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WICHIT CHANTANUSORNSIRI
Personal income taxes across the world are on a downward trend as governments increasingly recognise the importance of attracting and keeping skilled labour in today's globalised markets, according to the consultancy KPMG International.
''Global income taxes will decline as increased labour mobility forces governments to compete on tax,'' said KPMG's latest survey of global personal tax rates.
Thirty-three countries out of 87 surveyed cut individual tax rates in the past year, with only seven countries increasing taxes.
Overall, global tax rates have fallen by an average of 2.5 percentage points over the past six years as countries seek a balance between the need to maintain tax revenues and the importance of competing and attracting labour.
Average personal tax rates in 2008 were 28.8%, down from 31.3% in 2003, according to KPMG. Europe has the highest individual rates at 36.4%, while Asia Pacific countries averaged 34.6% and Latin America just 26.9%.
Denmark had the highest tax rate in the world, at 59% followed by Sweden at 55% and the Netherlands at 52%. At the other range of the scale, excluding countries with no tax, Bulgaria leads the EU at a rate of 10%, while Hong Kong is best in Asia at 16% and Paraguay leads Latin America at 10%.
The survey compared effective tax rates for wage earners with annual income of $100,000 and $300,000. In the region, Thailand had an effective rate of 24% for workers earning $100,000, against 31.07% for the Philippines, 21.84% in Malaysia and 31.42% in Vietnam. In the $300,000 bracket, Thailand charged a tax rate of 32.09%, compared with 31.7% for the Philippines, 25.95% in Malaysia and 35.54% in Vietnam.
Benjamas Kullakattimas, a tax partner at KPMG, said Thailand's top tax rate of 37% was relatively high compared with other countries in the region.
''If the government cut tax rates for personal income taxes and corporate taxes to increase the country's competitiveness, lost revenues could be offset by increases in value-added taxes, excise taxes, customs taxes or specific service taxes,'' she said.
Wirat Sirikajornkil, another tax partner at KPMG, said tax rates were a key factor for expatriate workers when comparing net compensation across different jurisdictions.
Lower tax rates can help attract skilled labour and specialists, which in turn will help attract foreign investment and generate added spending, he said.
Robert Porter, another KPMG tax expert, said that even in Europe, where tax rates have historically been high to support social spending programmes, the trend was towards lower personal income taxes.
France has made among the largest cuts, with its top rate falling to 40% in 2007 from 48.1% in 2003, while Germany now had a top rate of 45% compared with 48.5% earlier in the decade.
Such competition is seen even in Asia Pacific. Singapore cut its rate to 20% in 2007 compared with 22% in 2003 to better compete with Hong Kong in attracting skilled labour.
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