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Competitive Alternatives Highlights
KPMG's Guide to International Business Location
Cost components
Labor cost comparisons are based
on 42 job positions.
Labor costs include wages and salaries, statutory benefits (including
government pension plans, medical plans, etc.), and all other benefits
typically provided by employers.
For manufacturing operations, labor costs typically represent 58
to 74 percent of total location-sensitive costs. For non-manufacturing
operations, this range is typically 79 to 88 percent.
Labor-related costs vary significantly among countries:
- Mexico has the lowest salary and wage costs among the ten countries
examined, followed by France, Italy, and the United States.
- Costs for statutory plans, as a percentage of payroll, are
lowest in Canada, followed by Japan, the United States, and the
Netherlands.
- Costs for other employer-sponsored benefits, as a percentage
of payroll, are lowest in France, followed by Canada, Germany
and Mexico.
- Combining these three elements, total labor costs are lowest
in Mexico, followed by the United States, Canada, and Australia;
an order that is generally consistent with the overall cost rankings.
Facility costs generally represent
the second-largest group of location-sensitive business costs:
- For manufacturing operations, facility ownership costs (including
financing) range from 8 to 19 percent of location-sensitive costs.
Land purchase and building construction costs for a new industrial
facility are lowest in Mexico, followed by the United States,
Italy, and France.
- For non-manufacturing operations, office leasing costs range
from 4 to 14 percent of location-sensitive costs. Lease costs
include rent, plus all costs and taxes typically passed on by
the landlord to the tenant. Office lease costs are lowest in Italy,
followed by Mexico, the Netherlands, and Germany.
Transportation costs vary widely
by industry, and represent between 1 and 15 percent of location-sensitive
costs for the manufacturing operations examined. Transportation
costs vary by product and markets served, but tend to be lowest
in the more compact European market, with leading cost countries
including the Netherlands, the United Kingdom, and France. Despite
its broad expanse and more distant global location, Australia also
offers relatively low transportation costs.
Utility costs represent between
two and ten percent of location-sensitive costs:
- The lowest electricity costs are found in the United States,
Canada and France, but may vary significantly by region.
- Mexico, the United States, and Canada offer the lowest natural
gas costs.
- Telecommunication costs are lowest in the United States, Canada,
and the United Kingdom.
Income taxes typically represent
two to eight percent of location-sensitive costs. Effective income
tax rates are calculated net of generally-applicable tax credits,
grants and incentives:
- For manufacturing operations, the Netherlands offers the lowest
effective corporate income tax rate, followed by Canada, Mexico,
and France.
- For R&D operations, the Netherlands, France, the United
Kingdom, Canada, Australia, and many US states all offer significant
R&D tax incentives, which may be fully or partially refundable
in certain cases or locations.
- For other non-manufacturing operations, the United Kingdom,
the Netherlands, Canada, and Australia offer the lowest effective
corporate income tax rates.
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