Singapore Govts shifting to indirect taxes
For first time since 1994, none raises corporate tax: KPMG
By LYNETTE KHOO
CORPORATE taxes have continued to fall this year amid intense international pressure on governments worldwide to cut them. The focus has shifted to indirect taxes to make up for shortfalls in public revenue, KPMG’s Corporate and Indirect Tax Rate Survey 2008 shows.
For the first time since 1994, not one of the 106 countries covered by the survey raised its main corporate tax rate in the past year. The global average corporate tax rate fell 0.9 percentage point year on year to 25.9 per cent.
Asia-Pacific has the highest average corporate tax rates, which have fallen by 0.8 percentage point to 28.4 per cent. The lowest rates are still in the European Union, where the average rate has fallen by one percentage point since last year to 23.2 per cent.
At the same time, the indirect tax base is on the rise, particularly in the Asia-Pacific, where average indirect tax rates have risen by half a percentage point since 2006, though the region still saw the lowest average indirect tax rates at 11.14 per cent. The EU has the highest average in the world at 19.49 per cent.
‘We are seeing a worldwide move to ‘real-time’ taxes, as indirect taxes such as GST (goods and services tax) are sometimes known,’ said Owi Kek Hean, head of tax services at KPMG in Singapore.
‘This demands that tax departments have a real-time view of what is going on in their companies, with a far greater level of insight into transactions and related tax processes than many enjoy today.’
More governments have adopted or plan to adopt a value-added tax (VAT) or GST, KPMG said. There are now 135 jurisdictions in the world with GST.
There has also been an increase in transactions that these taxes apply to and a new focus by tax authorities, particularly in the Asia-Pacific, on efficient collection of indirect taxes.
In Singapore, the government has cut the corporate tax rate to 18 per cent from 22 per cent in 2003 and raised its indirect tax rate to 7 per cent from 5 per cent. It is in the process of extending its GST Compliance Assurance Programme to all businesses making annual GST supplies of $1 billion or more.
In India, there is a process of merging state-based indirect taxes as a prelude to introducing nationwide GST by 2010, KPMG said.
There is also an increasing emphasis on enforcing tax regulation, the survey noted. One of the most active new areas of tax regulation is transfer pricing.
In India, for instance, the government has adopted a tough attitude on companies using the country’s low tax base to improve profit margins elsewhere in the world.
Mr Owi said that amid such tensions, tax professionals need to be able to promote the benefits of efficient cross-border trade to governments and help develop new fiscal policies that these countries will need to win their share of global wealth.
Source : Business Time - 17 Sept 2008
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