By Jay Heflin - 10/14/10 08:49 PM EDT
The average global indirect tax rate increased from 15.1 percent in 2009 to 15.61 percent in 2010. Meanwhile, the average global corporate tax decreased over the same time period, from 25.44 percent to 24.99 percent.
Indirect taxes are usually levied on goods and services instead of corporations or individuals, and are ultimately paid by consumers in the form of higher prices.
The report states that countries with established value-added tax (VATs) or Goods and Services Tax (GST) systems such as the U.K., Spain, Greece, Finland, Poland, Romania, New Zealand and Portugal have already confirmed plans or have begun to increase indirect tax rates. China and India have also made significant progress toward implementing national VAT/GST systems.
Not mentioned in the report are efforts underway in the U.S. to create a consumption tax, perhaps a VAT, that would be added to the current tax system to help the country get out of debt.
"It seems clear that governments worldwide plan to use indirect taxes as one route to help create a more stable tax base and raise revenue to fund stimulus packages or tackle government debt," said Rodney Lawrence, principal-in-charge of KMPG's International Corporate Services practice.
As indirect taxes increase, corporate tax rates fall, the report found, with Latin America and Mexico being an exception to that rule.
"Many countries are lowering their corporate tax rates to position themselves as competitive places to do business in the global marketplace," Lawrence said.
Congress is also looking at lowering the corporate tax rate to entice companies to the U.S. But what businesses are willing to give up to get that lower rate is an open question. In some cases, tax preferences might be more valuable to a company than a lower rate.
The financial crisis in Europe might also make some countries rethink reducing their rates. Ireland, for instance, the one-time poster child for bringing economic growth to its shore by lowering its corporate rate, is now thinking of raising it to stave off financial calamity.
A copy of the report can be found at www.us.kpmg.com.