Corporate income tax rates have been on the decline in many parts of the world as countries position themselves to attract new businesses and investments. But that trend may be heading for at least a temporary halt.

Eighty-six percent of 115 countries studied by KPMG held their business income tax rates steady this year, and some increased them, according to the firm’s just-published 2009 Corporate and Indirect Tax Rate Survey.

In Europe, the average rate stayed at just over 23 percent, the first time in 13 years that it has failed to decline year-over-year. The global average corporate tax rate fell from 25.84 percent to 25.51 percent, a far cry from the full-percentage-point reductions that have become routine in the past ten years.

At the same time, governments are increasingly relying on indirect taxes, especially value-added taxes (VATs) and goods and service taxes (GSTs), the study notes. VAT/GST rates have held steady while income tax rates have declined.

What’s the big attraction of VATs? A few things, according to KPMG. They’re charged on consumption, which is less volatile than corporate profits. They’re levied on an economy’s gross value added rather than net profits, so they’re less vulnerable to avoidance and cyclical downturns. They’re usually paid throughout the year rather than in a lump sum, so authorities get regular doses of revenue. And they have relatively low collection costs.

All of which is no doubt grist to the mill for those who are currently advocating a federal VAT in the United States, which remains the only G-20 country without such a tax. ###