Canada bucks the global trend to increase indirect tax rates by reducing
TORONTO, Sept. 18 /CNW/ - Tax rates on corporate profits have continued
their long decline in the past year, but governments worldwide are
increasingly looking to taxes on goods and services to make up shortfalls in
public revenues, KPMG International's latest annual survey of tax rates
affecting business has found.
For the first time since 1994, not one of the 106 countries covered by
the survey has raised its main corporate tax rate in the past year.
Canada's general corporate tax rate of 33.5 percent for 2008, which
includes federal and provincial tax, compares favourably with the US corporate
rate of 40 percent, but is still higher than the Organization for Economic
Co-operation and Development (OECD) and European Union (EU) averages.
"Canada's corporate tax rate is the third highest among the OECD
countries," said Greg Wiebe, KPMG's Managing Partner, Tax. "But Canada's
general corporate tax rate will continue to fall until 2012, when the federal
tax rate will be 15 percent, versus 19.5 percent in 2008. Some provinces are
also cutting their corporate rates."
The survey indicates that the global average corporate tax rate stands at
25.9 percent, down just under 1 percent, year-over-year. Lowest average
corporate tax rates are still found in the EU, where the average rate has
fallen by 1 percent since 2007, to stand at 23.2 percent. Highest average
rates are in the Asia Pacific region, where rates fell by 0.8 percent to stand
at 28.4 percent.
Canada's general corporate tax rate has dropped by 2.6 percent in 2008
versus 2007 (33.5 percent in 2008, versus 36.1 percent in 2007). The reduction
results from the elimination of the corporate surtax and a 1.5 percent federal
rate cut. Canada's year-over-year rate drop of 2.6 percent is higher than:
- The average drop in rates for all 106 countries in the survey of
0.9 percent (25.9 percent in 2008, versus 26.8 percent in 2007)
- The average drop in OECD countries of 1.0 percent (26.7 percent in
2008, versus 27.7 percent for 2007)
- The average drop in EU countries of 1.0 percent (23.2 percent in
2008, versus 24.2 percent in 2007).
"Corporate income tax rates are important, but they are only one factor
in comparing country-to-country tax burdens," said Wiebe. "You also have to
consider sales tax, property tax, capital tax and other local business taxes,
which KPMG has done in our special report on tax in Competitive Alternatives
2008, our guide to international business costs."
The survey also compares value-added type indirect taxes-Goods and
Services Tax (GST) or Value-Added Tax (VAT). The survey indicates that 135
jurisdictions around the world have such indirect taxes, with the average rate
being 15.7 percent, with little movement over the past 5 years. In the Asia
Pacific region, indirect tax rates are lower at 11.14 percent, but the average
rate here has risen by 0.5 percent since 2006.
In contrast, Canada's GST rate dropped to 5 percent from 6 percent in
2007. Canada's 5 percent GST rate is lower than the OECD average VAT rates of
16.9 percent, and the EU countries' average of 19.5 percent.
"As the survey points out, businesses in Canada also have to contend with
the valued-added tax or retail sales tax imposed by all the provinces, except
Alberta, which effectively increases their indirect tax burden beyond the 5
percent GST," said Deb Taylor, National Partner-in-Charge of KPMG's Indirect
The survey also notes that the US does not impose a national value-added
tax. Instead, businesses have to deal with a complex system of "sales and use"
taxes imposed at various rates by most states and many local governments. This
makes it difficult to compare US companies' indirect tax burdens with Canada
and the rest of the world.
Note to editors:
KPMG International's Corporate and indirect tax rates survey 2008 has run
every year since 1993. It now covers 106 countries, including the 30
member countries of the OECD, the 27 EU countries, 20 countries in the
Asia Pacific Region and 20 countries in the Latin America Region. This
year's survey compares corporate income tax rates as at 1 April, 2008,
with their equivalent each January 1, all the way back to 1999. For the
first time, the survey also includes information on Value Added Taxes or
Goods and Services Taxes in 90 countries, going back 5 years. Tax
professionals from across KPMG's global network of member firms have
contributed to the survey.
The Corporate and indirect tax rate survey 2008 is available at
About KPMG in Canada
KPMG LLP, a Canadian limited liability partnership established under the
laws of Ontario, is the Canadian member firm affiliated with KPMG
International, a global network of professional firms providing Audit, Tax and
Advisory services. Member firms operate in 145 countries and have more than
123,000 professionals working around the world.
The independent member firms of the KPMG network are affiliated with KPMG
International, a Swiss cooperative. Each KPMG firm is a legally distinct and
separate entity, and describes itself as such.
KPMG's Web site is located at www.kpmg.ca
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