Country taxation: differences in the approaches

The indicator of the tax level of this or that country will always remain a relevant topic for a different sort of the international studies and ratings. Thus, grounding on the researches, which were conducted by the PWC consulting agency, one can provide the following data:

The most comfortable states, in the terms of the taxation, are mostly concentrated in the Middle East or in the Asian region. The leading position was also taken by a jurisdiction of the Maldives, where the country provides only the one type of the budgetary payments. In the Eurozone, Ireland is recognized as the most comfortable jurisdiction, where the aggregate tax rate is about 28%.

The authors of the research also argue that the convenience and the simplicity of the tax system depends on the government initiatives in the process of the collecting the budgetary payments. In turn, the effectiveness of state tax structures depends on the associated costs and expenses. As an example, of simplifying the tax system and showing the governmental initiatives, can serve the opportunity for submission of the declarations remotely via the Internet.

According to the independent experts, ignoring the modern technologies and using in practice of the old outdated methods that can reduce the convenience and the efficiency of the national fiscal system to the critical level.

For a visual example, here are a few points from the abovementioned rating (be aware that the indicated rates apply to the companies with the status of a resident of the jurisdiction):

Name of the jurisdiction
Tax rate (%)
Time for declaring the taxes (person/hour)
Maldives
9,3
0
The United Arab Emirates
14,1
12
Saudi Arabia
14,5
36
Bahrain
15
36
Eritrea
84,5
657
Argentina
108
864
The Comoro Islands
217
938

At the same time, there are many jurisdictions in the world which put into practice the preferential tax treatment for the potential investors and entrepreneurs. Let’s consider several types of the international tax-free jurisdictions.

Tax-free havens for the international business Countries of the Middle East, or oil giants

This category includes the Persian Gulf States such as the United Arab Emirates, Qatar, Oman, Kuwait, etc. Being the world's largest exporters of the oil and gas products, such countries can replenish the state treasury with the funds coming from the oil and gas industry.

So, in the United Arab Emirates the enterprises and the companies which operate in the oil and gas industry are liable to the corporate tax of 50-55% of the income. Moreover, the competent state policy has made it possible to diversify the national economy and to get rid of the oil dependency.

For example, if previously the main income source of the state consisted of the income from the oil exports, today tourism and international trade, industry and agriculture are actively developing. It should be noted that the Middle Eastern States have a relatively high GDP per capita.

Offshore areas

Availability of the preferential tax treatment or full exemption of business from the taxation are the characteristics of the classic offshore zones. Such structure is designed to attract the direct investments into the national economy. This category includes both the less populated island countries and developed micro nations such as Monaco.

In the international practice the offshore areas are mostly used for registration of the international companies or for creating solutions that allow to optimize the taxable base. As a rule, the norms of the corporate law of the offshore zones provide benefits and competitive advantages for the potential investors, including the absence of the state currency exchange regulation and financial reporting.

Among the traditional offshore zones the following jurisdictions can be singled out:

  • British Virgin Islands;
  • Andorra;
  • Cayman Islands;
  • New Zealand;
  • Panama;
  • Barbados;
  • Mauritius;
  • Belize;
  • Seychelles
  • Bermuda;

Switzerland

In the international practice, Switzerland is not considered as the classic offshore zone. But still, the local fiscal policy is characterized by the extreme flexibility, for attracting the potential investors. Corporate taxation rates of the international companies are determined in Switzerland basing on the numerous factors. So, when calculating the tax rates the kind of activity of the company, the number of the created jobs, the volume of the investments into the local economy etc. are taken into account.

Besides there are specialized zones in the world, which provide the preferential tax treatment for the international companies.


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