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Johannesburg - South African private business owners rate personal income tax as the most burdensome form of tax, with 31% of respondents across the country stating this as the greatest concern for their business, a Grant Thornton study has revealed.
Grant Thornton's International Business Report (IBR), which surveys over 7 400 business owners in 36 economies, shows an emerging pattern in 2010 is the shift in the perceived burden from taxes on business profits to employment-related taxes.
Business owners around the world were asked which domestic taxes they find most burdensome, and results showed that taxes on business profits (25%) topped the list. This is a slight decrease on last year's response (27%).
Employment taxes paid by the business (23%) and personal income tax (22%) come a close second and third.
"Employment-related taxes are now seen as the greatest burden by privately held businesses (PHBs) in 12 of the 36 economies surveyed," says AJ Jansen van Nieuwenhuizen, head of tax services at Grant Thornton Johannesburg.
"Businesses in Europe feel the most pain from payroll-related taxes, with 38% of PHBs reporting this group of taxes as their greatest burden."
The IBR survey also indicates a global need for PHBs to pay more attention to local tax regulations when deciding where to invest overseas.
The latest research also discloses that 17% of PHB owners globally do not consider the local tax regimes when investing in another county.
Businesses in northern Europe were among those least likely to focus on taxation in their investment decisions, with over 30% of PHBs in Poland, France, Denmark, Finland and Belgium saying they would not consider the tax regime of the target country in their decision to set up an operating base.
"PHBs are prepared to take economic risks with a new venture but do not always consider the tax risks, which can be minimised with suitable forward planning," says Jansen van Nieuwenhuizen.
"The message to PHBs is that they need to move tax issues higher up the agenda when making investment decisions in both their home markets and in foreign jurisdictions in order
to reduce their tax costs."
In contrast, tax considerations are a significant factor in southern Europe, Latin America and Asia Pacific. Less than 10% of respondents in Spain, Greece, Brazil, Argentina, Taiwan, Japan and mainland China said taxation would not affect their decision to invest.
Tax stability a top priority
Among PHBs who did consider tax in their overseas decision making, the most popular tax incentives were a tax free period of five years (41%), low tax rates on business profits (39%) and a stable tax regime (38%).
A stable tax regime is a key factor PHBs look for in the target country. Businesses across the globe want stability from the tax systems in which they operate. In every geographical region, an average of 34% or more of the PHBs surveyed said they would be influenced to invest by the degree of stability in the local tax regime.
Governments around the world are recognising that globalisation demands a simpler, more streamlined global tax system.
"Change is inevitable as tax regimes around the world become more coordinated - but that uncertainty increases the tax risk for PHBs," says Jansen van Nieuwenhuizen.
"Not least, the instinct of all politicians is to protect their own tax base as opposed to moves that would instil long-term simplicity and stability in the tax regime.
"Tax is a real cost for business so a clear message here is that PHB owners need to pay more attention to the tax systems of the countries they operate in," he says.
Grant Thornton's International Business Report (IBR), which surveys over 7 400 business owners in 36 economies, shows an emerging pattern in 2010 is the shift in the perceived burden from taxes on business profits to employment-related taxes.
Business owners around the world were asked which domestic taxes they find most burdensome, and results showed that taxes on business profits (25%) topped the list. This is a slight decrease on last year's response (27%).
Employment taxes paid by the business (23%) and personal income tax (22%) come a close second and third.
"Employment-related taxes are now seen as the greatest burden by privately held businesses (PHBs) in 12 of the 36 economies surveyed," says AJ Jansen van Nieuwenhuizen, head of tax services at Grant Thornton Johannesburg.
"Businesses in Europe feel the most pain from payroll-related taxes, with 38% of PHBs reporting this group of taxes as their greatest burden."
The IBR survey also indicates a global need for PHBs to pay more attention to local tax regulations when deciding where to invest overseas.
The latest research also discloses that 17% of PHB owners globally do not consider the local tax regimes when investing in another county.
Businesses in northern Europe were among those least likely to focus on taxation in their investment decisions, with over 30% of PHBs in Poland, France, Denmark, Finland and Belgium saying they would not consider the tax regime of the target country in their decision to set up an operating base.
"PHBs are prepared to take economic risks with a new venture but do not always consider the tax risks, which can be minimised with suitable forward planning," says Jansen van Nieuwenhuizen.
"The message to PHBs is that they need to move tax issues higher up the agenda when making investment decisions in both their home markets and in foreign jurisdictions in order
to reduce their tax costs."
In contrast, tax considerations are a significant factor in southern Europe, Latin America and Asia Pacific. Less than 10% of respondents in Spain, Greece, Brazil, Argentina, Taiwan, Japan and mainland China said taxation would not affect their decision to invest.
Tax stability a top priority
Among PHBs who did consider tax in their overseas decision making, the most popular tax incentives were a tax free period of five years (41%), low tax rates on business profits (39%) and a stable tax regime (38%).
A stable tax regime is a key factor PHBs look for in the target country. Businesses across the globe want stability from the tax systems in which they operate. In every geographical region, an average of 34% or more of the PHBs surveyed said they would be influenced to invest by the degree of stability in the local tax regime.
Governments around the world are recognising that globalisation demands a simpler, more streamlined global tax system.
"Change is inevitable as tax regimes around the world become more coordinated - but that uncertainty increases the tax risk for PHBs," says Jansen van Nieuwenhuizen.
"Not least, the instinct of all politicians is to protect their own tax base as opposed to moves that would instil long-term simplicity and stability in the tax regime.
"Tax is a real cost for business so a clear message here is that PHB owners need to pay more attention to the tax systems of the countries they operate in," he says.
