How low can you go?

The reforms in the pipeline cannot stop countries from offering attractive corporate tax rates to attract investors.

This week, in the debate between the United States presidential candidates Hilary Clinton and Donald Trump, the issue of corporate tax was tackled. Trump suggests lowering the rate from 35% to 15% (outgoing President Barack Obama recently proposed lowering it to 28%). Clinton recommends an “exit tax” for companies seeking to set up their headquarters outside the US in order to lower their tax bill.

But many governments are hypocritical about tax and using tax incentives, said Dermot Gaffney, the head of tax markets at KPMG South Africa. “The reality is [that] there is competition in direct tax rates and globally they are coming down.”

He said South Africa could offer a more attractive corporate tax rate to attract more foreign direct investment.

“Ireland collects more in corporate tax now than it ever did when the rates were more than double today’s rate, because they succeeded in attracting new industries [that] created jobs and boosted economic growth,” he said.