Canada goes against global trend of raising indirect tax rates
TORONTO, Feb. 21, 2013 /CNW/ - Canada's corporate tax rate dropped in
2012 as the last phase of federal cuts took effect. This tax cut is
consistent with the global trend in the reduction of corporate tax
rates, but Canada's rate fell faster than other countries' rates during
the year, according to KPMG's Global Corporate and Indirect Tax survey of tax rates affecting business.
"General corporate income tax rates are important but they are only one
factor in comparing country-to-country tax burdens," said Elio Luongo, Canadian Managing Partner, Tax, KPMG in Canada. "Sales tax, property
tax, capital tax and other local business taxes are all considerations.
International companies should analyze all of these costs carefully and
how they interact."
Canada's corporate tax rate has dropped by 2 percent to 26 percent in
2012 (from 28 percent in 2011) but the decline in most regions of the
world in 2012 was much smaller at less than 1 percent. Based on these
results, the survey says the global trend towards falling rates will
continue in 2013, albeit at a slower pace than in the past. No further
cuts are scheduled for Canada after 2012.
The survey compares corporate and indirect tax rates from more than 125
countries. Canada's general corporate tax rate of 26 percent for 2012,
which includes federal and provincial tax, compares favourably with the
U.S. corporate rate of 40 percent but is still higher than the U.K.
rate of 24 percent and the European Region average of 20.5 percent.
The survey also compares value-added type indirect taxes (Goods and
Services Tax (GST) or Value-Added Tax (VAT)) in 111 jurisdictions
around the world that have such indirect taxes. While corporate tax
rates have been declining around the world, GST and VAT regimes have
proliferated, with rates rising to an average of 15.5 percent in 2012.
These increases are expected to continue in 2013.
Canada has bucked this trend by not raising its federal GST rate. Also,
in the provincial context, British Columbia is moving from a harmonized
sales tax back to its former provincial sales tax regime.
"As the survey points out, businesses in Canada have to contend with the
harmonized sales tax or retail sales tax imposed by all of the
provinces except Alberta," said John Bain, Partner, Indirect Tax, KPMG in Canada. "For example, HST is 13 percent
in Ontario and GST and QST together are almost 15 percent in Quebec.
Businesses also have to contend with many changes recently made to the
GST rules and provincial rules, such as harmonizing the QST more
closely with the GST."
While it is possible to compare Canada's corporate income tax rate with
the U.S., it's not easy to compare indirect tax rates because the U.S.
does not impose a national value-added tax. Instead, businesses have a
complex system of "sales and use" taxes imposed by most states and many
local governments at various rates.
KPMG's tax rates online tool
Visit www.kpmg.com/taxrates for an interactive online tax rate tool. The online tool allows users
to view and compare the latest corporate and indirect tax rates from
across the globe. With the new tool, users can:
Compare a particular tax rate (e.g., corporate tax) between up to five
Choose the years they want to compare;
View the corporate and indirect tax rates for a particular country.
Follow @KPMG_Canada on Twitter and linkedin.com/company/kpmg-canada on LinkedIn for more information about corporate and indirect tax
KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian
limited liability partnership established under the laws of Ontario, is
the Canadian member firm of KPMG International Cooperative ("KPMG
International"). KPMG member firms around the world have 152,000
professionals, in 156 countries.
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SOURCE: KPMG LLP
For further information:
National Coordinator, Media Relations
KPMG in Canada