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International trends in company tax and Collective Investment Vehicles

International trends in company tax and CIV

Grant Wardell-Johnson and Andy Hutt discuss a new KPMG report that provides a snapshot of key trends of corporate tax systems around the world.

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The world has become an increasingly integrated and global place, creating opportunities for businesses to expand their networks beyond physical borders. This presents opportunities but also challenges to the corporate tax system, as the rise of intangibles and the digital economy creates difficulties in assessing and taxing profits and capital.

KPMG has released a new report, International trends in company tax and Collective Investment Vehicles, that aims to provide a cross-country comparison, drawing out the similarities and differences between corporate tax systems, with Australia’s corporate tax system at its centre. The major North American (United States and Canada), European (United Kingdom, Germany, France, Netherlands and Ireland) and Asian (China, India, New Zealand, Japan, Korea, Hong Kong, Singapore and Indonesia) economies were also selected, as they were identified as major players in the global economy and important trading partners to Australia.

The report aims to provide a snapshot of key trends of corporate tax systems around the world.

We chose four common indicators for the report. The ratio of company tax to gross domestic product (GDP) has been chosen as a common indicator to assess a country’s reliance on the company tax base. The statutory company tax rate and thin capitalisation rules have been chosen as common levers available to governments in shaping the corporate tax system. Collective investment vehicles (CIVs) were also chosen as an interesting and alternate lever available to governments in attracting foreign investment.

One of the findings of the report is that Australia’s revenue from corporate income tax is relatively high, as a percentage of GDP, when compared to most of the other countries in the report. However our unique full (and refundable) imputation system may somewhat distort this comparison.

Another finding is that there remains a variety of approaches to countering thin capitalisation across the countries included in the report. It will be interesting to see how quickly the Organisation for Economic Co-operation and Development's (OECD) initiatives on profit shifting drive convergence on this point.

It is also apparent that the tax and regulatory environment for CIVs is generally becoming more favourable, as governments look to both promote their funds management industries and find new sources of foreign inward investment.


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