These are the key findings of the latest edition of the survey, which compares corporate and indirect tax rates from more than 130 countries, including Singapore.
“Although corporate tax rates in many countries have stabilised after years of decline, there are still multiple factors that will influence corporate tax rates in the future," says Tay Hong Beng, Head of Tax, KPMG in Singapore. "We expect dramatic changes in the global tax landscape to continue.”
Within ASEAN, Tay has observed the trend of decreasing corporate taxes.
“Corporate tax rates in the ASEAN region have fallen over the past 15 years. In particular, there was an obvious fall in rates in 2007 on the signing of the ASEAN Economic Community (AEC) Blueprint.
“The reduction in corporate tax rates has continued, with Thailand and Vietnam reducing their corporate tax rates by three percent. Singapore continues to have the lowest corporate tax rate in the region,” he said.
Tax morality and transparency drive corporate tax fluctuations
The issue of tax transparency and morality – or whether companies are paying their ‘fair share’ of corporate tax – remain one of the most prominent areas scrutinised by governments, the general public, media and investors globally.
Meanwhile, tax authorities are also under pressure to increase revenues from their tax base with fewer resources.
This has led to more tax audits and investigations. Tax authorities are also looking for coordinated solutions in the European Union (EU), the Organisation for Economic Co-operation and Development (OECD) and G20 contexts.
“Besides actions pursued at the OECD or EU levels, countries have to independently adjust their legislation while maintaining their competitiveness," adds Tay. The cross-border interaction of these new measures remains to be seen, and corporate tax rates look set to go on a roller coaster ride.
“The issues at play will also translate into challenges for companies. They must look into putting solid tax strategies in place, identify and manage tax risks, and invest in external communications around tax.”
Indirect tax becoming ‘tax of choice’
The increases in indirect tax rates globally are arguably evidence of it becoming the choice tax for governments around the world seeking to raise much needed income.
Japan is a recent example. The Japan consumption rate rose from five to eight percent effective 1 April 2014, and a further increase to 10 percent may take place in 2015, depending on the economic situation.
Standard, Reduced and Intermediary rate increases at the end of 2014 are also expected in Luxembourg.
“Indirect tax and its application changes almost daily in any number of countries. This variety comes with numerous complexities,” said Tay.
“Businesses must recognise that indirect taxes are here to stay, and should think carefully about where they put their tax time, effort and dollars. They must also ensure that they embrace technology so that their accounting and reporting systems can handle the increasing complexities of indirect tax.”
Tax rates in a nutshell
For countries that impose an indirect tax, Hungary is the country imposing the highest rate at 27 percent. The lowest is Aruba at 1.5 percent.
In Asia, Singapore has the second lowest indirect tax rate at seven percent, just behind Taiwan at five percent.
Among countries that impose a corporate tax, the United Arab Emirates holds the top spot with the highest rate at 55 percent*. The lowest is Montenegro at nine percent.
Singapore, at 17 percent, has the ninth lowest corporate tax rate with Slovenia and Taiwan. Hong Kong at 16.5 percent is ranked just above Singapore, while Macau and Oman take the third lowest corporate tax rate position at 12 percent.
“Singapore’s headline corporate tax rate at 17 percent is still competitive in the region," said Tay. "In fact, if we were to take into consideration the tax incentives that are offered to targeted industries and activities, the effective tax rates could possibly be much lower.
“With the establishment of the AEC in the horizon, it is important that Singapore remains relevant not only on corporate tax rates, but also in terms of tax administration and business regulations. Doing so will attract and facilitate the entry of international businesses into Singapore and the region.”