If international comparisons are any consolation, the rate of GST in New Zealand is among the lowest in the OECD, according to the KMPG International Survey.
It is said as well as lower GST, corporate rates were also moving down, contrary to the global trends.
A report accompanying the KPMG Corporate and Indirect Tax Rate Survey 2010 said that while Canada and Japan had the lowest GST rates (5%) in the world, followed by Switzerland (7.6%), Australia, and Korea (10%) against the OECD average of 18.28%.
According to the Survey, average indirect tax rate in all countries with GST systems rose from 15.41% in 2009 to 15.61% this year.
It said New Zealand was the only country in the world to offer tax reduction across the board to more than offset the rise in GST.
New Zealand has the 7th highest corporate tax rate in the OECD and would drop further in 2012, which bucks the worldwide trend, it said.
Following the downward revision of the corporate tax rate to 28% effective 2012, New Zealand will rank 10th in the rate of corporate tax, behind Japan (40.69%), US (40%), Belgium (33.99%), France (33.33%), Italy (31.4%), Canada (31%), Spain, Mexico, Australia (30%), Germany (29.41%) and Luxembourg (28.59%).
KPMG New Zealand GST Partner Peter Scott said Governments should consider indirect taxes as a better and more attractive alternative to improve public revenue.
“They should shift the collection burden to businesses rather than the revenue authorities. Businesses should understand that the rules of the tax game are changing and they need to keep up to speed to succeed,” he said.
Mr Scott said many businesses were still not familiar with the changes effected to GST and their implications to systems and procedures.
The Firm’s Corporate Tax Partner Paul Dunne agreed, saying that the tax incentives announced in the 2010-2011 budget would make New Zealand more attractive than Australia and stem brain and capital drain.
“However, businesses are likely to find themselves paying for the reduced rate in other ways. For instance, companies can no longer claim depreciation on buildings,” Mr Dunne said.
He said businesses should be aware of the changes occurring in the tax systems in most countries of the world.
“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. Many countries are considering substantial reforms of their tax systems.
“There will be added pressures for New Zealand companies doing business offshore, and hence they should have efficient tax risk management in place to succeed,” Mr Dunne said.
