International Business Report 2008
Tax: the price we pay
International Business Report 2008 - Tax: the price we pay
People don’t like taxes. Governments, therefore have a tendancy to place the burden of tax on businesses, as they don’t vote.
Tax is a critical issue for all businesses. It is one of a handful of factors that can determine the long term viability of an enterprise.While a common feature worldwide, there is considerable variation on which taxes are seen to be a burden for specific firms. The views of major multinational listed companies on tax issues are well documented. But there has been little comprehensive research done on the impact of taxes on privately held businesses (PHBs) including entrepreneurs, family businesses and non-listed entities which account for over 98 per cent of businesses worldwide.
The Grant Thornton International Business Report (IBR) 2008 sought the opinions of owners and directors of PHBs worldwide on the issue of tax in the 34 participating economies. Specific tax issues focused on in this report are ‘the most burdensome aspects of taxation’ and ‘those aspects of taxation regimes that influence choice of location the most when establishing a foreign base’.
Against a background of tightening market conditions, the results provide a comprehensive picture of opinion on tax issues in this pivotal sector for economic growth. Fundamentally, leaders of PHBs want to see governments act to reduce the burden of taxes on employment and profits in their home states. They also seek meaningful tax incentives to invest in new markets.
There are, however, profound regional variations. Taxes on business profits rank as the highest burden in Asia Pacific and employer taxes rank highest in Europe. Personal income taxes are the central concern in North America; whilst in Latin America, indirect taxes feature at the top of the list.
Governments are under pressure to compete with each other as more and more countries cut their business tax rates to support existing businesses and entice others to relocate to their tax friendly jurisdiction. The recent interest in relocating to Ireland expressed by several businesses in the United Kingdom is a good example of the impact of tax competition in practice.
There is a core message for politicians and officials who determine tax policy. In home markets, leaders of PHBs want significantly lower rates of company and employer taxes. In new markets, they expect a better deal on tax incentives to encourage their investment.
Ian Evans
Global leader – tax services
Grant Thornton International