The World Bank Group’s Doing Business Project recently released the 2010 edition of its Paying Taxes Report. The report is unique in that it measures the ease of paying taxes across 183 economies, by assessing the time required for companies to prepare and file tax returns and pay taxes, and also the company’s total tax liability as a percentage of commercial profits.
The report measures three separate aspects of paying taxes. Two of these relate to the tax compliance burden and one to the cost of the tax burden.
Take a look at the report below:
According to the report, more economies reformed their tax regimes than in any previous year of the study. A few economies such as Russia and Korea reduced corporate income tax rates or accelerated previously planned reform programs as part of economic stimulus packages.
In several economies small and medium sized businesses benefitted from other crisis response measures. Australia, for example, sought to encourage investments in assets by increasing capital allowance Twelve other economies introduced similar measures, including the Czech Republic Korea and Lebanon. Five economies reduced property tax rates: Denmark, the Netherlands, Niger, Portugal and Singapore.
Because there’s a lot to digest, here’s a quick snapshot of some of the Report’s more interesting facts:
- The five easiest countries in which to pay corporate taxes are Maldives, Qatar, Hong Kong, UAE and Singapore:
- The top reformer was Timor-Leste, which introduced a new tax law, streamlined the business tax regime, and simplified tax administration.
- Between June 2008 and May 2009, 45 economies made it easier to pay taxes as measured by Doing Business, almost 25% more than in the previous year.
- Eastern Europe and Central Asia had the most reforms for the third year in a row, with 10 economies reforming.
- Around the world on average, the case study company faces a total tax rate (percentage of profit paid out in taxes) of 48.3% and spends 286 hours a year, and makes 31 tax payments, to comply with tax laws.
- The time to comply with tax requirements ranges from 212 hours a year on average in OECD high-income economies to 638 in Latin America.
- The number of payments also varies widely. The company makes the most payments in Eastern Europe and Central Asia, 53 a year on average. It makes the fewest in OECD high-income economies, just 14 on average.
- Survey respondents identified the way tax audits are dealt with and the approach of the tax authorities as the elements of the tax system most in need of improvement.
- Five European Union economies implemented tax reforms in 2008/09: Belgium, the Czech Republic, Finland, Poland, and Spain.
- In the EU the average total tax rate for the case study company fell from 46% to 44.5%. This reflects in part cuts in the corporate income tax rate implemented in 2007/08 in Germany and Italy.
- The average time required to comply with taxes in the EU is 232 hours, down from the previous year’s 257, with labor taxes requiring the most time (117 hours). The fall reflects continued efforts in implementing and enhancing electronic filing and payment systems and in streamlining regulations and improving tax returns to simplify compliance.
- While VAT stems from a common legal framework in the EU, the time required to comply with domestic legislation varies. VAT compliance takes 30 hours in Ireland, for example, and 178 in the Czech Republic.
- The number of taxes levied on the company averages 9.5 globally. The average for the EU is almost 11.