With the era of globalization in full blast today, it is necessary for international marketers to determine which countries are favorable investment locations. Although there are a lot of considerations in choosing the country to do business with, one of the main factors to be considered are the tax policies of countries. Table 1 below presents the income tax rates of some countries.
Note: From “Tax Rates Around the World 2013” by www.worldwide-tax.com, 2013.
Based on Table 1 above, one can conclude that on an after-tax basis, it is advantageous for companies to set up a business in Bulgaria because of the low corporate tax imposed. This means that on an after-tax basis, corporations will have more disposable income in Bulgaria because a large portion of their profits remain with them. However, a company who would like to locate in Bulgaria should not only consider the tax rates, but more importantly, whether there is a market for their product there. Otherwise, it is still not advisable to operate in Bulgaria if there is not much demand for their product in said country.
With regards to individual investors, China and Argentina are two countries which have a low individual income tax rate which ranges from three per cent to nine percent, but may go up to a higher rate depending on the income bracket of the individual. The caveat here however is that whereas China is a growing economy which promises big demand for products, Argentina’s economy is sluggish. It is still beset by an economic crisis unlike China.
Comparing the tax rates of the ten countries on Table 1, it is observed that Argentina, Belgium and Germany have the highest corporate income tax rates. This can be translated into lower disposable incomes for companies who choose to locate their business in these countries. Furthermore, one notes that in Denmark the individual income tax rate is quite high at 38% to 65%; therefore, for individuals who will invest in Denmark, they will have less disposable income. This is because they are charged a higher income tax rate for their investments in the country.
As a conclusion, one would like to clarify that although the tax rates in countries differ, it is only one aspect that must be considered. It is important that both corporations and individual investors look at the total market to determine which among the countries will give the most benefit to them. Tax is not the only factor to be taken into account, other aspects such as the political scenario, economy, culture, social aspects and infrastructures must also be regarded.
Worldwide-tax.com. (2013, July 1). Tax rates around the world 2013. Retrieved from worldwide-tax-com: http://www.worldwide-tax.com/#partthree