Canada maintains top spot as the most tax competitive country for business globally: KPMG Study

Toronto, Vancouver and Montreal lead the rankings of international cities for tax competitiveness

TORONTO, July 12, 2016 /CNW/ - Today, KPMG in Canada released its biennial Competitive Alternatives 2016: Focus on Tax report, revealing that Canada once again tops the list as the most tax competitive country for business globally. Canada's top international ranking is attributed to low corporate tax rates combined with moderate statutory labour costs, as well as low goods and services tax/harmonized sales tax. The United Kingdom ranked second with the Netherlands taking third place in terms of tax competitiveness.

The supplementary Focus on Tax 2016 report assesses the tax competitiveness of 111 cities in 10 countries featured in the Competitive Alternatives study KPMG released earlier this year. The supplementary report also focuses on tax comparisons for 51 major international cities.

"This year's Focus on Tax report reinforces Canada's position as an attractive option for businesses looking to relocate and expand their operations," said Jodi Kelleher, National Leader, International Tax, KPMG. "As our economy continues to rebound, this provides more positive news for the provinces and cities featured in the study."

According to the study results, all 17 of the featured Canadian cities have lower total effective tax costs when compared to all US cities featured. During the study period (based on tax rates effective/announced as of January 1, 2016), St. John, NFLD emerged as the most tax competitive city in Canada followed by Fredericton, NB and Moncton, NB.

Toronto, Vancouver and Montreal held three of the top four spots among the 51 major international cities (with a population of two million or more) ranking first, second and fourth, respectively.  Manchester, UK placed third.

Total tax costs are compared between countries and cities using a Total Tax Index (TTI) for each location. The TTI is a measure of the total taxes paid by companies in a particular location, expressed as a percentage of total taxes paid by similar firms in the US. As the benchmark country, the US has a TTI of 100.0. This study also defines a second measure of total taxes, which expresses tax costs as an effective rate, rather than an index of taxes actually paid. This measure is the Total Effective Tax Rate (TETR), which is calculated as: Total taxes paid by a corporation divided by Standardized net income before income tax.

Results by country

2016
Rank

Country

Total Tax Index

2014
Rank1

2016

2014

Change

1

Canada

52.4

53.6

-1.2

1

2

United Kingdom

64.5

66.6

-2.1

2

3

Netherlands

68.2

74.5

-6.3

4

4

Mexico

68.5

70.2

-1.7

3

5

Australia

95.7

112.9

-17.2

6

6

Germany

97.9

116.3

-18.4

7

7

United States

100.0

100.0

-

5

8

Japan

108.2

118.6

-10.4

8

9

Italy

110.5

135.8

-25.3

9

10

France

136.6

163.3

-26.7

10

1 Rank among the 10 countries included in both the 2014 and 2016 studies.

 

How Canada ranks:

  • Canada's federal Corporate Income Tax rate of 15 percent provides a very competitive base for corporate tax even when combined with provincial rates, which typically range from 10 to 15 percent. In comparison, the US federal corporate income tax rate is approximately 34 percent.
  • Among other Corporate Taxes, Canada's GST and HST sales taxes, which are generally refundable to businesses after Input Tax Credits are claimed, result in lower tax costs than the non-refundable sales taxes that apply in most US states. (Non-refundable sales taxes also apply to British Columbia, Saskatchewan and Manitoba.)
  • For Statutory Labour Costs, income thresholds for CPP and EI (at approximately $51,000) result in low statutory plan costs for Canada relative to many other countries.

Ranking and Total Tax Index (TTI) for featured Canadian cities (international and smaller cities)

2016
Rank

City

2016 Total
Index

2016
Rank

City

2016 Total
Index

1

St. John's

36.4

10

Toronto

47.4

2

Fredericton

39.0

11

Kelowna

47.7

3

Moncton

39.1

12

Vancouver

49.0

4

Edmonton

40.6

13

Sault Ste. Marie

49.5

5

Calgary

41.9

6

Halifax

43.8

14

Winnipeg

50.4

7

Charlottetown

44.2

15

Gatineau

52.4

8

Saskatoon

44.2

16

Quebec City

53.6

9

Barrie

44.6

17

Montreal

57.4

 

Canadian cities' highlights:

  • St. John's ranks 1st overall among 17 Canadian cities moving up from 4th in 2014. The introduction of a new tax credit in 2015 for digital media activities in Newfoundland & Labrador boosted the city's placement in the study.
    *Note: This analysis is based on tax data as of January 1, 2016 for all featured countries and cities and does not reflect tax changes announced by Newfoundland & Labrador in its April 2016 budget.
  • Toronto ranks 1st among the 51 major international cities studied and 10th overall among the 17 Canadian cities. The Ontario digital media tax credit has a significant impact on the results for Toronto in the Digital Services sector and also contributes to the city's overall positive ranking.
  • Vancouver ranks 2nd among the 51 major international cities studied and 12th overall among the 17 Canadian cities. British Columbia's R&D tax credit (10 percent) and digital media tax credit (17.5 percent) have a significant impact on the results for Vancouver in those sectors, and contribute to Vancouver's overall positive ranking.
  • Montreal ranks 4th among the 51 major international cities studied and 17th overall among the 17 Canadian cities. The range of tax incentives included in this study for Montreal such as R&D, e-commerce, digital media production, international financial activities and manufacturing contributed to the city's relatively low tax costs compared to its global peers.

LEARN MORE
Competitive Alternatives: Focus on Tax 
Focus on Tax Canadian regional backgrounder  
Competitive Alternatives 2016 report  
KPMG Tax  
@KPMG_Canada 
KPMG on LinkedIn

About KPMG's Competitive Alternatives: Focus on Tax
Focus on Tax is a supplement to Competitive Alternatives 2016, a biennial global report released in March examining business costs across 10 countries.  Focus on Tax assesses general tax competitiveness in the 111 featured cities and 10 countries and compares various tax rates in each location including: corporate income tax, property taxes, capital taxes, sales taxes, miscellaneous local business taxes and statutory labour costs - all resulting in a Total Tax Index (TTI). Details of all cities covered are included in Appendix A of the main report.

Full details of the specific tax rates applied for corporate income tax and other corporate taxes in each jurisdiction can be found in Appendix B of the Competitive Alternatives 2016 report.

Full details of data sources used for tax information and the broader business cost factors (such as local wages and property values) that impact this study can be found in Appendix C of the Competitive Alternatives 2016 report.

To access the full report, please visit www.competitivealternatives.com/tax.

About KPMG
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 174,000 professionals, in 155 countries.

The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss entity. Each KPMG firm is a legally distinct and separate entity, and describes itself as such.

SOURCE KPMG LLP

Image with caption: "Focus on Tax (CNW Group/KPMG LLP)". Image available at: http://photos.newswire.ca/images/download/20160712_C5149_PHOTO_EN_732007.jpg

For further information: Tonique Bedeau, National Senior Manager, Communications, KPMG in Canada, 416.777.3142, tbedeau@kpmg.ca

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