Richard Cornelisse

Global Indirect Tax Burden: Rate Changes Q1 2012

In Tax News on 04/05/2012 at 8:54 am
Global Indirect Tax Burden

According to the latest ONESOURCE Indirect Tax rate report there were 30 percent fewer indirect tax increases reported globally in the first quarter of 2012 than there were during the same period in 2011:

The number of indirect tax increases declined from 154 in Q1 2011 to 107 in Q1 2012.

This includes two components:

  • The total number of state, county, and city sales tax increases in the U.S. declined from 100 to 90.
  • The number of value added tax increases globally dropped from 54 to 17

The global Q1 2012 report released today found that:

  • In the U.S. – The average state sales tax was 5.48 percent in Q1 2012, down from 5.52 percent in Q1 2011.
  • In Europe – France, Ireland, Norway, Hungary, Cyprus, and the Czech Republic raised VAT rates in Q1.
  • In Asia – China added a reduced rate for the sale of self-used fixed assets sold in the Shanghai VAT Pilot Region.

Overall, there were 446 changes to indirect tax rates in Q1 2012, down significantly from 2,154 in Q1 2011.

Carla Yrjanson, vice president of tax research and content at Thomson Reuters:

“Global companies had to comply with nearly 450 tax changes this past quarter”

“Without the right technology, domain expertise and accurate tax information, a company would find it difficult, if not impossible, to achieve compliance with confidence in a timely fashion.”

VAT Rates Overview
  1. Overview of EU VAT rates, changes or proposals: EU VAT Rates | TMF
  2. Overview of ‘Global VAT/GST’: Global VAT/GST Rates| TMF
Related Topics

From VAT Throughput – Calculating The Taxes:

“What is the effect of increasing VAT/GST rates on this “VAT throughput”?  Governments increase the VAT rates to balance their budget. More VAT/GST in the system equates to more tax authority scrutiny and higher penalties for errors – the greater the amount of tax in the system, the greater the tax risk. Could be that an update of the tax risk register and tax risk evaluation is necessary.”

From About US Tax reform – Larry Lindsey, Former Fed Governor: “A Value Added Tax Should Be On The Table?:

“The global spread of Value Added Taxes (sometimes referred to as Goods and Services Taxes) has been the most remarkable development in taxation over the last 50 years. Operated in less than 10 countries in the late 1960s, VAT now raises one fifth of the world’s tax revenue and still more countries are adopting it. The increasing importance of VAT as a source of government revenue is likely to continue as countries deal with fiscal consolidation pressures in the wake of the economic crisis while seeking to restore growth.”

“Raising the standard VAT rate has often been considered as the easiest way to increase revenues from the tax, particularly at a time when many governments are seeking ways to address large fiscal deficits. Some countries have even explicitly linked rate increases to the objective of fiscal consolidation. For instance the Slovak Republic has temporarily increased its VAT rate until the deficit will be reduced to below 3% and in Poland the VAT rates will automatically increase if the public debt to GDP ratio increases above a certain level.” Jeffrey Owens

From Would Europe’s Value Added Tax Work For The United States:

However, we see in countries that have a VAT system a shift from direct to indirect tax and increase of VAT rates are a trend.

    1. What is the impact on the economy in the downturn?
    2. To stimulate the economy, would a decrease of VAT rates make more sense?

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