The UK has moved up to second place in KPMG’s rankings of the competitiveness of the overall business tax system in ten different countries, one place higher than in the previous survey.
KPMG’s biennial Competitive Alternatives: Focus on Tax study compared the total tax burden faced by companies in 107 cities in ten countries: Australia, Canada, France, Germany, Italy, Japan, Mexico, the Netherlands, the UK and the US.
The study takes into account a range of location-based and national taxes, including corporate income taxes, property taxes, capital taxes, sales taxes, miscellaneous local business taxes and statutory labour costs, which it says provide a more insightful approach to calculating the total tax burden than simply looking at a country’s corporate income tax rate.
On this basis, Canada has the lowest Total Tax Index (TTI) at 53.6%, meaning total tax costs in Canada are 46.4% lower than in the US, which has a TTI of 100% and represents the benchmark against which all locations are scored.
The UK, Mexico and the Netherlands also have a TTI score below the US. At the other end of the spectrum, France’s TTI of 163.3% indicates that total tax costs in France are 63.3% higher than in the US.
The TTI rankings of countries in 2014 are broadly consistent with the 2012 rankings among the 10 countries, although the UK has edged up the table, moving ahead of Mexico to second place with a TTI of 66.6 (an improvement of 6.7 points since 2012).
The UK has also improved its rankings for model businesses in three of the four different sectors in the study. In corporate services, the UK leapfrogged Canada and Mexico to take the top spot. For both digital services and research and development, the UK moved from third in 2012 to second (to Canada) in 2014.
In manufacturing, all the rankings remain the same with the UK in third place behind Mexico and Canada.
Chris Morgan, head of tax policy at KPMG in the UK, said: ‘The UK government has been actively pursuing a policy of making the British tax system the most attractive in the G7.This latest survey is more evidence that measures such as reducing the corporate tax rate and introducing targeted tax incentives for specific activities are having an effect.’
