Singapore - Companies operating in multiple countries are at risk of increasing their cost burden if they fail to manage their tax compliance efficiently or utilise tax incentives available in each local market.
According to KPMG International's 2010 Global Corporate and Indirect Tax Survey, the average global corporate tax has dropped slightly from 25.44% in 2009 to 24.99% this year. In Asia, average corporate tax rates have dropped from 24.81% last year to 24.44%. But many countries are considering raising rates for indirect tax to recoup lost revenue that were used to fund fiscal stimulus. The average indirect tax rate has risen to 15.61% in 2010, a slight increase from 15.41% last year.
While Singapore is still offering the eighth lowest corporate tax rate globally at 17% and the fourth lowest indirect tax rate of 7%, companies should expect fluctuations in other countries in the next few months.
More than 17 countries have changed their tax rates - corporate and indirect - since 2009, or have announced plans for tax rate changes in 2011. For example, corporate tax for the UK will drop to 24% over four years while New Zealand will reduce its current tax rate of 30% to 28%. China and India are also looking at implementing national VAT/GST systems while governments in the Gulf region are considering the introduction of a similar system.
Tay Hong Beng, head of tax at KPMG Advisory, said companies operating in multiple jurisdictions need to be "highly aware" of the changing tax regulations. "The risk of double or even triple taxation, meaning profits will be taxed more than one time, has become very real."
Tay added that it is no longer sufficient for a multinational company to adapt to each of its local operating environment separately. Companies should take into account of "local, regional and national factors" in each market and its stakeholders.
Tay said, "The winners will be companies that are most efficient in their management of tax compliance and engaging local tax authorities, as well as, utilising available tax incentives so they can make informed choices in relation to their tax burden."
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