The Most Tax Friendly Country In The World Is.. (Spoiler Alert: It's Not the U.S.) (Forbes)

Tax (Photo credit: 401(K) 2012)

Article originally published on Forbes.com by Kelly Phillips Erb - 09/25/2012

The United States pays more in taxes than other developed countries.

It’s more expensive to do business here than anywhere else.

You've heard those kinds of statements before, right? It’s been drilled into our consciousness – especially in an election year. But is it true?

Not so says KPMG. The accounting giant conducted a major study of the general tax competitiveness of fourteen countries with an emphasis on the climate in 55 major international cities. The study took into consideration the relative corporate income tax, capital tax, sales tax, property tax and miscellaneous local business tax burdens of those countries, along with the statutory labor costs. Here’s how the fourteen countries in the study measured up, from least tax burdened to most:

1. India
2. Canada
3. China
4. Mexico
5. Russia
6. United Kingdom
7. Netherlands
8. United States
9. Germany
10. Australia
11. Brazil
12. Japan
13. Italy
14. France

For purposes of the study, KMPG used a score of 100 as the benchmark; the United States was assigned that score. India’s score came in at 49.7, which means that total tax costs are about half of that in the United States. In contrast, France’s score was 179.7, meaning that tax costs are about 80% higher in that country than in the United States.

No U.S. city made the top ten least tax burdened cities list, though Canada locked up three spots. The Indian city of Chennai took the top spot and the Russian city of Saint Petersburg rounded out the list:

1. Chennai, IN
2. Vancouver, CA
3. Chengdu, CN
4. Mumbai, IN
5. Toronto, CA
6. Montreal, CA
7. Monterrey, MX
8. Mexico City, MX
9. Manchester, UK
10. Saint Petersburg, RU

The top ranked U.S. city (remember, we’re talking least tax burdened at the top) was Cincinnati – yes, Cincinnati – which came in 16th. Hot on its heels to round out the top 20 were Baltimore, Cleveland, Atlanta and Pittsburgh. My own Philadelphia ranked middle in the study (which sure surprised me) since the chatter about the tax burden in the City of Brotherly Love is pretty brutal.

Of course, there’s a lot of wiggle room in the study, as KPMG acknowledges. Tax burdens can vary by industry, the underlying cost of doing business and by how the taxes are weighted.

The study has lots of good stuff for tax geeks (yes, I could go on and on) so expect a follow-up piece in the next day or so. You can check out the study in its entirety here (downloads as a pdf).

Article originally published on Forbes.com by Kelly Phillips Erb - 09/25/2012

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