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The short answer is: very. The United Arab Emirates, Saudi Arabia, Qatar and Bahrain levy the least taxes on international companies, according to a PricewaterHouseCoopers (PWC) report. Business Roundtable, an association of major U.S. companies, engaged PwC to examine global effective tax rates of U.S.- and other foreign-headquartered companies for the years 2006 to 2009. PwC calculated and compared effective tax rates by country for the 2,000 largest companies in the world as ranked by the 2010 Forbes Global 2000 list.
The result shows that the UAE had the second lowest tax regime with a mere 2.2% tax on some of the world's largest companies, making it one of the most tax-effective regimes in the world during the three-year period, according to the PWC report. In fact, the cluster of Gulf countries offered one of the lowest tax regimes, with Qatar, Kuwait, Bahrain and Saudi Arabia all levying some of the lowest taxes among the 58 nations surveyed in the PWC report. Only Venezuela was below the UAE. The South American country had a negative effective tax rate as the result of companies with negative income tax provisions and positive income.
However, not all Middle East countries did well. At a 33.9% tax rate, Morocco levied the second highest taxes in the world, below Japan which levied 38.8%. The only Gulf outlier with double-digit taxation rates was Oman, with a tax rate of 11.9%, and was ranked 50th. Egypt was ranked 21 st, with an effective tax rate of 21.4%, and Jordan (33 rd) had a tax rate of 19.9%. Tax rates in Morocco, Egypt and Jordan are higher than the average tax rates of non-OECD countries, which stood at 16.5%, and were comparable to the global tax rate average of 19.5% (excluding the United States).
The Gulf countries have done especially well as they offer incentives to set up business for international companies via free zones. The absence of value-added tax (VAT) also helps these countries to keep tax rates low. This strategy is likely to continue. While the Gulf states have been working on implementing a VAT programme, social unrest will make it an unpopular move in the current political climate. But some Gulf states are looking to bring their free zones into the tax loop.
A separate PWC tax study on Middle East states show that the Qatar Financial Centre AuthorityQatar Financial Centre Authority has announced that a tax regime for the QFCQFC has taken effect. "The QFCQFC tax law appears transparent in dealing with taxpayers, particularly as the provisions introduce a streamlined tax ruling procedure which means that taxpayers can obtain certainty on sometimes unclear tax positions. Key provisions of the QFCQFC tax law are given below. - QFCQFC entities are subject to corporation tax on their 'local source' profits at a rate of 10 percent. - No withholding taxes will apply. Although there could be a tax liability for a lender, it is unclear at this stage as to how the tax would be imposed."
Of course low taxes are not the sole reason for companies set up business in a country. Japan (ranked first), Italy (third), Germany (fifth), the United States (sixth) and Australia (ninth) have some of the highest tax rates in the world, but remain some of the most vital economies in world trade. In fact, what's worrying is that countries like Morocco (second), Indonesia (fourth), South Africa (11th) and Thailand (16th) - all of which are keen on attracting international companies - have such high tax rates. Morocco, Egypt, Jordan, Lebanon and Oman are all going through tumultuous times with their citizens looking to their governments to create jobs and economic prosperity. Perhaps these governments can look to reform their taxation programmes as a quick way to be more attractive to international companies and create jobs.
alifarabia.com
The result shows that the UAE had the second lowest tax regime with a mere 2.2% tax on some of the world's largest companies, making it one of the most tax-effective regimes in the world during the three-year period, according to the PWC report. In fact, the cluster of Gulf countries offered one of the lowest tax regimes, with Qatar, Kuwait, Bahrain and Saudi Arabia all levying some of the lowest taxes among the 58 nations surveyed in the PWC report. Only Venezuela was below the UAE. The South American country had a negative effective tax rate as the result of companies with negative income tax provisions and positive income.
However, not all Middle East countries did well. At a 33.9% tax rate, Morocco levied the second highest taxes in the world, below Japan which levied 38.8%. The only Gulf outlier with double-digit taxation rates was Oman, with a tax rate of 11.9%, and was ranked 50th. Egypt was ranked 21 st, with an effective tax rate of 21.4%, and Jordan (33 rd) had a tax rate of 19.9%. Tax rates in Morocco, Egypt and Jordan are higher than the average tax rates of non-OECD countries, which stood at 16.5%, and were comparable to the global tax rate average of 19.5% (excluding the United States).
The Gulf countries have done especially well as they offer incentives to set up business for international companies via free zones. The absence of value-added tax (VAT) also helps these countries to keep tax rates low. This strategy is likely to continue. While the Gulf states have been working on implementing a VAT programme, social unrest will make it an unpopular move in the current political climate. But some Gulf states are looking to bring their free zones into the tax loop.
A separate PWC tax study on Middle East states show that the Qatar Financial Centre AuthorityQatar Financial Centre Authority has announced that a tax regime for the QFCQFC has taken effect. "The QFCQFC tax law appears transparent in dealing with taxpayers, particularly as the provisions introduce a streamlined tax ruling procedure which means that taxpayers can obtain certainty on sometimes unclear tax positions. Key provisions of the QFCQFC tax law are given below. - QFCQFC entities are subject to corporation tax on their 'local source' profits at a rate of 10 percent. - No withholding taxes will apply. Although there could be a tax liability for a lender, it is unclear at this stage as to how the tax would be imposed."
Of course low taxes are not the sole reason for companies set up business in a country. Japan (ranked first), Italy (third), Germany (fifth), the United States (sixth) and Australia (ninth) have some of the highest tax rates in the world, but remain some of the most vital economies in world trade. In fact, what's worrying is that countries like Morocco (second), Indonesia (fourth), South Africa (11th) and Thailand (16th) - all of which are keen on attracting international companies - have such high tax rates. Morocco, Egypt, Jordan, Lebanon and Oman are all going through tumultuous times with their citizens looking to their governments to create jobs and economic prosperity. Perhaps these governments can look to reform their taxation programmes as a quick way to be more attractive to international companies and create jobs.
alifarabia.com
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