the rise of indirect tax

© 2013 EYGM Limited. All Rights Reserved. ED none. 133 Total size of GE’s global indirect tax team, up from zero, 17 years ago 20% The current standard VAT in Morocco, compared with 16% in Kenya, 14% in South Africa and 5% in Nigeria The proportion of tax policy-makers who expect indirect taxes to generate more revenue in the future 69% The average tax revenue across the Organisation for Economic Co-operation and Development (OECD) that was accounted for by VAT in 2012, compared with 8.8% in 1975 The rise of indirect tax Amount that could be raised in the US by a European-style value–added tax (VAT) system with a 20% standard rate 1954 France becomes the ﬁrst country to introduce VAT 1967 Brazil and Denmark introduce VAT, soon followed by Germany, Sweden and the Netherlands 1969 Eight countries have introduced VAT 1991 South Africa and Canada introduce VAT, followed later in the decade by Poland and Switzerland, among others 2001 Worldwide, 129 countries now have VAT 2006 A European Council Directive requires Member States to have a minimum VAT standard rate of 15% and one or two reduced rates not to be below 5% 2009 VAT receipts represent an average 7.4% of gross domestic product (GDP) among EU Member States 2010 The European Commission releases a Green Paper recommending “a broad-based VAT system, ideally with a single rate” 2011 Hungary announces that its standard VAT rate will rise to 27% in 2012 – the highest in the EU 2012 Some form of VAT and GST applies to 156 countries worldwide, accounting for an average of 20% of total tax revenue Hungary Sweden United Kingdom Germany Russia South Africa Switzerland Singapore (GST) Japan (consumption tax) United Arab Emirates 27% 25% 20% 19% 18% 14% 8% 7% 5% 0% Country * 2012 Standard rate in selected countries Value added tax (VAT) Source: HSBC Expat Explorer 2011, Atlas Corporate Relocation Survey 2011, Ernst & Young Global Mobility Effectiveness Survey 2011, EIU — Up or out: Next moves for the modern expatriate 2010; graphic: Käthi Dübi For the latest tax news and insights, please visit: ey.com/tmagazine US$1,000,000,000,000 1973 The UK, Austria and Italy introduces VAT 1986 New Zealand introduce a goods and services tax (GST) 1989 Japan becomes the 53rd country to introduces a VAT system Six global indirect tax trends Reﬁning of consumption tax systems Reducing customs duties, arising from more free trade Rising VAT and GST rates Broadening base for VAT and GST Renewed efforts by tax administrations on compliance and avoidance, aided by use of advanced technologies Rising excise duties 18.7% EU-27 Average standard VAT rate 18 19 20 21 22 2000 2002 2004 2006 2008 2010 2012 Source: Indirect Tax in 2012, Ernst & Young Average VAT rates across the EU-27

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Indirect taxes are booming. As they work to bring public finances under control, governments around the world are increasing VAT, excises and other indirect taxes. They see this as a straightforward way to raise additional revenue. To find out more, visit: http://tmagazine.ey.com/issue/issue-08/

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133Total size of GE’s global indirecttax team, up from zero, 17 years ago

20%The current standard VAT in Morocco,compared with 16% in Kenya, 14% in South Africa and 5% in Nigeria

The proportion oftax policy-makerswho expect indirect taxesto generate more revenuein the future

69%

The average tax revenueacross the Organisation forEconomic Co-operation andDevelopment (OECD) that wasaccounted for by VAT in 2012,compared with 8.8% in 1975

The riseof indirect tax

Amount that could be raised in the US by a European-style value–added tax (VAT) system with a 20% standard rate

1954 France becomes the firstcountry to introduce VAT

1967 Brazil and Denmark introduceVAT, soon followed by Germany,Sweden and the Netherlands

1969 Eight countries have introducedVAT

1991 South Africa and Canadaintroduce VAT, followed laterin the decade by Poland and Switzerland,among others

2001 Worldwide, 129 countries nowhave VAT

2006 A European Council Directiverequires Member States to havea minimum VAT standard rate of 15% and one or two reduced rates not to be below 5%

2009 VAT receipts represent anaverage 7.4% of gross domesticproduct (GDP) among EU Member States

2010 The European Commissionreleases a Green Paper recommending“a broad-based VAT system, ideallywith a single rate”

2011 Hungary announces that itsstandard VAT rate will rise to 27%in 2012 – the highest in the EU

2012 Some form of VAT and GST applies to 156 countries worldwide, accounting for an average of 20% of total tax revenue

HungarySwedenUnited KingdomGermanyRussiaSouth AfricaSwitzerlandSingapore (GST)Japan (consumption tax)United Arab Emirates

27%25%20%19%18%14%8%7%5%0%

Country

*2012

Standard ratein selected countries

Value added tax (VAT)

Source: HSBC Expat Explorer 2011, Atlas Corporate Relocation Survey 2011, Ernst & Young Global Mobility EffectivenessSurvey 2011, EIU — Up or out: Next moves for the modern expatriate 2010; graphic: Käthi Dübi

For the latest tax news and insights, please visit: ey.com/tmagazine

US$1,000,000,000,000

1973 The UK, Austria and Italyintroduces VAT

1986 New Zealand introduce a goodsand services tax (GST)

1989 Japan becomes the 53rd countryto introduces a VAT system

Six global indirect tax trends

Refining of consumptiontax systems

Reducing customs duties,arising from more free trade

Rising VAT and GST rates

Broadening base for VAT and GST

Renewed efforts by taxadministrations on complianceand avoidance, aided by use of advanced technologies

Rising excise duties