Despite the recent hike to 15%, New Zealand’s GST rate is the fourth lowest in the OECD and remains below the global average, as measured by an international survey.
The annual KPMG Corporate and Indirect Tax Rate Survey 2010 reveals New Zealand’s GST rate outweighs only Canada and Japan (5 percent), Switzerland (7.6 percent), and Australia and Korea (10 percent) amongst OECD countries and is below the OECD average of 18.28%.
Over the last year the average indirect tax rate for all countries with GST systems rose slightly from 15.41% in 2009 to 15.61%
The survey also found that, unlike any other country in the world, New Zealand’s increase in GST rate is matched by personal tax rate reductions.
KPMG New Zealand’s GST partner Peter Scott said governments around the world considered indirect taxes such as GST as one of the more attractive ways of gaining revenue – shifting the collection burden to businesses rather than the revenue authorities.
“Businesses need to understand the rules of the tax game are changing and they need to keep up to speed to succeed. For instance, we are finding that many businesses are still grappling with the recent GST changes,” he said.
“It’s important that businesses think through the implications of the changes now, and upgrade their processes and systems,” said Mr Scott.
New Zealand currently has the seventh highest corporate tax rate in the OECD. However, New Zealand’s corporate tax rate is due to fall further in 2012, which stands in contrast to the rest of the world where the downward trend has halted.
KPMG corporate tax partner Paul Dunne said the reduction of corporate tax rates in the May 2010 budget made New Zealand comparatively more attractive than Australia on this measure.
“However, businesses are likely to find themselves paying for the reduced rate in other ways. For instance, companies can no longer claim depreciation on buildings,” he said.
With increasing co-ordination and sophistication among tax authorities around the globe, local companies needed to carefully plan and structure their tax.
“As governments look to recoup lost revenues from the economic downturn, the entire world is in the midst of a period of considerable change with their taxation regimes. A large number of countries are considering, or are in the process of implementing, substantial reforms of their tax systems,” said Mr Dunne.
“In this environment, there will be added pressures for New Zealand companies doing business offshore, and hence they need to have efficient tax risk management in place to succeed.”
Once the 28% corporate tax rate takes effect in 2012, New Zealand will have the 10th highest corporate tax rate in the OECD, behind Japan (40.69%), US (40%), Belgium (33.99%), France (33.33%), Italy (31.4%), Canada (31%), Spain, Mexico, Australia (30%), Germany (29.41%) and Luxembourg (28.59%), the survey showed.
Mon, 18 Oct 2010