A new study by KPMG has found more governments worldwide imposing value-added taxes and goods and services taxes to make up for declining revenue from other sources, and warns the U.S. may follow suit.

The long-term slide in corporate income tax rates came to a halt in many countries in 2009, according to the report. KPMG sees signs that any further cuts will likely be paid for by measures to broaden the tax base. A federal VAT has been proposed as a potential revenue-raiser in the U.S. to help address the country’s rising deficit. The U.S. is the only G-20 country without a federal VAT or GST, and has one of the world’s highest statutory corporate income tax rates.


“These shifts present clear evidence of a major, and a potential long-term change in the way that many governments around the world are funded,” said Tim Gillis, partner-in-charge of KPMG LLP’s state and local tax practice. “For U.S. multinationals, it means that the management of indirect taxes will become much more important from a compliance, risk management and performance perspective.” 

Gillis noted that indirect taxes already exist at the state and local level in the U.S. in the form of sales taxes. The U.S may begin imposing such taxes at the federal level, as other countries do. In Europe, indirect tax rates rose from 19.5 percent in 2008 to 19.8 percent in 2009, and in Latin America from 15.9 percent in 2008 to 16.2 percent in 2009, according to the KPMG survey. Among Asia-Pacific countries, however, there was a marginal drop in the indirect tax rate from 10.9 percent in 2008 to 10.8 percent in 2009, primarily due to a 3 percent VAT/GST cut in Sri Lanka.

More than 150 countries now have indirect tax systems. Many governments that already have these systems are expanding or considering expanding the list of goods and services subject to the VAT.

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