Ontario, Canada – Canada remains the world’s most tax friendly country for global business, according to KPMG’s Competitive Alternatives 2014: Focus on Tax report.
Canada’s top international ranking, the international business consultancy said, “is mainly due to low effective corporate income tax policy combined with moderate statutory labor costs, as well as the country’s system of harmonized sales taxes.”
The United Kingdom ranked in second spot with Mexico landing in third in terms of tax competitiveness. The study also revealed there is no standard approach in setting tax policy among the countries analyzed.
Although the types of taxes used to raise government revenues are more or less similar among countries, it found that “there is a large range in how these taxes are weighted and applied.”
Some countries, it said, “have a tax policy focused on delivering a low corporate income tax rate in order to compete for more businesses. Those countries may need to rely more heavily on other taxes, such as sales or payroll taxes, to derive their tax revenues.”
Similarly, other countries “use their tax policies to attract certain types of businesses with targeted incentives for activities such as manufacturing or research and development.”
The countries were scored based on their TTI, or Total Tax Index, with the US, which ranked fifth on the list, providing the benchmark at 100.0.
For example, an overall TTI number of 51.6 means total tax costs are 48.4 percent lower in that country than in the US.
Spotlighted countries given as examples were Canada (53.6 percent); the UK (66.6 percent); Mexico (70.2 percent); The Netherlands (74.5 percent); the US ( —); Australia (112.9 percent); Germany (116.3 percent); Japan (118.6 percent); Italy (135.8 percent); and France (163.3 percent).