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How Corporate Tax Rates Change in 2013

Freemont Group
07 February, 2013

Ever since Adam Smith published his study “An Inquiry into the Nature and Causes of the Wealth of Nations” in 1776, economic growth has been brought in direct connection with economic freedom.

Economic freedom is mostly defined as the absence of government controls, such as regulations, taxes, tariffs, quotas, etc. More than two hundred years after Smith’s book, since 1996, this has been measured globally by the Canadian Frasier Institute that publishes its “Index of Economic Freedom” survey annually.

The report compares 42 variables, taxes belonging among the top 5. In this year’s index, Hong Kong retains the highest rating for economic freedom, other top scores belong to Singapore, New Zealand, Switzerland, Australia, Canada, Bahrain and Mauritius. This year, Bahrain and Finland are new to the top 10 — replacing, the United Kingdom that dropped to nr 12 and the United States that fell to nr 18.

It seems like in theory, the majority of governments understand exactly what needs to happen to guide their economies out of deep crises, however, they do not always act upon it. A couple of examples include some East European countries: As of January 2013, Serbia has increased the corporate tax rate from 10% to 15%. Slovakia has acted in a similar way increasing its corporate tax rate from 19% to 23%.

Luckily, many others seem to understand the concept and their corporate tax rates fell in 2013. To name a few, Slovenia reduced its rate from 18% to 17%, Sweden from 26.3% to 22%, Thailand from 23% to 20%, Ukraine from 21% to 19%, Brunei from 22% to 20% and Ecuador from 23% to 22%.

The future looks rather bright as the global average corporate tax rate has dropped from 27.5% in 2006 to 24.4 in 2013. Unfortunately, for those who consider these figures promising, here is the hidden reality: Corporate income tax represents only a part of the total tax burden each corporation has to face. It actually accounts only for 12% of payments, 26% of time and 36% of the total tax rate. While corporate tax rate might be dropping gradually, the indirect tax rate rises. The VAT in EU increased from 19.4% in 2006 to 21.3% in 2013.

Each year, an average company needs 267 hours to arrange its tax matters, it has to make 27 payments and its average tax burden is almost 45%.


About the Author

Freemont Group

Freemont Group is a comprehensive provider of fiduciary services, including corporate formation and administration, trust, fund formation, legal-and tax services. Contact: info@freemontgroup.com


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