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Tax Ranked
Canada's GST System Ranks in Top 10 for Global Businesses
But 64 per cent of Canadian finance executives surveyed believe Ottawa
will rely more on indirect taxes like GST to raise revenues over the
next 5 years.
TORONTO - Canada's GST system ranks seventh easiest for businesses among indirect tax systems in 32 countries including the U.S., according to a KPMG-commissioned survey of senior finance professionals at more than 500 large corporations in countries around the world.
When asked which jurisdictions the respondents had found it most easy or
most difficult to do business in from a value added tax and GST perspective,
they rated Canada seventh among 32 countries. The U.K. was rated as most
"VAT-friendly" and Italy was rated the most difficult. The U.S. ranked
eleventh.
"While the survey demonstrates that Canada's GST indirect tax system is
"user-friendly" from a global perspective, we are not there yet" said Deb
Taylor, National Partner in Charge of KPMG's Indirect Tax Group in Canada.
"It's interesting that one of the countries whose respondents found the
Canadian indirect tax system difficult to work with is China, one of Canada's
largest trading partners."
Taylor continued, "In addition, some of the Canadian respondents also
ranked Canada's system as difficult. Five of our provinces have both GST and a
retail sales tax that businesses have to deal with. Based on the survey
results, perhaps Canada could be more competitive if we didn't have both
retail sales tax and GST systems in these provinces."
The research, some of the most extensive KPMG has ever commissioned on
the subject, helps to confirm that indirect taxes are becoming increasingly
important for global businesses as corporate income tax rates decline.
Of all the global businesses KPMG surveyed, 75% believe that governments
will rely more on indirect taxes in the future. Sixty-four percent of Canadian
respondents agreed, despite the recent reductions in the GST rate to 5%.
When asked about income tax and VAT/GST compliance risks, 45% of global
respondents rated errors in VAT compliance as the top global tax risk for
their organization. In Canada, 35% of respondents were more concerned about
risks in Indirect Tax than corporate income tax risks.
"Even though the majority of Canadian respondents predict that GST will
increase as a source of revenue to the government, and more than one-third of
the respondents view indirect tax as a risk for their organization, it's
interesting that the Canadian companies surveyed had one of the smallest
increases in their indirect tax management resources in the last five years
out of all the organizations surveyed," said Taylor.
The survey also provides evidence on the amount of VAT/GST that global
organizations are working to manage every day, with 82% of those responding
indicating their organization's annual "VAT throughput" was between US$200
million and $1 billion each year.
Of Canadian respondents, 86% said their annual GST/VAT throughput (GST
collected on sales plus GST paid on purchases) fell into this US$200 million -
$1 billion range, with 10% reporting their annual GST/VAT throughput was more
than US$1 billion.
"GST throughput can involve much more money than income tax, and the cost
remains significant even without profits," said Taylor. "Companies that aren't
paying attention to these costs may be missing opportunities to minimize
them."
Ranking of countries' "VAT-friendliness"
The respondents were asked which jurisdictions they had found it most
easy or most difficult to do business in from a VAT perspective. Their replies
can be viewed at:
http://www.kpmg.ca/ecommunications/marketing/indirecttaxationandbusinessa
globalperspective/GlobalVATSurvey2008.pdf
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