According to the KPMG survey, the world’s average corporate tax rate has fallen in each of the past 11 years, from 29.03 percent in 2000 to 22.96 percent in 2011.
Regionally we see that:
• The Asia Pacific Region average rate when from 23.96 percent in 2010 to 22.78 percent in 2011;
• The Latin America region went from 25.33 percent in 2010 to 25.06 percent in 2011;
• North America went from 23.67 percent in 2010 to 22.77 percent in 2011;
• Oceania went from 24.17 percent in 2010 to 23.83 percent in 2011;
• Europe was the only region where we saw a slight increase – from 19.98 percent in 2010 to 20.12 percent in 2011; and
• The Africa Region remained flat.
Andes comments, “Based on these results, it seems certain that the decade-long era of sharply declining corporate tax rates is almost behind us.”
The indirect story
Average indirect tax rates at the global level have been stable, hovering at or near the 2011 average of 15.41 percent for the past three years. Excluding the countries that do not charge VAT/GST, we found:
• The Africa region saw its average VAT/GST rate rise from 13.91 percent in 2010 to 14.17 percent in 2011, while the average rate in Asia rose from 11.64 percent in 2010 to 11.93 percent in 2011.
• Oceania’s average rose from 12 percent in 2010 to 12.5 percent in 2011.
• Europe saw its average VAT rate dip slightly, from 19.67 in 2010 to 19.71 percent in 2011
• Latin America also dropped from 13.90 percent in 2010 to 12.78 percent in 2011.
“Governments are increasing their reliance on VAT/GST systems for economically sound reasons,” says Andes. “Compared to income taxes, VATs are less affected by economic ups and downs and thus more stable, their revenue bases are less mobile, and their real-time collection provides a steadier revenue stream. But political concerns drive tax policy as much or even more than economic ones.”
While global movements in average corporate income and VAT/GST rates provide a glimpse of the big picture, one needs to dig deeper where individual countries and taxpayers are concerned.
To make valid cross-country comparisons, rates of tax are just a starting point: what really counts are the gross amounts of income tax paid and collected and the company’s gross VAT/GST throughput, which is the total of its global sales, purchases and VAT/GST remittances.
The KPMG report points out though, that beyond corporate income taxes and VATs, other payroll, property, sales and other taxes may apply. International companies should analyze all of these costs carefully and how they interact. Planning these factors in the total tax costs of activities, assets and income by location can reduce an organization’s worldwide tax bill considerably.
KPMG International also released today new online, interactive tax rate tool available at www.kpmg.com/taxrates.
The new online rate tool allows users to view and compare the latest corporate and indirect tax rates from across the globe. Currently with the new tool, users can:
• Compare a particular tax rate (e.g. corporate tax) between up to five countries.
• Choose the years that you want to compare.
• View the corporate and indirect tax rates for a particular country.