International tax report 2010

Privately held businesses (PHBs) need to pay more attention to local tax regulations when deciding where to invest overseas. A survey of over 7,400 business owners in 36 economies reveals that 17% of PHB owners globally do not consider the local tax regimes when investing in another county. Businesses in northern Europe were among those least likely to focus on taxation in their investment decisions with over 30% of PHBs in Poland, France, Denmark, Finland and Belgium saying they would not consider the tax regime of the target country in their decision to set up an operating base.

In contrast, tax considerations are a significant factor in southern Europe, Latin America and Asia Pacific. Less than 10% of respondents in Spain, Greece, Brazil, Argentina, Taiwan, Japan and mainland China said taxation would not affect their decision to invest.

Popular tax incentives
Amongst PHBs who did consider tax in their overseas decision making, the most popular tax incentives were a tax free period of five years (41%), low tax rates on business profits (39%) and a stable tax regime (38%).

Respondents were also asked which domestic taxes they find most burdensome with taxes on business profits (25%) topping the list. This is a slight decrease on last year's response (27%). Employment taxes paid by the business (23%) and personal income tax (22%) come a close second and third.

Administrative burdens
Pallavi Joshi Bakhru from Grant Thornton, India, states: “We are a fairly regulated economy in India but the tax administration system is bureaucratic and at times arduous for smaller companies. Our tax rates are not very high but the multiple compliances for direct tax, VAT and service tax make compliance a pain for organizations that are not large enough to pay a considerable professional fee for external assistance. The growth in the Indian economy has occurred despite the prevailing tax system.”

To find out more, download the report here.