Most Competitive Tax Location in Asia

www.global-arena.com 1 July 23, 2012

www.global-arena.com July 23, 2012 2

Executive Summary

Taxes matter to business. Corporate taxes affect business decisions since they represent a significant business cost and therefore have a material impact on net operating margins. Evidence shows that countries with lower tax costs are more attractive to business investment and more likely to experience economic growth.

By offering high growth opportunities Asia is attracting global businesses to set up, expand or relocate

operation to capture growth. However, tax systems differ between Asian countries, not only in terms of total tax rate, but also in the ease of compliance burden and related governance and economic factors. As part of its Go-global solutions Global-Arena.com’s interactive analysis to the most attractive tax location in Asia unveils the comparative advantages of 17 Asian economies:

•  Singapore, South Korea and Malaysia offer the most attractive business environments for tax in Asia. All three show favourable conditions in terms of taxation systems

•  Biggest populated emerging economies China and India show attractive economic growth figures combined with the highest number of signed bilateral taxation treaties, but show a mixed performance on other aspects

•  Other emerging markets such as Cambodia, Indonesia and Azerbaijan rank high on specific aspects


Tax Systems Key to Competitive Business Environments •  Tax matters to business: taxes represent a significant business cost for

corporations and have a material impact on net operating margins •  Corporate tax rate, compliance burden and transparency of the tax system are

decisive location factors for companies considering to set up, relocate or expand operations

•  Because taxes directly affect business investments and location decisions, national, regional and local governments compete to offer the most attractive tax regimes and continue to reform, resulting in dropping tax rates and easing compliance burdens

•  When it comes to site selection a 360-degree real-time view and performance monitoring of the market, business environment and local and global talent supply, including comparisons of tax systems is needed


Overall Attractiveness Ranking of Asian countries for tax activities

7%

10%

14%

19%

21%

22%

25%

49%

55%

55%

64%

74%

75%

80%

85%

90%

98%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Sri Lanka

Vietman

Pakistan

Cambodia

Bangladesh

Philippines

Armenia

Indonesia

Thailand

Azerbaijan

India

Taiwan

China

Japan

Malaysia

South Korea

Singapore


Key Findings

•  Singapore, South Korea and Malaysia offer the most attractive business environments for tax in Asia. All three show favourable conditions in terms of taxation systems (tax rate, time to comply, tax payments and double taxation treaties)

•  Singapore outperforms the other countries on most of the included location factors, only in terms of expected economic growth the country scores below average

•  Biggest populated emerging economies China and India show attractive economic growth figures combined with the highest number of signed bilateral taxation treaties, but show a mixed performance on other aspects

•  Other emerging markets such as Cambodia, Indonesia and Azerbaijan rank high on specific aspects

PwC Total Tax Rate

PwC Time to Comply

PwC Tax Payments

Double TaxaAon TreaAes

Ease of Market Entry

Quality of Governance

Economic Growth

Infrastructure CapabiliAes

Interconnectedness

Malaysia

Malaysia Mean

PwC Total Tax Rate

PwC Time to Comply

PwC Tax Payments

Double TaxaAon TreaAes

Ease of Market Entry

Quality of Governance

Economic Growth

Infrastructure CapabiliAes

Interconnectedness

Singapore

Singapore Mean


Ranking Component: PwC Total Tax Rate

Data Series Used • Total Tax Rate as % of commercial profits PwC Paying Taxes Survey

Analysis • Cambodia offers of all Asian countries the most attractive environment when it comes to the total tax rate. The country ranks on top with taxing commercial profits with 22,5% • Of all 17 countries included, Sri Lanka is the least attractive with a total tax rate of 105,2%

0%

15%

17%

38%

44%

55%

57%

57%

62%

66%

66%

67%

68%

69%

76%

80%

86%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Sri Lanka

China

India

Japan

Philippines

Armenia

Vietman

Azerbaijan

Thailand

Taiwan

Pakistan

Bangladesh

Indonesia

Malaysia

South Korea

Singapore

Cambodia


Ranking Component: PwC Time to Comply

Data Series Used • Time to comply (in hours) PwC Paying Taxes Survey

Analysis • When it comes to hours needed to comply Singapore ranks on top in Asia with only 84 hours • Malaysia (133), Cambodia (173)and the Philippines (195) follow

0%

11%

18%

34%

47%

53%

60%

60%

61%

62%

64%

67%

67%

72%

76%

82%

87%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Vietman

Pakistan

Armenia

China

Japan

Bangladesh

Indonesia

Thailand

Sri Lanka

India

Taiwan

Azerbaijan

South Korea

Philippines

Cambodia

Malaysia

Singapore

www.global-arena.com July 23, 2012

8

Ranking Component: PwC Tax Payments

Data Series Used • Number of tax payments PwC Paying Taxes Survey

Analysis • Of the countries included Singapore offers the most attractive business environment in terms of required number of tax payments. The country ranks on top with 5 payments per year •  China follows with 7 tax payments per year

1%

11%

15%

15%

28%

38%

40%

42%

62%

66%

72%

77%

79%

80%

82%

88%

90%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Sri Lanka

Indonesia

Pakistan

Philippines

Cambodia

Armenia

India

Vietman

Thailand

Bangladesh

Azerbaijan

Taiwan

Japan

Malaysia

South Korea

China

Singapore


Ranking Component: Double Taxation Treaties

Data Series Used • Double Taxation Treaties listed in the OECD EOI Tax Database

Analysis • China is most attractive Asian country with respect to avoidance of double taxation of income, capital and sales taxes. The country signed 99 such bilateral agreements • India and South Korea follow with 88 and 84 agreements respectively • Cambodia is the least attractive country in this perspective: the country didn’t sign any double taxation treaty to date

5%

10%

19%

22%

26%

27%

34%

35%

37%

37%

70%

75%

79%

81%

90%

92%

96%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cambodia

Taiwan

Bangladesh

Azerbaijan

Sri Lanka

Armenia

Pakistan

Thailand

Philippines

Vietman

Japan

Indonesia

Singapore

Malaysia

South Korea

India

China


Ranking Component: Ease of Market Entry

Data Series Used • Ease of establishment index World Bank Investing Across Borders Database

Analysis • In Japan it takes the least effort to establish a foreign business. The country ranks top in terms of number procedures and days needed • Taiwan, Singapore and Armenia follow 4%

7%

15%

20%

27%

27%

35%

35%

46%

49%

70%

72%

83%

88%

88%

90%

92%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cambodia

Sri Lanka

Indonesia

Bangladesh

Philippines

Vietman

Malaysia

Thailand

China

Pakistan

South Korea

Azerbaijan

India

Armenia

Singapore

Taiwan

Japan


Ranking Component: Quality of Governance

Data Series Used • World Bank Governance Indicators on Rule of Law • Transparency International Corruption Index

Analysis • Countries such as Singapore, Japan, Taiwan and South Korea offer the most reliable governance environment when it comes to the rule of law and corruption. In particular Singapore and Japan rank high on these aspects • Although improving their quality of governance, countries like Malaysia, Sri Lanka, India, Thailand and China do not show comparable levels yet

11%

17%

20%

22%

26%

27%

30%

32%

43%

45%

46%

47%

54%

85%

89%

97%

99%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cambodia

Azerbaijan

Pakistan

Bangladesh

Philippines

Indonesia

Armenia

Vietman

China

Thailand

India

Sri Lanka

Malaysia

South Korea

Taiwan

Japan

Singapore


Ranking Component: Economic Growth

Data Series Used • IMF forecast total GDP growth rate 2012-2017

Analysis • Indonesia is expected to show the highest economic growth in the next five years. IMF forecast indicates the country’s GDP will have increased by app. 45% by 2017 • Also economies such as Azerbaijan, Cambodia, China and India are expected to grow significantly the next five years 5%

5%

7%

20%

26%

40%

43%

52%

53%

58%

60%

72%

76%

79%

80%

90%

96%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Singapore

Japan

Pakistan

Armenia

Philippines

Thailand

Malaysia

South Korea

Bangladesh

Taiwan

Vietman

Sri Lanka

India

China

Cambodia

Azerbaijan

Indonesia


Ranking Component: Infrastructure Capability"

Data Series Used • World Economic Forum Global Competitiveness Report items on Infrastructure:

• Roads • Railroads • Airport • Available airline seat kilometers

Analysis •  With regards to the infrastructure capabilities countries such as Singapore, China, South Korea, Japan and Malaysia offer the most attractive business environment: these countries all offer a state of the art road, rail and air infrastructure 9%

9%

13%

18%

19%

23%

30%

39%

45%

51%

61%

75%

84%

88%

88%

89%

96%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Bangladesh

Philippines

Vietman

Cambodia

Armenia

Pakistan

Indonesia

Azerbaijan

Sri Lanka

India

Thailand

Taiwan

Malaysia

Japan

South Korea

China

Singapore


Ranking Component: Interconnectedness

Data Series Used • KOF Index of Globalisation:

• Economic dimension • Political dimension • Social dimension

Analysis •  Singapore and Malaysia are the most interconnected Asian countries when it comes to economic, political and social integration • Thailand, Japan and South Korea follow, whereas countries such as Cambodia, Vietnam and Bangladesh rank significantly lower on these aspects

8%

12%

14%

24%

25%

34%

38%

39%

40%

52%

53%

60%

71%

72%

73%

95%

99%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Bangladesh

Vietman

Cambodia

Armenia

Sri Lanka

Azerbaijan

Taiwan

Pakistan

India

Philippines

Indonesia

China

South Korea

Japan

Thailand

Malaysia

Singapore


Have a look yourself

Looking for the most attractive business environments with the most favourable taxation system?

Click here to visit the interactive analysis to adjust the sliders and to learn more about our Go-global Enterprise Location Planning services


Appendices •  About Global-Arena.com •  Data sources


Global-Arena.com Global-Arena.com is the leading secure online matching platform that brings together companies, investors and business locations worldwide. Global-Arena.com offers innovative digital services and gives them a data advantage to save cost and time. With it’s Go-global solutions Enterprise Location Planning and Economic Development Planning Global-Arena.com is able to provide companies and governments an integrated 360-degree view and comparative advantages analysis of the market, business environment and talent supply by: •  Analysing and comparing the attractiveness of business locations in support of its clients growth strategies •  Searching and analysing growth, expansion and relocation opportunities worldwide •  Visualising scenarios of business and policy impacts based on real time economic statistics, trends and forecasts

To learn more about how Global-Arena.com can support your site selection or location promotion processes, visit our website www.global-arena.com or contact:

Peter Storm CEO [email protected] www.global-arena.com


Our Approach: From Long to Short List


Data Sources used per Location Factor Tax Factors Sources Governance

Factors Sources Growth Factors Sources

PwC Total Tax Rate PwC Paying Taxes Survey as a percentage of commercial profits

Double TaxaAon TreaAes OECD EOI Tax Database number of listed double taxaAon treaAes

Forecast Economic Growth

IMF Forecast annual GDP growth rate 2012-‐2017

PwC Time to Comply PwC Paying Taxes Survey hours per year needed to comply

Ease of Market Entry World Bank InvesAng Across Border Database Ease of establishment index

Infrastructure CapabiliAes World Economic Forum Global CompeAAveness Report 2011-‐2012 items on infrastructure quality: •  Roads •  Railroads •  Airports •  Available airline seat kilometers

PwC Tax Payments PwC Paying Taxes Survey number of tax payments per year

Governance Quality World Bank Governance Indicators on Rule of Law Transparency InternaAonal CorrupAon Index

Interconnectedness KOF Index of GlobalisaAon: •  Economic Dimension •  Social Dimension •  PoliAcal Dimension

Investor Relations

Most Competitive Tax Location in Asia