Global rebalancing of corporate versus indirect t... | KPMG | RU

Global rebalancing of corporate versus indirect tax continues: KPMG International Survey shows

Global rebalancing of corporate versus indirect t...

According to KPMG International’s annual Corporate and Indirect Tax Survey, the 2011 story of the world’s corporate and indirect tax rates continues that of the one told in previous years.

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Corporate tax rates have been steadily falling for a decade, while value added tax and goods and services tax (VAT/GST) systems have been introduced across the globe, rising to higher rates and applying to more items as indirect tax systems mature.

“Some commentators have wondered if these dual trends were temporary anomalies that would reverse over time,” says Wilbert Kannekens, KPMG’s Global Head of International Corporate Tax. “Based on our reading of this year’s survey results, the chance of a return to the pre-2000 status quo is remote and the global re-balancing of corporate and indirect taxes will continue. International businesses should ensure they have the right mix of income tax and VAT/GST management resources in place to stay ahead of this long-term trend.”

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 went from 23.96 percent in 2010 to 23.33 percent in 2011;
  • North America went from 35.5 percent in 2010 to 34 percent in 2011;
  • Oceania went from 29 percent in 2010 to 28.6 percent in 2011;
  • Europe went from 21.52 percent in 2010 to 20.88 percent in 2011;
  • and the only regions where we saw a slight increase were the Latin America region - from 27.87 percent in 2010 to 29.02 percent in 2011 and the Africa Region - from 28.25 percent in 2010 to 28.45 percent in 2011

Kannekens 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 11.84 percent in 2011.
  • Oceania’s average rose from 12 percent in 2010 to 12.5 percent in 2011.
  • Europe saw its average VAT rate increased 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 Niall Campbell, KPMG’s Global Head of Indirect Tax Services. “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.

NB: Information is current as of time of printing and the report and data presented is intended only to be a snapshot in a particular time frame. Changes to rate information following 1 March 2011 for corporate tax and October 1 for indirect tax, will be reflected in future annual reports. For the latest rates please visit the new online rate tool www.kpmg.com/taxrates.

© 2017 KPMG Audit LLC, the Mongolian member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

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