An urgent need for more revenue is pushing many governments into active moves to increase the tax take from indirect taxes, and a worldwide broadening of the tax base for corporate income taxes, KPMG International???„?s latest annual survey of tax rates affecting business has found. Figures from KPMG???„?s 2009 Corporate and Indirect Tax Rate Survey showed that the long term slide in tax rates applied to company profits in Europe and Latin America has come to a halt in 2009.

But while this may be a pause before competitive pressures continue to drive corporate tax rates lower, there are some clear signs that any further cuts are likely to be paid for by widespread restrictions on tax allowances and tighter enforcement.

In Europe, average rates stayed at 23.2 percent, the first time in 13 years that they have failed to fall year-on-year. The UK corporate tax rate remains at 28 percent, having been reduced from 30 percent in 2008.

In Latin America, the average corporate tax rate this year was unchanged at 26.9 percent, the first time there has been no cut in rates since 2004.

Only in the Asia Pacific region has the average rate this year matched the cuts of previous years, falling from 28.4 percent in 2008 to 27.5 percent in 2009.

Looking at indirect taxes, mainly Value Added Tax (VAT) or Goods and Services Tax (GST), rates in Europe have risen from 19.5 percent to 19.8 percent and in Latin America 15.9 percent to 16.2 percent.

Among the Asia-Pacific countries there was a marginal drop in indirect tax rate from 10.9 percent to 10.8 percent.

???Indirect taxes are generally very stable.??? said Sue Bonney, head of tax at KPMG Europe ???Up until this year, taxes on corporate profits have tended to decline each year while indirect taxes have stayed roughly the same. So for the past five or six years, revenues from indirect taxes have quietly been contributing a larger and larger part of many government incomes.

???But now we are seeing more active moves in this direction. Here in the UK, figures from HMRC* predict that revenues from corporate tax receipts are set to decline by around 21 percent in the current tax year.

???If the UK VAT rate had not gone down, we estimate that the fall in VAT receipts over the same period would only have been around ten percent ????? showing that VAT is more resilient than corporate tax in the downturn.

???The number of countries with indirect tax systems is now over 150 and rising annually. Those governments that already have these systems are widening the range of services that attract VAT. Rates in Asia-Pacific are expected to rise as their systems develop and mature, and increases already planned are likely to take the average in the European Union up to 20 percent next year.

???All this is clear evidence of a major long term change in the way that many governments are funded. For companies, it means that the management of indirect taxes will become much more important as tax authorities focus more attention on the collection of ???real-time???„? taxes.???

Turning to taxes on profits, many countries have used them as a competitive tool to attract corporate investment. But the urgent need for tax revenues to plug holes in public budgets around the world, as a result of the global recession, seems to have forced a subtle change in this policy.

This year, many governments have acted to widen and strengthen their tax bases by measures including:

• restricting the circumstances under which companies can use losses to reduce taxable profits,
• taking a more aggressive approach to enforcing transfer pricing rules,
• reducing the tax deductibility of interest payments.

At the same time, there has been a significant increase in international co-operation among tax authorities, especially on action against tax havens and exchange of information. It remains to be seen whether that co-operation is converted into pressure on those countries with the lowest rates to move closer to the average.

???It is likely that headline corporate tax rates will resume their fall in time, but companies are likely to find themselves paying for the reduced rate in other ways,??? said Sue Bonney. Overall effective tax rates for global companies may well rise, due to the broadening of the tax base.???

SunTrust Banks has announced that it has named Terry Vacheron Senior Vice President and Corporate Director of Tax. Ms. Vacheron, who will report to SunTrust Chief Financial Officer Mark A. Chancy, succeeds Deborah Jamison who previously announced her plans to relocate to New York.

“Terry is a dynamic leader whose knowledge of SunTrust and respected professional experience will serve as a tremendous asset to our Company,” said Mr. Chancy. “We appreciate the many contributions Debby has made during her 21-year career at SunTrust as well as her assistance during this transition period. We wish her well in her new endeavors.”

As Corporate Director of Tax, Ms. Vacheron will be responsible for overseeing all aspects of SunTrust’s corporate tax matters including federal and state income and local taxes as well as information reporting to clients.

Ms. Vacheron has more than 20 years of corporate tax experience most recently working as a tax consultant for SunTrust. Previously, she was a Tax Partner at Deloitte & Touche, LLP for five years, and served as the Federal Income Tax Director at SunTrust from 2001 to 2003. Prior to that, she was a Tax Partner at Arthur Andersen LLP.

EY Middle East has appointed Sherif El-Kilany to lead its regional Tax practice. Currently based in Sherif is a Fellow of the Egyptian Society of Accountants and Auditors and the Egyptian Society of Taxation. He is Co-Chairman of the Customs and Taxation Committee of the American Chamber of Commerce. He is also a member of the Egyptian Businessmen’s Association and heads the suburban chapter of the Egyptian Society of Taxation.