World tax rates may rise to fund debt, social welfare: KPMG

Expect to pay more tax as governments constantly tweak legislation and systems to repay debt and find cash for more social welfare, says a KPMG survey.

The auditing giant said: "While tax rates in general are not changing very fast, governments are moving to widen the tax base, increasing the range of goods, services and activities that can be taxed to bring in more revenue."

It added that tax concessions, which were brought in during recession years to support industries and encourage consumer spending, are being withdrawn.

Mr Tay Hong Beng, head of tax at KPMG in Singapore, said the moves were partly driven by the global economic recovery and the changing expectations of state- provided social care.

The findings were from KPMG's global tax rate survey released late last month. Its member firms in 145 jurisdictions were surveyed on tax rates and to find out what strategies governments use to raise revenue from businesses and individuals.

KPMG noted that it is difficult to raise income tax rates as companies and people can easily compare the rates of different countries. This leads to higher social security rates, for instance.

The survey found that global average social security rates paid by employers rose from 15.35 per cent in 2014 to 17.14 per cent this year, which KPMG said is the highest in the past seven years.

Here, the employer's Central Provident Fund contribution rate rose by 1 percentage point to 17 per cent.

Other countries in Asia have also raised their social security rate. Japan increased it by 0.18 percentage point to 14.7 per cent, and Vietnam, by 1 percentage point to 18 per cent.

The survey found that since 2008, the global average individual tax rate has shifted in a range of less than 1 percentage point on either side of the 31 per cent mark. This year, that figure is 31.53 per cent.

Singapore's corporate tax rates have stayed at 17 per cent, but the survey noted higher individual tax rates for top earners.

KPMG said the top marginal tax rate will increase from 20 per cent to 22 per cent in the 2017 year of assessment for top earners.

The firm said: "The economic and social drivers for higher taxes comes at a time when a major international effort to update tax systems is reaching completion."

The survey comes after the Organisation for Economic Cooperation and Development (OECD) released final reports on how governments can tax more effectively.

Mr Tay said: "The work being done by the OECD will lead to a different tax system in the future - a system that encourages more transparency and better aligns the location of profits where activities are performed.

"In this regard, Singapore is well placed to position itself as a key jurisdiction in the global economy within this new tax framework."

A version of this article appeared in the print edition of The Straits Times on December 08, 2015, with the headline 'World tax rates may rise to fund debt, social welfare: KPMG'. Print Edition | Subscribe