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Governments favouring indirect taxes to raise revenues: KPMG

One in 10 countries has increased indirect tax rates in past 15 months
Tuesday, April 29, 2014 - 06:00

[SINGAPORE] Indirect taxes are becoming the "tax of choice" to boost state coffers worldwide, according to a KPMG report released yesterday.

Over the past 15 months, one in 10 countries has pushed up indirect tax rates, while none has lowered such levies. Indirect taxes are not directly imposed on income, but on the consumption of goods and services.

"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," said KPMG.

At 7 per cent, Singapore's indirect taxes are the second-lowest in Asia, behind Taiwan (5 per cent).

Of more than 130 countries and markets studied by KPMG, Singapore - along with Panama and Thailand - has the fourth-lowest indirect tax rate.

Said Tay Hong Beng, head of Tax, KPMG in Singapore: "Indirect tax and its application changes almost daily in any number of countries. This variety comes with numerous complexities.

"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."

As for corporate taxes, at 17 per cent, Singapore's corporate tax rate continues to be the lowest in Asean.

Of the economies KPMG studied, the United Arab Emirates has the highest corporate tax rate (55 per cent), while Montenegro has the lowest (9 per cent).

Singapore, Slovenia, and Taiwan have the ninth-lowest corporate tax rates. Regional rival Hong Kong, at 16.5 per cent, is ranked just above Singapore in eighth place.

Mr Tay said Singapore's 17 per cent corporate tax rate was "still competitive" in the region: "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 (Asean Economic Community) on 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."

Separately, the issue of tax transparency and morality - or whether companies are paying their "fair share" of corporate tax - remains one of the most prominent areas scrutinised by governments, the public as well as investors globally.

KPMG said these issues were the drivers behind corporate tax fluctuations over the past 15 months, where some 24 countries lowered corporate tax rates and nine others raised them.

And with a greater spotlight on tax transparency and morality, Mr Tay thinks corporate tax rates "look set to go on a roller- coaster ride".

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