THE G7 ECONOMIES risk seriously undermining entrepreneurial activity with the levy of punitive taxes, international accounting network UHY has found.
An average of 28.6% is paid in taxes on the successful sale of a $50m (£33m) business, compared to a global average of 19.8%, according to the network, which collected the data from 25 nations in its network.
Across those countries, UHY analysed how much profit an investor in a typical small or medium size business would be allowed to keep when they sell their stake in the business, based on an initial investment of $1m and the sale of the stake for either $10m or $50m.
Entrepreneurs selling a similar business in one of the BRIC economies would pay an average of just 16.7% in tax on their gain.
UHY warms the disparity in the rewards for entrepreneurship between the Brazil Russia India and China (BRIC) and G7 economies puts the G7 at risk of discouraging entrepreneurialism and losing out as a destination for setting up a business.
Germany and France in particular drew criticism for their particularly high rates. An entrepreneur selling a $50m company realising a $49m gain would pay 46.6% or $23.3m in tax in Germany and 36% or $17.6m in France.
In the UK, the despite a headline tax rate of 28% on capital gains an entrepreneur selling a business of $10m would pay just, 9% in tax, rising sharply to 21.8% after tax reliefs and exemptions, for a sale of $50m.
Ladislav Hornan (pictured), chairman of UHY said: “Historically G7 economies have been able to depend on a steady stream of business creation because their sheer size offers great opportunities.
“However emerging economies are starting to rival them as a place to start a business; their business environments are becoming more benign, they offer growing pools of affluent consumers, increasingly skilled workforces – and as this study shows a much more favourable tax environment too.”