Competitive Alternatives 2012 Special Report: Focus on Tax reveals that the emerging markets offer more than just growth potential; they also offer some of the lowest tax costs. This study estimates that companies located in India pay about 50 percent less in tax costs than their peers in the United States. Indeed, of the five countries with the lowest total tax costs, four are emerging markets: India, China, Mexico and Russia.
The survey, which assesses the impact of all business taxes including corporate income taxes, capital taxes, sales taxes, property taxes and statutory labor costs, finds that a country’s tax competitiveness is strongly related to how taxes are weighted and applied in different jurisdictions.
Among 14 major countries surveyed, outside of the emerging markets only Canada (ranked second), the United Kingdom (ranked sixth) and the Netherlands (ranked seventh) offer lower total tax costs than the United States. Higher tax costs seem to prevail in parts of Europe (Germany, Italy and France) and Asia Pacific (Australia and Japan). But Brazil stands out as an enigma: the country is widely recognized as a top emerging market, yet its total tax costs are around 43 percent higher than those of the United States.
|Tax Competitiveness – 2012 and 2010 Rankings by Country|
|*||India, China, Russia, and Brazil were not examined in the 2010 study.|
The survey also finds that R&D organizations tend to see the most extreme variation in tax costs between countries, largely due to intense competition among many countries to attract R&D businesses by offering generous tax incentives. But R&D executives would be wise to look at the full range of taxes being levied: France ranks first in corporate income tax rates for R&D organizations (an amazing negative 65 percent due to refundable tax credits), yet ranks a distant last for total taxes due to high other corporate taxes and very high statutory labor costs.
Overall, the changes in Total Tax Index (TTI) for all countries are the product of a number of factors, including:
The total tax burden can also vary from city to city within the same jurisdiction. The survey, which compared 113 cities from 14 countries, found that the tax burden spread between Cincinnati and San Francisco, for example, exceeded 25 percent; and the spread between Osaka and Tokyo was more than 20 percent, while the spread between Amsterdam and Rotterdam was a mere 0.5 percent.
|Tax Competitiveness – 2012 Rankings for 55 Major International Cities|
|1||Chennai, IN||46.4||29||Denver, US||94.3|
|2||Vancouver, CA||49.2||30||Chicago, US||95|
|3||Chengdu, CN||51.3||31||Detroit, US||95.9|
|4||Mumbai, IN||53||32||Houston, US||98.4|
|5||Toronto, CA||56||33||Phoenix, US||98.4|
|6||Montreal, CA||62.1||34||Dallas-Fort Worth, US||98.6|
|7||Monterrey, MX||62.8||35||Sacramento, US||100.2|
|8||Mexico City, MX||64.2||36||Riverside-San Bernardino, US||100.4|
|9||Manchester, UK||66.8||37||San Diego, US||101|
|10||Saint Petersburg, RU||67.8||38||New York City, US||101.3|
|11||Shanghai, CN||68||39||Portland, US||102.3|
|12||Moscow, RU||75.7||40||Los Angeles, US||105.1|
|13||Amsterdam, NL||76.9||41||St. Louis, US||105.3|
|14||Rotterdam, NL||77.4||42||San Francisco, US||106.6|
|15||London, UK||79.8||43||Berlin, GE||118.2|
|16||Cincinnati, US||80.8||44||Brisbane, AU||122.1|
|17||Baltimore, US||83.3||45||Melbourne, AU||123.4|
|18||Cleveland, US||85.2||46||Frankfurt, GE||125.8|
|19||Atlanta, US||86.7||47||Sydney, AU||126.8|
|20||Pittsburgh, US||89.1||48||Belo Horizonte, BR||138.4|
|21||Orlando, US||89.6||49||Osaka, JP||141.9|
|22||Minneapolis, US||89.8||50||São Paulo, BR||146.8|
|23||Philadelphia, US||90.8||51||Milan, IT||150.8|
|24||Tampa, US||91||52||Rome, IT||155|
|25||Boston, US||91.9||53||Tokyo, JP||162.6|
|26||North Virginia, Metro DC, US||92.4||54||Marseille, FR||172.3|
|27||Seattle, US||92.6||55||Paris, FR||187.1|
The analysis is based on cost information collected primarily between July 2011 and January 2012. Taxes reflect tax rates in effect on January 1, 2012, and also incorporate any announced changes at that time to take effect at specified later dates. Tax rates and other tax-related information are also subject to further change as a result of new legislation, judicial decisions, and administrative pronouncements. Of course, exchange rates and other cost factors will change over time.
The complete Special Report: Focus on Tax document is available for download in the Downloads section of this website.
|1||Changes in exchange rates influence the TTI results by changing the US dollar cost associated with taxes not based on income.|