US Ranks 7th Most Cost-Competitive Tax Structure Among Countries Studied; Industry Sector Rankings Highlight Digital Services, R&D, Corporate Services, Manufacturing
Cincinnati, Cleveland, Baltimore, Atlanta and Tampa, Fla., offer the most favorable tax structures for businesses among U.S. cities/locations with populations exceeding 2 million, according to a study released today by KPMG LLP, the audit, tax and advisory firm. To view the full report, visit https://www.competitivealternatives.com/tax.
Of the 51 large international cities highlighted in the study, Cincinnati, Cleveland, Baltimore, Atlanta, and Tampa all placed in the top 20 globally – ranking ninth, 11th, 12th, 13th and 14th, respectively. Among the 10 countries in the study, the U.S. ranked seventh in terms of favorability of its overall tax structure for business.
“While a number of large U.S. cities rank favorably internationally, Cincinnati and Cleveland, in particular, fared well because of Ohio’s tax structure and total business costs,” said Christine Bustamante, principal in the Global Location and Expansion Services practice of KPMG LLP. “Cincinnati’s low property-based taxes, coupled with no state corporate income tax and Ohio’s tax credits applicable to video game production help reduce the effective tax rate for the digital services sector, contributing to both cities’ relatively low corporate tax burdens.”
KPMG’s 2016 Competitive Alternatives: Focus on Tax study is a global comparison of the total tax burden that companies in 111 cities throughout 10 countries may face, including corporate income taxes, capital taxes, sales taxes, property taxes, miscellaneous local business taxes and statutory labor costs – contributing to the study’s Total Tax Index (TTI).
According to the study, Cincinnati had a TTI of 73.2, representing tax costs 26.8 percent below the U.S. baseline of 100.0, followed by Cleveland (78.8), Baltimore (81.0), Atlanta (81.6), and Tampa (81.6), rounding out the top-five favorable large U.S. cities.
Other U.S. cities that ranked in the top 20 among international cities for most cost-competitive tax structure included:
Cities Ranked for Digital Services, R&D, Corporate Services and Manufacturing
The 2016 Competitive Alternatives: Focus on Tax report also highlights which countries and cities offer the lowest tax burdens for business based on industry sectors, including digital services, research and development (R&D), corporate services and manufacturing.
As a location for digital services, Cincinnati (58.4), Cleveland (60.7), Tampa (67.7), Orlando (68.4) and Miami (68.7) topped U.S. cities in the large-city category for most cost-effective tax structures. The U.S. ranked fifth globally for digital services.
“Approximately one-fourth of states in the U.S. offer significant incentives to the digital media industry, making this a highly competitive sector in which to achieve top rankings,” said KPMG’s Bustamante.
Atlanta (77.1), Detroit (77.5), Cincinnati (77.5), Tampa (77.8) and Pittsburgh (79.5) were the top-five large cities in the R&D sector for most favorable tax structures, contributing to the sixth-place ranking of the U.S.
“Results for R&D operations are heavily influenced by local tax incentives provided for R&D-related activities, especially since the U.S. federal R&D credit is now permanent,” said Bustamante.
The U.S. ranked fifth for most cost-effective tax structure for corporate services, which reflects results for two model businesses: a professional services operation and a support services operation. Kansas City, Mo., (83.2), Tampa (83.8), Atlanta (83.9), Orlando (84.3), and Cincinnati and St. Louis tied at 84.5, represent the top large U.S. cities for the corporate services sector.
“Total taxes on corporate services operations usually closely reflect statutory labor costs, given the high significance of labor among total costs in this sector,” said Bustamante. “Property tax costs for downtown office space are also an important influence in rankings for this sector.
For manufacturing operations, where property taxes and taxes on equipment and capital are of greater importance, the five large U.S. cities providing the most cost-effective tax structures for business were Baltimore (73.1), Cincinnati (74.7), Atlanta (79.4), Charlotte (80.0) and Pittsburgh (80.3). The U.S. ranked eighth overall.
Bustamante added: “While the strong American dollar relative to other currencies and the high tax costs in our nation’s cities used for the baseline are the reasons the U.S. ranked eight out of 10 for manufacturing operations, a number of individual U.S. cities rank ahead of cities in Australia, Germany and Italy."
RESULTS FOR KPMG’s 2016 COMPETITIVE ALTERNATIVES FOCUS ON
(U.S. cities with populations of more than 2 million)
Virginia, Metro DC
York City, NY
The total tax index is a measure of the total taxes paid by corporations in a
particular location and industry, expressed as a percentage of total taxes paid
by similar corporations in the United States baseline cities (New York City,
Los Angeles, Chicago and Dallas-Fort Worth).Thus the United States has a total tax index of 100.0, which represents the benchmark against which the other countries and cities are scored.
These results are part of KPMG’s global 2016 Competitive Alternatives study, which measured business location costs in 111 cities in 10 countries. The complete 2016 global study is available online at www.competitivealternatives.com.
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 174,000 professionals, including more than 9,000 partners, in 155 countries.