Average indirect tax rate down to 12.5%, says KPMG study

The average indirect tax rate in India, comprising excise duty, customs duty, service tax, value added tax and other local taxes, has come down from 16 per cent in 2005 to 12.5 per cent in 2010 — lower than the global average of 15.61 per cent.

The corporate tax rate has also fallen from 39.55 per cent in 2001 to 33.99 per cent in 2010, but it is still high than the global average of 24.99 per cent, says a study.

According to KPMG International’s 2010 Global Corporate and Indirect Tax Survey released today, since 2009 the average global corporate tax has dropped slightly from 25.44 per cent to 24.99 per cent in 2010. The average indirect tax rate rose slightly from 15.41 per cent in 2009 to 15.61 per cent in 2010.

“As governments look to recoup lost revenues from the economic downturn, the entire world is in the midst of a period of considerable change with their taxation regimes. A large number of countries are considering, or are in the process of implementing, substantial reforms of their tax systems,” it said.

According to the research, there has also been significant progress in two of the world’s major developing economies, China and India, who are at different stages of implementing national value added tax (VAT)/ goods and services tax (GST) systems. Furthermore, the debate in the US has progressed to the extent that consensus is building around the need for a fiscal solution such as VAT.

In the last one year all regions — Africa, Asia, Europe, North American, and Oceania — showed drop in their average corporate tax rates (29.77 per cent to 29.36 per cent in Africa, 24.81 per cent to 24.44 per cent in Asia, 21.70 per cent to 21.52 per cent in Europe, 36.50 per cent to 35.50 per cent in North America, 29.2 per cent to 29 per cent in Oceania). However, the Latin American region bucked the trend and showed an increase from 26.82 per cent in 2009 to 27.87 per cent in 2010, largely due to an increase in the Mexican corporate rate from 28 per cent in 2009 to 30 per cent in 2010.