Corporate tax rates in Europe and the more developed OECD nations carried on their downwards direction during 1999 and the gap has narrowed between these rates and those of less developed nations, KPMG's annual survey of international tax rates shows.
According to the survey, the average corporate tax rate in the industrialised OECD states has been reduced from 34.8% to 34.1%, while the average in comparatively less developed nations in Asia Pacific has risen from 31.9% to 32.2%.
Latin American countries have also seen their average rate rise from 28.5% a year ago to 29% now.
Ian Barlow, Chair of KPMG’s European Tax Group said: ‘The long-term trend towards lower corporate tax rates among the major OECD states, particularly in Europe, has carried on steadily.
‘While there were few headline-grabbing rate cuts last year, with the exception of Japan (more than 6%) we can expect to see more over the next year or two as countries try to attract investment and compete more effectively in the global market.
‘Ireland’s rate fell by 4% last year to 24% and will be down to 12.5% by 2003. This really sets the pace in Europe and is a challenge to advocates of tax harmonisation. Meanwhile, Germany is also expected to see major corporate tax reform with its rate going below 40% compared to well over 50% a year ago.’
He added: ‘The OECD and the European Union have concentrated their fire over the last twelve months on perceived ‘harmful’ tax practices and alleged ‘tax havens’.
The reality is that most countries are determined to stay competitive on their overall tax rates. Against this background, the European Commission’s actions really should be concentrated on overcoming the cross-border barriers to business integration and mobility of employees and rationalising some of the underlying national tax bases.’
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