Competitive Alternatives

Competitive Alternatives – Highlights

KPMG's Guide to International Business Location Costs


Special Report: Focus on Tax

Competitive Alternatives 2014 Special Report: Focus on Tax assesses the impact of business taxes in 10 countries and 107 cities. This supplemental report compares total tax costs, including corporate income taxes, capital taxes, sales taxes, property taxes, and statutory labor costs.

Tax costs are compared using a Total Tax Index (TTI), a measure of the total taxes paid by corporations in a particular location expressed as a percentage of the US baseline tax cost of 100.0. For example, a TTI of 75.0 reflects total tax costs in a jurisdiction that are 25 percent lower than in the US. For calculating income taxes, net income before income tax has been standardized as a fixed amount in US dollars for all locations, so that total taxes paid can be realistically compared in absolute dollar terms.

Among the countries studied, Canada has the lowest Total Tax Index at 53.6. In other words, total tax costs in Canada are 46.4 percent lower than in the United States. The United Kingdom, Mexico, and the Netherlands also have TTI scores below the US. At the other end of the spectrum, France’s TTI of 163.3 signifies that total tax costs in France are 63.3 percent higher than in the US.

Tax Competitiveness – 2014 and 2012 Rankings by Country
Rank Country Total
Tax
Index
2014
2012
Rank1
1 Canada 53.6 1
2 United Kingdom 66.6 3
3 Mexico 70.2 2
4 Netherlands 74.5 4
5 United States 100.0 5
6 Australia 112.9 7
7 Germany 116.3 6
8 Japan 118.6 8
9 Italy 135.8 9
10 France 163.3 10
Rank among the 10 countries included in both the 2012 and 2014 studies.

The 2014 TTI rankings are broadly consistent with the 2012 rankings among the 10 countries. The United Kingdom has moved ahead of Mexico, and Australia has moved ahead of Germany, but all other countries rank consistently between the 2012 and 2014 standings. Even among the countries whose rankings have not changed, Japan, Italy, and France have all seen significant improvements in their TTI scores since 2012.

Overall, the changes in TTI for all countries are the product of a number of factors, including:

  • Changes in tax rates, including income tax rate decreases in a number of countries
  • Incentive changes, including new, revised or expired incentives in various jurisdictions
  • Exchange rate changes, including the significant depreciation of the Japanese yen and the Australian dollar over the last 2 years1
  • Changes in the US baseline, as even minor tax changes in the US baseline locations influence the relative TTIs of all other locations
  • Lesser factors, including changes in underlying business costs in each location (e.g., property values and labor rates).
     

The total tax costs can also vary from city to city within any country. The survey compared 107 cities from 10 countries, and found some significant differences in tax costs among the cities. For example, the tax index spread between Cincinnati and New York City exceeded 38 percent and the spread between Osaka and Tokyo was more than 17 percent. Meanwhile, for the Netherlands and Germany, the spreads between cities within each country were less than 1 percent.

Tax Competitiveness – 2014 Rankings for 51 Major International Cities
Rank City Total
Tax
Index
  Rank City Total
Tax
Index
1Toronto, CA51.6 27Chicago, US93.9
2Vancouver, CA54.5 28Dallas-Fort Worth, US94.1
3Montreal, CA55.6 29Seattle, US95.4
4Manchester, UK58.1 30Riverside-San Bernardino, US95.4
5Monterrey, MX69.4 31Phoenix, US95.6
6Mexico City, MX70.9 32San Antonio, US95.9
7Cincinnati, US73.5 33San Diego, US96.3
8Eindhoven, NL74.2 34Sacramento, US96.6
9Twente Region, NL74.7 35Las Vegas, US97.1
10London, UK75.0 36Los Angeles, US100.1
11Cleveland, US80.2 37St. Louis, US100.7
12Atlanta, US81.1 38Kansas City, US101.4
13Baltimore, US81.2 39San Francisco, US102.1
14Pittsburgh, US81.9 40Osaka, JP109.8
15Philadelphia, US84.1 41Melbourne, AU111.0
16Charlotte, US84.5 42New York City, US111.8
17Minneapolis, US88.1 43Brisbane, AU112.9
18Orlando, US88.2 44Sydney, AU114.9
19Tampa, US89.1 45Frankfurt, GE116.0
20North Virginia (Metro DC), US89.9 46Berlin, GE116.6
21Detroit, US90.0 47Tokyo, JP127.3
22Boston, US90.0 48Milan, IT133.2
23Miami, US91.7 49Rome, IT138.3
24Portland, US92.5 50Marseille, FR159.6
25Houston, US93.2 51Paris, FR166.9
26Denver, US93.4    

The analysis is based on cost information collected primarily between July 2013 and January 2014. Taxes reflect tax rates in effect on January 1, 2014, 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.

Changes in exchange rates influence the TTI results by changing the US dollar cost associated with taxes not based on income.

 
Focus on Tax report cover

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