The price of doing business

The current basic corporate tax rate in India is 35%. There is a 2.5% surcharge and a 2% education cess too. All these elements take the effective tax rate to 36.6%. Let us now look at the global scenario. Australia, for example, has a tax rate of 30%. This rate applies to the income earned by a corporate during the period July 1 to June 30. Brazil, which is another emerging market and whose stock market now seems to be showing a high correlation with that of India, has a total tax rate of 34%. This comprises corporate tax and a social contribution tax on profits. In terms of corporate income tax the basic rate is 15% plus a surtax of 10% on annual income over a specified limit. The social contribution tax is 9% on corporate income. Canadaâ€™s tally is slightly higher at 36.1%. This varies slightly between provinces because the overall rate consists of a federal tax of 22.1% plus a provincial tax. In Europe, the rates are a bit harder. France, for example, has a tax rate of 34.33%. Germanyâ€™s is higher at 39.58%, which includes the corporate tax and trade tax on income. The rate is in the thirties for several other European countries too. Italy has a corporate tax of 38.25% while in Netherlands it is 34.5%. Spain charges 35% while Portugalâ€™s rate is 33%. A couple of countries with a slightly lower rate here are Poland at 27% and Sweden at 28%. The Asian economies however sport considerably lower rates. Consider Hong Kong where the corporate tax rate is 17.5%. This applies to Hong Kong sourced profits or profits that are derived from a business carried on in Hong Kong. Offshore profits, capital gains and dividends are exempt from tax. Korea has a rate of 29.7% that applies on income of more than 100m KRW. From January 1, â€™05 the rate has dropped to 27.5%. Two more countries with tax rates in the twenties are Singapore (22%) and Taiwan (25%). Chinaâ€™s tax figures are a bit complicated. There is a rate of 33% that is applicable to foreign investment enterprises and includes both the state tax rate and a local tax. Domestic enterprises are subject to a different set of tax laws and regulations. The tax rate goes down if a company is located in specially designed zones or if the local tax is waived. Finally, at the higher end of the spectrum we also take a look at the tax rates in some of the more developed countries. The UK charges 30% corporate tax, while the rate is USA is rather high at 40%. Japan has an even higher tax rate of 42%, which is one of the highest rates across the leading countries in the world. (Data was obtained from the KPMG Corporate Tax survey 2004 and various websites. For most countries the rate for â€™04 has been considered. However, details within countries differ and hence direct comparisons must be made carefully. The difference will arise in terms of benefits or exemptions and other support provided under the tax laws. The actual tax payable may be lower than the rates mentioned here.)

The price of doing business

Corporate tax rates play a big part in making a country attractive for investors. As India gets integrated with the world, there is an increasing need to compare our tax rates with those of other countries

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