Trend is for governments to expand their tax systems

Drawing on information from KPMG member firms in 145 countries, the survey shows that while tax rates in general are not changing very fast, governments are moving to widen the tax base, increasing the range of goods, services and activities that can be taxed to bring in more revenue.

Simply raising income-tax rates is difficult when companies and people can easily make comparisons between tax rates in different countries, so governments are having to find different ways to increase their revenue.

The survey finding is in line with the Thai government’s attempt to increase the tax base rather than raise tax rates. The Cabinet has recently approved reducing the corporate income-tax rate to 20 per cent permanently, as well as extending the 7-per-cent rate for value-added tax (VAT) |and reducing the personal income-tax rate for one more year.

The reduction in the tax rates will pressure the Thai government to find other ways to increase revenue. Recently, the government has increased the tax base by introducing an inheritance tax and a proposed property tax, including amendment of the Revenue Code in relation to tax collection from partnership and tutor businesses.

In addition, the government is attempting to expand the tax base by bringing into the tax system small and medium-sized enterprises that may not properly pay tax, such as e-commerce businesses.

Introduction of a transfer-pricing law is also one of the ways to increase the tax base. It is anticipated that we may see more updated tax laws in the near future.

The survey shows that social-security rates have been increasing around the world. Global average rates for employers and employees are now higher than they have been at any time in the past seven years. There has also been a quiet movement in favour of indirect taxes – VAT, or goods and services tax (GST).

With new VATs being introduced this year in Malaysia and the Bahamas, and plans for a similar tax in India and the Arab Gulf states, VAT is now used in more than 160 countries.

In light of the establishment of the Asean Economic Community (AEC) at the end of this month without the harmonisation of taxation, tax becomes a point of differen-tiation among member countries that will use it as a competitive factor against one another in attracting foreign investment.

Looking at Asean corporate tax, rates have gone down since the signing of the AEC Blueprint, now ranging from 17 per cent in Singapore to 30 per cent in the Philippines.

Thailand has reduced its corporate-tax rate from 30 per cent in 2011 to 20 per cent, while Vietnam has also reduced its standard corporate-tax rate, from 25 per cent to 22 per cent – and will lower it further, to 20 per cent, on January 1.

According to the KPMG survey, the corporate-tax rates of Asean member countries, except the Philippines, are within both the global and Asian averages, which are 23.68 per cent and 21.91 per cent respectively.

At a glance, the VAT/GST rate of most member countries is 10 per cent. This includes Thailand, although the Thai VAT rate is temporarily reduced to 7 per cent until September 30, 2016.

The Philippines has the highest rate at 12 per cent, while Brunei has no VAT or anything similar. Malaysia implemented GST from April 1 this year, with a standard rate of 6 per cent.

In benchmarking with the global average (15.78 per cent) and Asian average (12.35 per cent), the VAT/GST rates of Asean member countries are not considered high.

Europe is the highest region for VAT/GST, with an average of 20.2 per cent across the continent.

Full details of KPMG’s |“2015 Global Tax Survey”, including detailed information on tax rates and systems for each of 145 countries, can be found at www.kpmg.com/taxrates.