Asia-Pacific region highest corporate tax giver globally

New Delhi, July 25 (UNI) The higest corporate taxes exist in the Asia-Pacific region which includes India while Europe has the lowest in the world, KPMG's annual global tax rate survey has said.

The survey says the lowest corporate taxes among the developed economies are still to be found in the the European Union (EU).

In a review of corporate tax rates at the beginning of the year in 92 countries, the average rate in the EU was 24.2 per cent, compared with 27.8 per cent in the OECD countries, 28 per cent in Latin America and 30.1 per cent in Asia-Pacific.

This is the fourth year that European rates have been below those of the Latin American countries and the sixth year 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.

Commenting on the survey findings Sudhir Kapadia, National Head, Tax and Regulatory Services, KPMG India said the KPMG survey clearly shows that world over the tax rates have reduced especially in the EU and OECD countries. The survey also shows that other Asian countries' corporate tax rates are significantly lower than India's corporate tax rate.

For example Hong Kong's corporate tax rate is 17.5 per cent, Singapore 's corporate tax rate is 20 per cent and Malaysia's corporate tax rate is 27 per cent.

These countries are also in the process of developing their economies and with their lower corporate tax rates can provide stiff competition to India for attracting foreign direct investment (FDI).

Further, next year, significant reductions are in the pipeline in the UK, Germany, Spain, Singapore and China, Mr Kapadia said.

''We believe India should post haste implement the Kelkar Committee recommendation of reduction of corporate rates to 30 per cent. This is particularly so as various exemptions under domestic tax laws are being progressively phased out.'' From an indirect tax perspective, Subramaniam Harishanker, National Head, Indirect Tax, KPMG, said, ''The KPMG Tax survey 2007 underlines the increasing importance of indirect taxes as a revenue gathering strategy in many countries with a tendency among competing nations to reduce corporate taxes to attract investment and shore up shortfall by either rationalising or increasing indirect taxes.

''Our India experience equally underlines the growing importance of indirect taxes with the introduction of VAT and the stated implementation of GST by April 2010, Mr Harishanker said. The significant increase in revenues of states that have implemented VAT, along with the impressive revenue growth of service tax at the Federal level are indicators of growing importance of indirect taxes as a revenue source across the country.

Therefore it is imperative we focus on the implementation of GST by 2010 and rationalise indirect taxes, to avoid multiplicity of taxes, ensure revenues/ compliance and provide a better and sound tax administration,'' he added.

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 was 19.5 per cent, compared with 17.7 per cent in the OECD, 14.2 per cent in Latin America and only 10.8 per cent in Asia Pacific.

''This is the first year that we have added indirect taxes to our long-running survey of international corporate tax rates,'' said KPMG's Global Head of Tax Loughlin Hickey.

''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 governments say about the decisions they are making,'' he said.

UNI