The 2012/01/17 at 06:50
The 2012 edition of the “Observatoire des politiques budgétaires et fiscales” (Budgetary and Tax Policy Observatory), published in January by Ernst & Young highlights at least two tendencies: the rise of indirect tax in Europe and the high level of tax pressure in Asia. Confronted by the demands of rating agencies, developed countries have introduced numerous tax measures conducive to boosting public coffers. “Nine States including France have hardened their tax base with the aim of reducing public deficits,” indicates the report. More widely, no global zone has been spared by the tightening of tax rules. In Europe and North America, governments are increasing indirect taxes such as the VAT and are placing a greater burden on higher incomes. In Europe, “governments are maintaining, or even reducing corporate tax rates, while simultaneously widening the base of this tax,” specifies Ernst & Young.
Ireland is the European country that taxes companies the least, with a corporate tax rate of 12.5 %. Amongst the other countries with the lowest corporate tax rates in Europe are Switzerland (18.95 %), Poland, Slovakia and Hungary (all at 19 %). Germany, the leading Eurozone economy, imposes a corporate tax rate of 29.83 %. In this domain, France nevertheless outdoes Germany, with an average tax rate of 34.43% – in other words almost three times more than that of Ireland. The French rate is even set to increase with the country’s new austerity plan, going up to 36.1 % in 2012. While France remains the European country where corporate tax is the highest, it nevertheless remains in the middle for the VAT. According to calculations by Ernst & Young, the average rate in Europe comes to 19.51%, with significant divergences from country to country. Switzerland practises a VAT rate of 8%, while Hungary notches up indirect taxes of 27%.
Although the tax base is generally being consolidated or widened, a number of countries are cutting corporate tax rates and multiplying tax breaks to draw investments, especially from overseas. This is notably the case in Asia and North America. In this area, Europeans are, surprisingly, more competitive than Asia. In China, the corporate tax rate is 26%, that is, above the European average. Japan nevertheless beats all records with a rate of 41%. Meanwhile, South Korea taxes companies at a rate of 24.2%. More widely, the company tax rate in Asia-Pacific averages at 29.87% compared with an average of 24.42% in European countries. In the quest for extra tax income, many States have turned tax evasion into a priority goal. Already, 498 treaties and agreements on information exchange and administrative assistance have been signed between States worldwide. But only one-half of these have been enforced. Given the breadth of their public deficits, we can safely bet that many Eurozone countries will be backing up their weapons against tax evasion in coming months.