United Kingdom

Details

  • Service: Tax, Corporate Tax, Indirect Tax
  • Type: Press release
  • Date: 28/04/2014

Indirect tax becomes the ‘tax of choice’  

  • Countries around the world respond to the ongoing public debate on tax while still competing for international investment, says KPMG

 

There are fundamental changes in attitudes and approaches to tax all over the world, according to KPMG International’s Corporate and Indirect Tax Rate Survey 2014. Tax rates, reflective of a country’s economic situation, are going up and down and there is no consistent approach.

 

According to the KPMG report, the global tax landscape is changing dramatically and will continue to do so for the foreseeable future.  Although corporate tax rates in many countries have stabilised after a decade of decline, there are multiple issues currently at play that deeply influence the works of corporate tax.  As rates have levelled off, tax authorities in the vast majority of developed countries are facing pressure to increase revenues from their tax base with fewer resources. This has led to tax authorities pursuing more tax audits and investigations leading to larger adjustments with more potential for penalties and interest. 

 

Moreover, tax authorities are also looking for co-ordinated solutions in the EU, OECD and G20 context.  Tax transparency and morality continues to influence tax regulation around the world.  Chris Morgan, Head of Tax Policy at KPMG in the UK, comments:  “The public debate and the link between tax and morality have led to multiple discussions about corporate tax among international bodies and domestic governments.  What is clear is that, there is immense pressure for governments around the world to take action to stop situations where double non-taxation occurs.  And besides multilateral actions pursued at the level of the EU and OECD, all countries are independently adjusting their legislation to address this critical issue.”

 

“One of the biggest challenges today is that tax law is local but businesses are global,” continues Chris Morgan.  “The complexity of applying national tax laws to companies that operate internationally causes problems. Many countries use their tax systems to compete for investment dollars and jobs, and to benefit from the foreign activity of their own multinationals.”

 

Indirect tax becoming the ‘tax of choice’ around the world

 

KPMG International’s Corporate and Indirect Tax Rate Survey 2014 shows that, since the publication of the survey’s previous edition in January 2013, 13 countries increased their indirect tax rate and none decreased. Nine countries increased their corporate tax rate and 24 decreased.

 

The increases in indirect tax rates are arguably evidence of it becoming the ‘tax of choice’ for governments around the world who are looking to raise much needed income. The attractiveness of indirect tax are its real time nature, its low cost of collection and the fact that it is a tax on consumption not profit.

 

“Indirect tax is becoming increasingly complex with rules and rates changing constantly around the world combined with an increasingly aggressive and adversarial approach to its collection and payment. This together with the real time nature of the tax and the fact that it is prevalent throughout the business brings very real challenges to its effective management,” says Gary Harley, Head of Indirect Tax at KPMG in the UK. “The modern day tax department should be proactive and maximise where they put their tax time, effort and dollars to ensure they manage risk as well as create value.”

 

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 9 percent.

 

For countries that impose an indirect tax, Hungary takes the top spot at 27 percent. The lowest is Aruba at 1.5 percent. 

 

Changes to Corporate Tax Rates

 

Increases since KPMG International’s 2013 survey (released in January 2013)

 

Country

Previous rate (as of January 2013)

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 since KPMG International’s 2013 survey (released in January 2013)

 

Country

Previous rate (as of January 2013)

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 since KPMG International’s 2013 survey (released in January 2013)

Increases

 

Country

Previous rate (as of January 2013)

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

 

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

 

Notes to editor:

 

  • Information is current as of time of this release. 

*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 Organization for Standardization (ISO).

 

For more information, please contact:

 

Carolyn Forest

Head of Global Tax Communications

KPMG International

+1 416 777 3857

cforest@kpmg.ca

 

Margot Cowhig

PR Manager, Tax and Pensions, KPMG in the UK

+44 207 694 4246

margot.cowhig@kpmg.co.uk

 

About KPMG International

 

KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 155 countries and have more than 155,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

 

 

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