China has harshest tax regime, India adds most misery

April 5th, 2009 - 8:48 pm ICT by IANS  

By Arun Kumar
Washington, April 5 (IANS) China has the harshest tax regime in the Asia-Pacific region, Hong Kong offers the friendliest, but India has added the most misery to its tax regime last year, according to Forbes Asia.

While New Delhi still maintains a relatively low rank of 23rd least friendly tax climate in this year’s Tax Misery Index, India saw its misery score rise by 24 points to 113.4 after it raised social security charges for employers and employees, the business magazine said in its latest survey.

New Zealand made the biggest improvement in the Asia-Pacific region after it eased individual and social security taxes.

“This move is part of a trend in Asia toward increasing social security coverage to a level comparable to that in Europe,” Forbes said.

India was ranked 35th least tax friendly jurisdiction in the 2008 list. In India’s total score of 113.4 points in this year’s index, corporate and personal income tax rates contribute 42 points and 34 points respectively, 12.4 points are for VAT/sales tax, 12 points come for each of employer and employee social security and one point is contributed by wealth tax.

The top-end corporate tax rate of 42 per cent in India is higher than any other jurisdiction in the world, except for two in the US, where New York City has 46.2 per cent and Illinois has 42.3 per cent corporate tax rates. With a corporate tax rate of 41 per cent, Japan is ranked third after the US and India.

Forbes said China’s tax “misery score” rose seven points to 159 from last year after Beijing imposed higher employer and employee social security taxes as its economy took a hit from the global economic downturn.

China levies a 25 percent tax on corporate income, 45 percent on personal income, 49 percent for employers’ social security, 23 percent for employees social security and a 17 percent tax on goods and services, the survey showed.

By contrast, Hong Kong’s tax misery score of 41.5 ranked the best in the Asia-Pacific region. Hong Kong’s corporate tax stands at 16.5 percent, personal income tax at 15 percent and employer and employee social security levy at 5.0 percent each, it said.

“This year, most Asian jurisdictions continue to have (a) more tax-friendly environment compared with other parts of the world,” Forbes said.

“The survey shows that outside of China and Japan, the rest of Asia continues to enjoy stable, low tax advantage.”

Japan’s misery score of 122.6 ranked it as having Asia’s second-least friendly tax environment after China, while Taiwan followed Hong Kong as the region’s second-most friendly with a score of 75, the survey said.

Eight of the 10 least tax-friendly countries on the list are European, it added. Worldwide, France topped the list by having the least friendly tax regime with a misery score of 167.9 among all the 50 jurisdictions surveyed.

Forbes calculates the misery score by taking the sum of the corporate, personal, social security and sales tax rates. It is used to assess whether a jurisdiction’s tax policy attracts or repels talent and capital.

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