TORONTO, June 26 /CNW/ - The lowest corporate taxes among the developed
economies are still to be found in the countries of the European Union, KPMG
International's latest global corporate tax rate survey has found. Canada,
however, stands out as having one of the highest corporate tax rates in the
In a review of corporate tax rates at the beginning of 2007 in
92 countries, the average rate in the EU was 24.2 percent, compared with
27.8 percent in the OECD countries, 28 percent in Latin America and 30.1
percent in Asia-Pacific. Among developed economies, Canada's corporate tax
rate of 36.1 percent is one of the highest. However, the United States and
Japan still have higher corporate tax rates at 40 percent and 40.7 percent
This is the fourth year that European rates have been below those of the
Latin American countries and the sixth that they have been below those of Asia
Pacific. Additionally it is 11 years since average rates in the OECD nations
were below those of Europe.
But the survey also found that indirect taxes in Europe are the highest
in the world. Value Added Tax (VAT) or Goods and Services Tax (GST) rates in
the EU countries average 19.5 percent, compared with 17.7 percent in the OECD,
14.2 percent in Latin America and only 10.8 percent in Asia Pacific. Canada's
average federal GST is 6 percent. Additionally, all provinces, except for
Alberta, impose a form of GST or retail sales tax at rates ranging from 6-10%,
on the sales of taxable goods and services.
"This is the first year that we have added indirect taxes to our
long-running survey of international corporate tax rates," said KPMG Canada's
National Indirect Tax Leader, Deb Taylor, "and the figures seem to confirm a
global trend for indirect taxes to rise to compensate for lower corporate tax
"The highest indirect taxes in the world, over 25 percent, are found in
Denmark, Norway and Sweden. Each of these countries has a corporate tax rate
of 28 percent, which puts them at the upper end of the corporate tax rate
However, they are still some way behind the U.S. and Japan, whose
corporate tax rates of 40 percent and 40.7 percent respectively make them the
most expensive of the developed economies for corporate taxpayers. Japan's
main indirect tax rate is 5 percent, while the U.S. does not have a federal
GST, but the states impose their own sales taxes at various rates.
Across the OECD countries, the average VAT rate has held steady over the
past six years at around 18 percent, while the average corporate income tax
rate has fallen by more than a tenth, from 31.4 percent to 27.8 percent. So
without changing rates, VAT and VAT type taxes have become steadily more
important to national governments.
This seems to be a trend, but a cautious one, and some commentators have
asked why governments do not rely even more heavily on indirect tax revenues.
One answer is that higher indirect taxes are politically difficult to
introduce. The link between higher indirect taxes and higher prices is obvious
to anyone who buys goods and services, as clearly this is a disincentive for
consumer spending. The link between lower corporate tax rates and increased
corporate investment in Canada, with the increased employment and
infrastructure development it can bring, is less well understood.
We only have one year's figures for indirect taxes, so it is too early
for us to say definitively that there is a link. But this does coincide with
what many governments say about the decisions they are making. It's
interesting that, with our high corporate tax rate and recent GST rate cut,
Canada appears to be bucking this trend."
Globally, the reduction in corporate tax rates from 2006 to 2007 has been
very slight, from 27.2 to 26.8 percent. This is much less than the
year-on-year reductions of the 1980s and 1990s. Canada has remained at 36.1
percent since 2004, with its most recent dramatic reduction (from 44.6 percent
to 38.6 percent) occurring between 2000 and 2002.
But some countries have made significant cuts, such as Turkey's reduction
from 30 percent to 20 percent and Bulgaria's reduction by 5 percent to
10 percent. There are also reductions in the pipeline from Germany, Spain, the
U.K., Singapore, China and possibly in France, which should be reflected in
future KPMG surveys.
About KPMG in Canada
KPMG LLP is the Canadian member firm of KPMG International, the global
network of professional services firms whose aim is to turn knowledge into
value for the benefit of their clients, people and the capital markets. With
nearly 94,000 people worldwide, KPMG member firms provide industry-focused
audit, tax, and advisory services from more than 717 cities in 148 countries.
KPMG's Canadian Web site is located at www.kpmg.ca.
For further information: Julie Bannerjea, KPMG LLP, (416) 777-3243