The emerging markets of the world offer a lot to the global market including good resources, cheaper labor, and lower tax rates for corporations. The lower tax rates, along with the other benefits, are large incentives to businesses, who could save millions of dollars by having their tax rate reduced. The emerging markets where there are good prospects to invest are places such as Brazil, China, India, and South Korea.
Brazil is a nation with great prospects to become a contending world power. The tax rate is relatively high, with corporate income tax rate at 25 percent. The 25 percent is made up of two different taxes, including a 15 percent basic rate and 10 percent surtax on income over BRL 240,000 per year. Based on current exchange rates, BRL 240,000 is currently equivalent to 135,211.20 USD. Brazil also has an additional social contribution on net profits added on, which is collected on net profits at a rate of 9%. This brings the overall tax rate for a corporation to 34%. The tax for some business is, however, can be up to 40% in some industries. KPMG says this is thanks to the ‘social contribution’ tax which has, as of May 1, 2008 “…been increased from the current 9 percent to 15 percent for financial institutions, private insurance, and capitalization companies.” Brazil is, in terms of development and tax rate is on the verge, if not already, secured its place as a key economy in the decades to come.
One emerging market that offers a substantial tax break by comparison to the United States is China. KMPG found that as a member of WTO, China enacted a “…new corporate income tax …to resident enterprises and non-resident enterprises with establishment in China or having China-sourced income.” For all companies, the corporate income tax is 25%. There are however reductions available. One can obtain a “reduced rate applicable to small-scale enterprises with low profitability,” and only have to pay a “20 percent” corporate income tax. Also, to promote the growth of new technologies, China has a reduction “…to hi-tech enterprise eligible for…15 percent” as their tax rate. The tax system is set up to promote startup of new businesses as well as the introduction of newer and more advanced technologies, while maximum of corporate income tax is not much relative to other regions of the world.
India is an emerging market still uses a corporate tax system that distinguished based on a company being foreign or domestic. As of 2009, foreign companies pay more than domestic and are taxed at a rate of 40 percent. This is 10% higher than the rate for domestic companies. There are additional taxes on Dividend distribution (DOT) which is levied at 15 percent on dividends distributed by a domestic company, as well as on the Securities transaction called the “securities transaction tax” (STT), though the rate is dependent on the value of the taxable securities. India has been taking steps with the United States, as well as other nations to help remedy some of the protectionist rules in place that put foreign companies at a disadvantage to domestic companies.
All of these markets are of growing significance and will only gain more importance as an economy as time progresses. Each market has its own vales it brings to the global community, and many offer better tax rates than more established economies of scale to try and promote the country as a good place to do business.
By – Domenic Gabriella for Investor.org