· Malaysia ranks fifth lowest tax burden in research
· Among the G8, only Russia has a tax burden less than 20% of GDP
· The current fast-growth economies have avoided high tax burdens
· Research by UHY, a top 25 global accounting and consultancy network
KUALA LUMPUR, June 25 (Bernama) -- Malaysia collects just 21% of GDP in tax,
lower than the majority of G8 and BRIC nations, according to UHY, the
international accounting and consultancy network.
On average, both the G8 and the fast-growing “BRIC” nations take 28% of GDP in
tax. Both China and Brazil collect a higher proportion of GDP in tax than
Malaysia. Among the G8, only Russia collect less tax than Malaysia (19%).
Malaysia collected USD 49.8 billion of taxes from GDP of USD 238.8 billon in the
most recent tax year. Of that total, indirect taxes comprised USD 6.2 billion
and income taxes USD 22.7 billion.
UHY research shows that the three major Eurozone economies - Germany, France and
Italy – collect, on average 43.4% of GDP in tax. France imposes the highest tax
burden among the nations studied, taking 44% of GDP in tax. Even the UK, which
is seen as a relatively low tax country by some of its European competitors, is
struggling with a burden of 34% of GDP.
Alvin Tee, Senior Partner of UHY in Malaysia comments: “The tax burden in
Malaysia is highly competitive by global standards. Even among the BRIC nations,
Malaysia imposes lower taxes than both China and Brazil, which will surprise
many people. It is crucial that we retain a competitive tax regime if we are to
attract foreign investment.”
According to UHY, many G8 nations have raised taxes over the last few years as
governments have made efforts to reduce their debt levels. A higher tax burden,
however, is often identified as an important factor inhibiting economic growth.
UHY professionals studied tax and GDP data for 23 countries across its
international network, including the G8, as well as key emerging economies,
including the BRIC nations.
The study by UHY also analysed the type of taxes collected by each country.
Among the G8, for example, Russia and Italy collect the highest proportion of
their taxes as indirect taxes at 33% (USD116 billion and USD 295.2 billion
respectively). The UK is the next highest at 32% (USD260.9 billion).
UHY points out that these taxes are easier to collect, but are often seen as
having a dampening effect on consumer confidence.
The study also shows that, among the G8, there is a wide gulf in the relative
value of social security contributions collected as a proportion of total tax
revenues. For example, 63.5% of all tax (USD 778.7 billion) in France is social
security whereas, at the other end of the scale, specific social security taxes
comprise just 18.4% (USD 151 billion) of all tax in the UK.
According to UHY, this is significant because the burden of social security
partly falls on employers and is sometimes called a ‘tax on jobs’.
The research also reveals that, among the Eurozone nations included in the
study, only Ireland and Slovakia have tax burdens less than 30% of GDP. Germany,
France and Italy have tax burdens of 43%, 44% and 43% of GDP, respectively. UHY
says that this shows just how little room they have for maneuver in terms of
raising taxes to shore up public finances, while at the same time trying to
stimulate economic growth.
Total tax burden as a percentage of GDP
TOTAL TAX COLLECTED (US$bn) GDP (US$bn) TOTAL TAX AS % of GDP
Mexico 120.2 1,154.8 10%
India* 197.3 1,676.1 12%
Nigeria 31.0 238.9 13%
Russia 354.5 1,850.4 19%
Malaysia 49.8 238.8 21%
Japan 1,232.8 5,458.8 23%
Australia 354.1 1,507.4 23%
US 3648.0 5094.0 24%
China 1,796.9 7,484.1 24%
Slovakia 24.0 87.3 28%
Ireland 64.3 217.7 30%
Spain 425.0 1,407.4 30%
Romania 57.4 189.8 30%
Czech Republic 63.5 198.5 32%
Canada 559.0 1,736.9 32%
Estonia 7.0 22.2 32%
Denmark 104.5 333.0 33%
UK 817.6 2,417.6 34%
Brazil 704.1 2,081.2 34%
Netherlands 300.0 780.7 38%
Germany 1,394.2 3,255.5 43%
Italy 891.8 2,060.9 43%
France 1,225.6 2,776.3 44%
G8 9,536.5 34,650.4 28%
BRIC 3,052.7 11,010.6 28%
* Does not include local taxes
* Does not include local taxes
Alvin Tee adds: “The comparison between the Eurozone countries, the BRIC and
other Western nations is extreme. Generally speaking, the lower tax rate
countries are experiencing higher growth, while most of the lower growth
countries have higher tax rates.”
“The G8 and BRIC nations both collected, on average, 28% of (BRIC) and 29% (G8)
of GDP as tax, but the G8 figure has been pulled upwards by its European
members.”
“High taxes are usually seen as an impediment to economic growth and can be a
drag on competitiveness. When you look at these numbers, it’s quite clear that,
from a tax perspective, eurozone nations are pricing themselves out of the
market. Many are raising taxes to pay down debts, eroding competitiveness even
further – it’s a Catch 22.
“While it can be argued that money taken out of the economy in tax is usually
put back in by government, if taxes are being raised to service interest on debt
rather than being invested, then it’s very much a drain for the economy
concerned.
He adds: “Eurozone countries have very few fiscal weapons left in their
arsenals, but they do retain control of tax policy. Cutting taxes is likely to
be one of the more viable options for boosting demand, but with tax revenues
still falling or stagnant, securing the recovery while maintaining sound public
finances will pose a significant challenge. The UHY research shows that, among
the 23 countries studied, Mexico collects the lowest amount of tax as a
proportion of GDP at just 10%.”
CP Oscar Gutierrez Esquivel, of UHY Glassman Esquivel y Cía, member firm of UHY
in Mexico comments: “Over the last few decades Mexico has implemented liberal
reforms, reducing the role of the state in the economy and the overall tax
burden. This has left Mexico with very competitive tax rates amongst major
economies. While low taxes alone are not sufficient for economic growth, they
have laid the foundations for Mexico to become one of the fastest growing
economies in the world today.”
“However, it is very important that the Government improves its tax collection
rates as these fall short of the revenue that the Government should expect to be
collecting.”
The UHY study also reveals that Italy has one of the highest tax burdens as a
proportion of GDP at 43%.
Andrea D’Amico of FiderConsult Srl, member firm of UHY in Italy, comments: “The
tax burden in Italy has been creeping up since the financial crisis as the
Government has implemented its deficit-reduction programme, which very likely
will further increase the tax burden for future years.”
“The problem for Italy is that the tax burden is not compatible with a steady
rate of economic growth. It’s a very difficult balancing act, but the Government
needs to find ways of reducing the amount taken out of the economy in tax, while
simultaneously taking actions to improve the economic growth and international
competitiveness.”
Notes for Editors
About UHY, Malaysia
UHY, a Malaysian partnership, has 4 offices and more than 100 professional
staff. The firm has service capabilities in audit, advisory, tax, forensic,
litigation support and valuation areas.
UHY, a Malaysian partnership, is a member of UHY, an international network of
independent accounting and consulting firms with offices in major business
centres throughout the world. Further information can be found at
www.uhy.com.my
About UHY
UHY is proud to celebrate its 25th Anniversary in 2011. Established in 1986 and
based in London, UK, UHY is a network of independent accounting and consulting
firms with offices in nearly 240 major business centres in 78 countries. Over
6,300 staff generated an aggregate income of US$583 million in 2010, ranking UHY
the 23rd largest international accounting and consultancy network. Each member
of UHY is a legally separate and independent firm.
For further information on UHY please go to www.uhy.com
UHY is a full member of the Forum of Firms, an association of international
networks of accounting firms. For additional information on the Forum of Firms,
visit www.ifac.org/Forum_of_Firms
The UHY network, via local experts and a cohesive international network, has the
capability to help businesses to internationalise. UHY colleagues from across
our cohesive network of like-minded firms and individuals assist clients in
considering a complex matrix of market entry factors, and help mitigate risk of
the internationalisation process.
For more information on UHY, please contact Dominique Maeremans, marketing &
business development manager, UHY International, Quadrant House, 4 Thomas More
Square, London E1W 1YW, UK. Tel: +44 (0)20 7767 2621, or email:
d.maeremans@uhy.com
SOURCE: UHY MALAYSIA
FOR MORE INFORMATION PLEASE CONTACT:
NAME : Steven Chong
Corporate Communications
UHY, Malaysia
TEL : 603 2279 3088
EMAIL : stevenchong@uhy-my.com
For UHY, the international network
NAME : Dominique Maeremans
TEL : +44 20 7767 2621
EMAIL : d.maeremans@uhy.com
NAME : Nick Cosgrove or Nick Mattison
Mattison Public Relations
TEL : +44 20 7645 3636
EMAIL : pa@mattison.co.uk
--BERNAMA