Difference %change
Cyprus 17% 19% 2.00% 11.76%
Czech Republic 20% 21% 1.00% 5.00%
Dominican Republic 16% 18% 2.00% 12.50%
Finland 23% 24% 1.00% 4.35%
France 19.60% 20% 0.40% 2.04%
Honduras 12% 15% 3.00% 25.00%
Israel 17% 18% 1.00% 5.88%
Italy 21% 22% 1.00% 4.76%
Japan 5% 8% 3.00% 60.00%
Montenegro 17% 19% 2.00% 11.76%
Pakistan 16% 17% 1.00% 6.25%
Slovenia 20% 22% 2.00% 10.00%
Sudan 15% 17% 2.00% 13.33%

Top 10: Highest and Lowest Corporate Tax Rates
Highest Lowest
Position Rate (%) Country Position Rate (%) Country
1 55 United Arab Emirates* 1 9 Montenegro
2 40 United States 2 10 Bosnia and Herzegovina, Bulgaria, Gibraltar, Macedonia, Paraguay, Qatar
3 35.64 Japan 3 12 Macau, Oman
4 35 Angola, Argentina, Malta, Sudan, Zambia 4 12.5 Cyprus, Ireland, Liechtenstein
5 34.5 St. Maarten 5 14 Jordan
6 34 Brazil, Pakistan, Venezuela 6 15 Albania, Georgia, Iraq, Kuwait, Latvia, Lebanon, Lithuania, Mauritius, Serbia
7 33.99 Belgium, India 7 16 Romania
8 33.33 France 8 16.5 Hong Kong
9 33 Namibia 9 17 Singapore, Slovenia, Taiwan
10 32 Mozambique 10 17.92 Switzerland

Top 10: Highest and Lowest Indirect Tax Rates
Highest Lowest
Position Rate (%) Country Position Rate (%) Country
1 27 Hungary 1 1.5 Aruba
2 25.5 Iceland 2 5 Jersey, Nigeria, St. Maarten, Taiwan, Yemen
3 25 Croatia, Denmark, Norway, Sweden 3 6 Curacao
4 24 Finland, Romania 4 7 Panama, Singapore, Thailand
5 23 Greece, Ireland, Poland, Portugal 5 8 Bonaire, St. Eustatius & Saba***, Japan, Liechtenstein, Switzerland
6 22 Italy, Slovenia, Uruguay 6 10 Angola, Australia, Cambodia, Egypt, Indonesia, Lebanon, Malaysia, Papua New Guinea, Paraguay, South Korea, Vietnam
7 21 Argentina, Belgium, Czech Republic, Latvia, Lithuania, Netherlands, Spain 7 12 Botswana, Ecuador, Guatemala, Kazakhstan, Philippines, Sri Lanka, Venezuela
8 20 Albania, Armenia, Austria, Belarus, Bulgaria, Estonia, France, Isle of Man, Morocco, Serbia, Slovak Republic, Ukraine, United Kingdom 8 12.5 Vanuatu
9 19 Chile, Cyprus, Germany, Montenegro 9 13 Bolivia, Costa Rica, El Salvador
10 18 Dominican Republic, Georgia, Israel, Macedonia, Malta, Peru, Russia, Tanzania, Tunisia, Turkey, Uganda 10 14 South Africa


* Having the highest statutory rate does not mean that the tax is actually levied.
**Until 2012, the corporate tax rate in the city of Zurich was published in this survey as the main tax rate of Switzerland. However, it has been decided that the average tax rate application in the capital cities of the cantons is considered to be more meaningful and so the previous rate listed here has been adjusted accordingly.
*** The BES Islands are grouped together as per the guidelines of the International Organisation for Standardisation (ISO).