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3 Corporate Tax Rate Survey 2006

KPMG’s Corporate Tax Rates Survey January, 2006

KPMG’s International Tax Center has great pleasure in presenting its 2006 global survey of statutory corporate income tax rates. The survey (begun in 1993) now covers 86 countries, including the 30 member countries of the Organisation for Economic Cooperation and Development (OECD), the 25 European Union (EU) member states, 19 countries in the Asia Pacific region, and 19 countries in the Latin America region. Tax professionals at KPMG member firms in all these countries have contributed to this survey.

Continued downward pressure on tax rates

Among nations that changed their statutory corporate income tax rates over the past 12 months, the overwhelming majority cut them, continuing a trend towards lower rates that has persisted for several years.

Rate reductions were most pronounced in Europe where the average statutory corporate income tax rate fell from 25.32 percent to 25.04 percent, thanks to rate cuts in six EU member states. The reduction in the EU average rate compares with a reduction in the OECD’s average rate from 28.55 percent to 28.31 percent. This has had the effect of widening the gap between the EU and OECD averages slightly from 3.23 to 3.27 percentage points.

This may reflect intensifying tax competition within the EU as a result of the accession of 10 new member states last year and the encouragement EU law and jurisprudence has been giving to capital mobility within the EU.

Elsewhere, national tax systems are less permeable, and tax competition is consequently less evident. In Asia-Pacific region, India reduced its rate by three percentage points during the year, the Philippines increased its rate by the same proportion, but the region’s average rate remained unchanged. The picture was much the same in Latin America. The region’s average fell very slightly by less than a tenth of a percentage point. In terms of statutory rates, Europe looks distinctly more attractive than either Asia-Pacific or Latin America:

Region Average statutory rate

EU

25.04

Asia Pacific

29.99

Latin America

28.25

© 2006 KPMG International. KPMG International is a Swiss cooperative of which all KPMG firms are members. KPMG International provides no services to clients. Each member firm is a separate and independent legal entity and each describes itself as such. All rights reserved.

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