A survey of more than 3,400 businesses in 44 economies finds that 67% would not relocate their business to another country for any level of reduction in their corporate tax rate.
Business leaders in New Zealand are the most resistant to relocation “ 94% say they would not move abroad for a lower corporate tax rate. They are followed by Georgia (92%), Switzerland (90%), France (88%), Germany (87%) and Ireland (86%). The economies in which the most businesses would move for a lower rate are Russia, India, Taiwan, Greece, Botswana and Norway.
Simple headline rates are only part of the story, said Francesca Lagerberg, Grant Thornton UK head of tax and incoming global leader of tax at Grant Thornton International Ltd. “What matters to most corporates who operate internationally is how they can manage their effective tax rates so a single change in one place isn't always enough of a push or a pull. However, a combination of factors does lead to change as shown in the United Kingdom when several companies began to headquarter elsewhere and then reversed their decision when corporation tax rates fell and there were other tax breaks.
Over two-thirds of business leaders (68%) would favour lowering the corporate tax rate in their country even if it meant eliminating some current tax deductions. Support was greatest in Vietnam (94%), Lithuania (92%), Malaysia (92%), Peru (90%), Greece (88%), Mexico (82%), India (81%) and the United States (81%).
A trade-off between tax breaks and headline rates of tax, leading to a simple low tax rate with no or few deductions, does have the advantage of bringing simplicity. The difficulty is that tax breaks are hard to remove once in place, especially in those economies which are currently struggling to find growth and which use tax breaks to stimulate certain sectors or industries,†continued Lagerberg.
Important decisions can be taken on the basis of existing tax breaks and if the breaks go, the decision may look like a poor one because the goal posts have changed. Business likes certainty so any change needs a long lead in and clear communication.â€
Three in five business leaders surveyed (61%) did not think their government was doing enough with tax measures to help ease economic pressures. The countries with the highest dissatisfaction were Argentina (92%), Japan (86%), Poland (82%), Spain (82%), Latvia (78%), Australia (77%) and Denmark (76%).
Perhaps no surprise here too as we'd always like more,†said Lagerberg. Given the current environment where tax is headline news, what would be ideal would be governments co-operating more on tax issues and providing clarity on a global basis.â€
The survey was conducted by Experian in November and December 2012 as part of the quarterly Grant Thornton International Business Report with 3,450 respondents in 44 economies.
Notes to editors
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of more than 12,500 businesses per year across 44 economies. This unique survey draws upon 21 years of trend data for most European participants and 10 years for many non-European economies. For more information, please visit: www.internationalbusinessreport.com
Data collection
Data collection is managed by Grant Thornton International's core research partner -Experian. Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis. The research is carried out primarily by telephone.
Sample
IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 3,450 chief executive officers, managing directors, chairmen or other senior executives from all industry sectors conducted in November/December 2012.
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