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| Canada's GST System Ranks in Top 10 for Global Businesses - KPMG Survey |
August 20, 2008 |
But 64 per cent of Canadian finance executives surveyed believe Ottawa will rely more on indirect taxes like GST to raise revenues over the next 5 years.
TORONTO, Aug. 19 /CNW/ - Canada's GST system ranks seventh easiest for businesses among indirect tax systems in 32 countries including the U.S., according to a KPMG-commissioned survey of senior finance professionals at more than 500 large corporations in countries around the world.
When asked which jurisdictions the respondents had found it most easy or most difficult to do business in from a value added tax and GST perspective, they rated Canada seventh among 32 countries. The U.K. was rated as most "VAT-friendly" and Italy was rated the most difficult. The U.S. ranked eleventh.
"While the survey demonstrates that Canada's GST indirect tax system is "user-friendly" from a global perspective, we are not there yet" said Deb Taylor, National Partner in Charge of KPMG's Indirect Tax Group in Canada. "It's interesting that one of the countries whose respondents found the Canadian indirect tax system difficult to work with is China, one of Canada's largest trading partners."
Taylor continued, "In addition, some of the Canadian respondents also ranked Canada's system as difficult. Five of our provinces have both GST and a retail sales tax that businesses have to deal with. Based on the survey results, perhaps Canada could be more competitive if we didn't have both retail sales tax and GST systems in these provinces."
The research, some of the most extensive KPMG has ever commissioned on the subject, helps to confirm that indirect taxes are becoming increasingly important for global businesses as corporate income tax rates decline. Of all the global businesses KPMG surveyed, 75% believe that governments will rely more on indirect taxes in the future. Sixty-four percent of Canadian respondents agreed, despite the recent reductions in the GST rate to 5%.
When asked about income tax and VAT/GST compliance risks, 45% of global respondents rated errors in VAT compliance as the top global tax risk for their organization. In Canada, 35% of respondents were more concerned about risks in Indirect Tax than corporate income tax risks.
"Even though the majority of Canadian respondents predict that GST will increase as a source of revenue to the government, and more than one-third of the respondents view indirect tax as a risk for their organization, it's interesting that the Canadian companies surveyed had one of the smallest increases in their indirect tax management resources in the last five years out of all the organizations surveyed," said Taylor.
The survey also provides evidence on the amount of VAT/GST thatglobal organizations are working to manage every day, with 82% of those responding indicating their organization's annual "VAT throughput" was between US$200 million and $1 billion each year.
Of Canadian respondents, 86% said their annual GST/VAT throughput (GST collected on sales plus GST paid on purchases) fell into this US$200 million - $1 billion range, with 10% reporting their annual GST/VAT throughput was more than US$1 billion.
"GST throughput can involve much more money than incometax, and the cost remains significant even without profits," said Taylor. "Companies that aren't paying attention to these costs may be missing opportunities to minimize them."
Ranking of countries' "VAT-friendliness"
The respondents were asked which jurisdictions they had found it most easy or most difficult to do business in from a VAT perspective. Their replies can be viewed at:
http://www.kpmg.ca/ecommunications/marketing/indirecttaxationandbusinessaglobalperspective/GlobalVATSurvey2008.pdf
The survey is available on KPMG Canada's website: www.kpmg.ca.
About KPMG in Canada
KPMG LLP is the Canadian member firm of KPMG International, the global network of professional services firms whose aim is to turn knowledge into value for the benefit of their clients, people and the capital markets. With nearly 94,000 people worldwide, KPMG member firms provide industry-focused audit, tax, and advisory services from more than 717 cities in 148 countries. KPMG's Canadian Web site is located at www.kpmg.ca.
(c) 2005 CNW Group Ltd, all rights reserved
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