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1 Scott A. Hodge, New KMPG International Location Study: U.S. Is Falling Behind; Taxes Are a Major Fault 1 (2010)

handle is hein.taxfoundation/ffccbxz0001 and id is 1 raw text is: UFISCAL
April 14, 2010                    AC
No. 221                  FACT
New KMPG International Location Study: U.S.
Is Falling Behind; Taxes Are a Major Fault
By Scott A. Hodge
The image of the United States as a competitive place to do business was dealt another blow with
the recent release of KPMG's 2010 Competitive Alternatives, the firm's guide to international
business location.' Of the ten countries ranked by several criteria- including labor costs, facility
costs, transportation costs, and tax costs - the U.S. ranked 8th, ahead of only Germany and Japan.
What should alarm federal and state lawmakers in the U.S. is that our border nations, Mexico and
Canada, ranked first and second best respectively with the lowest overall cost of doing business of
the ten nations surveyed. Mexico, which was the only emerging country included in the study, was
determined to be the most cost-effective place to do business in large measure because of its low
labor and facilities costs. Canada's main advantage comes from the pro-business tax policies it has
enacted over the past decade at both the federal and provincial levels. Since 2000, Canada's
combined corporate tax rate (federal and provincial) has fallen from 43 percent to 31 percent.
The Canadian government's stated goal is to have the lowest statutory corporate tax rate among
the major G-7 countries. Indeed, the government's 2010 budget would lower the federal corporate
rate from 18 percent to 16.5 percent as a first step toward lowering the rate to 15 percent by 2012.
This will bring the combined rate down to roughly 26 percent. However, that rate could fall
further if the provinces continue to cut their rates. For example, Ontario recently announced a
three-year plan to cut its corporate income tax from 14 percent to 10 percent.
The KPMG study not only compares the business-cost competitiveness of the ten countries but
also ranks 112 cities in those countries, including 15 in Canada and 60 in the U.S. Considering
every factor, the most cost-effective city was Monterrey, Mexico, while Montreal was the top-
rated Canadian city and Tampa the top-ranked American city.
On the tax side, KPMG considers corporate income taxes, capital taxes, sales taxes, property taxes
and local business taxes. Table 1 compares corporate income taxes for selected cities across the
I Report downloaded on April 7, 2010, from http://www.conipetitiealternatives.coni/default.aspx.
2 Jeffrey Hodgson, Canada Keeps Corporate Tax Cuts in Place, Targets, Reuters, March 4, 2010.

Scott Hodge is President of the Tax Foundation.

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