The major criteria which determine the ease of doing business are the tax rate applicable in the country. This is coupled with the taxing system which helps the business in flourishing. Lower tax rate means that the business would have more capital that can be used for expansion and growth whereas high tax rate means high tax to business. In such a case, many multinational companies prefer doing business in countries where the tax rate is really low. This helps them in gaining a head start in the competitive environment of the global economy.
In this article, we have compiled a list of top 10 countries with the lowest tax rate in the world. Let us now have a look at these countries one by one.
Singapore was once on verge of collapsing but today, the Singapore is one of the most significant countries in the world. The country has an effective tax rate of 18.4% and this makes it an essential country for doing business. Many of the countries have a base in Singapore as it helps them in getting an easy access to Asian markets. The Singapore is well connected with ports and it has an amazing human resource which helps the organizations in building their empire in Asian countries. The country also has a prominent electronics industry with a lot of research and development going on in the field.
Next on our list is Georgia. The country has an effective tax rate of 16.4% and in addition to this, you must know that the country had a very high tax rate during the era of Soviet Union. But after the collapse of the Soviet Union, the government decided to adopt a low tax model as it would benefit the country by attracting more companies. The tax rate in Georgia is quite a low known and this is a major plus point of this country.
8. The United Arab Emirates
Now, everyone knows about the taxation system of United Arab Emirates. There are many things which are tax-free in the country and this enables the country to bring down the tax rate to 15.9%. The country has a ranking of 8th position in our list but if we talk about the countries in the Middle East, the United Arab Emirates stands at 5th position. The country has many of the business operating from here and the access to port enables the companies in meeting the logistic needs.
7. Saudi Arabia
On number 7, we have Saudi Arabia. The country has a little lower tax rate when compared with the United Arab Emirates. So talking about the fact, the tax rate in the country is 15% and the country is going through a tough time because of low oil prices. In a recent update, the country decided to adopt cost-cutting measures so as to increase its public finances. The country has really cheap oil and that helps the companies in meeting energy requirements with a lower tax rate.
Lesotho is located in Africa and it is the country which has the lowest tax rate in Africa. In addition to this, the country has an effective tax rate of 13.6%. As per the statistics, the county is one of the poorest countries in the world but it still keeps the tax low which attracts many businesses in the world. It is surely among one of the best countries for the manufacturing business as the tax rate is quite low in the country and in addition to this, it is possible to get cheap labor in the country which keeps the cost of the good low.
Bahrain is surely a tax heaven as the country has an effective tax rate of 13.5%. In addition to this, the country also has significant oil deposits. The country is going through a tough time because of falling oil prices and the country has also started exploring for an alternative source of finances as the future of energy price is really uncertain in this global economy when most of the world is debating for clean energy.
Kuwait has an effective tax rate of 13% which is among the lowest in the world. In recent years, the IMF suggested the country to introduce a business profit tax which would eventually help the country in dealing with the fiscal shortfall but Kuwait rejected the proposal from IMF. One of the reasons why the country rejected the proposal is that introducing new tax would have shot up the tax rates and this could have impacted many businesses in the country. The increased tax rate would have also impacted the FDI in many sectors.
Macedonia is on number three in our list and the country has an effective tax rate of 12.9%. The country surely offers a lot of benefits when you talk about the tax but there is a lack of proper policies which in turn impacts the stability as a macro factor. If the government improves its ranking on this parameter then Macedonia will be able to attract more foreign investors to invest in country. The government is on its way to adapting to new reforms and you would certainly see improvement in many any areas in coming future.
Qatar has an effective tax rate of 11.3% and the market offers good support system to all the business because of the low tax rate. Qatar stands on the second list when we talk about the tax rate and it stands on 18th rank when we talk about the overall competitiveness of the country. The country scores a little low among other oil-rich nation but the lower tax rate compensates for the same. The country also has a very developed infrastructure which makes it great to start the business in the country.
On number one, we have Brunei with an effective tax rate of 8.7%. At this point, you must be wondering that why is Panama not on the top. The reason for that is that the effective tax rate in Panama increases with the increasing income. Thus we have Brunei occupying this spot. The country has a relatively small population and it has just about 500,000 residents. At the same time, the country scores really high in the competitive index as well.
These were the top 10 countries which have the lowest tax rate in the world. In addition to this, if you are planning to start a new venture then these are the countries which could help you in gaining a head start in the business.