Privately held businesses demand stability and transparency from their tax systems

Research from the annual Grant Thornton International Business Report shows that privately held businesses (PHBs) are looking for stability and transparency from their tax systems. The survey reveals that taxes on business profits are seen as the most burdensome domestic tax by 27% of privately held businesses (PHBs) globally, this is a slight increase on last year's response (24%). Employment related taxes (20%) and personal income tax (19%) come a close second and third.

In 2008 taxes on business profits were tied with employment taxes as being the most burdensome on a global level, with each cited by 24% of respondents. But in 2009, the perceived burden has tipped towards business taxes.

On average, 78% of businesses include taxation as one of the important factors when considering opening an operating base outside their own country. The most attractive factor is a tax-free period for five years (45% of respondents). A low rate of tax on business profits and a stable tax regime (42%) came a close second, followed by incentives for capital investment (36%) and levels of employment related taxes (31%). 22% of respondents said taxation would not effect their decision to establish a foreign based operation.

Ian Evans, global leader - tax services for Grant Thornton International says, "The only certainty looking forward is that taxes are going to rise in many countries to pay for their bailouts. The easy route is to raise revenue with indirect taxes, but a popular solution is to hit high earning individuals with personal tax increases. This may encourage successful business owners to think hard about their global tax strategies, and move capital to lower tax jurisdictions.

"Governments around the world are in a tricky position; they need to raise revenue to pay off the debt used to support various key players in their economies, such as banks and motor manufacturers, but raising mainstream tax rates can be a difficult "sell". A solution which is becoming apparent to many governments is to increase net tax revenues by reducing the costs of collection, increasing penalties and interest for non-compliance and raising the rates of indirect or flat taxes. The burden of most of these changes is borne, disproportionately, by businesses."

It is clear that PHBs, whether they have a domestic or international focus, are aware that managing the tax risks and costs is a real business issue. In these times of great economic upheaval business owners are saying they do not want further burdens placed upon them by excessive taxes. They are demanding stability and transparency from their tax systems and clarity and fairness in how the tax laws are administered.

For further information please contact: 
Christine Hobart 
International communications manager
T +44 (0) 20 7391 9548