Corporate rates drop as indirect taxes soar: survey
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Corporate tax rates have been steadily falling for a decade, while value-added and goods-and-services tax systems have been introduced across the globe, rising to higher rates and applying to more items as indirect tax systems mature, according to KPMG In
Some commentators have wondered whether these dual trends were temporary anomalies that would reverse over time, said John Andes, KPMG Thailand’s 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 per cent in 2000 to 22.96 per cent in 2011.
Regionally, the Asia-Pacific average rate went from 23.96 per cent in 2010 to 22.78 per cent this year. In the same period, the Latin America region went from 25.33 to 25.06 per cent, North America from 23.67 per cent to 22.77 per cent, and Oceania from 24.17 percent to 23.83 per cent. Europe was the only region with a slight increase – from 19.98 per cent in 2010 to 20.12 per cent in 2011, while Africa remained flat.
Average indirect tax rates at the global level have been stable, hovering at or near the 2011 average of 15.41 per cent for the past three years, excluding the countries that do not charge value-added tax (VAT) or goods-and-services tax (GST).
The Africa region saw its average VAT/GST rate rise from 13.91 per cent in 2010 to 14.17 per cent in 2011, while the average rate in Asia rose from 11.64 per cent to 11.93 per cent in the period. Oceania’s average rose from 12 per cent to 12.5 per cent. There was only Europe which saw its average VAT rate dip slightly, from 19.67 in 2010 to 19.71 per cent this year. Latin America also dropped from 13.90 per cent in 2010 to 12.78 per cent in 2011.
Governments are increasing their reliance on VAT/GST systems for economically sound reasons, Andes said.
“Compared with 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 as 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, the survey report said.
