Corporate tax rates are dropping around the world, but that's only half the story, according to a survey of 114 countries by KPMG. As corporate taxes fall, countries ranging from China and India to the U.K. and some Latin American nations are turning to indirect taxation, either by establishing VAT or GST taxes or raising existing VAT or GST taxes.
Competition for investment is increasing globally, KPMG says, and countries are responding by cutting their corporate tax rates to look investor-friendly. But Rodney Lawrence, principal in charge of KPMG's U.S. international corporate services practices, says, "We believe the impact of these changes will be an increase overall in taxes in most jurisdictions."
KPMG warns global companies will need to work hard to reduce the impact of VAT or GST taxes on cash flow and to reduce the amount of such taxes that go unrecovered. Corporations will also need to reduce tax compliance costs and to implement tax-efficient supply-chain management--all "massive" challenges.