Paying Taxes Survey Unveiled By PwC

by Robert Lee, Tax-News.com, London

20 February 2012

60% of world economies have made paying taxes easier over the past seven years, a new study has shown, with total tax rates falling by an average of 8.5%.

PwC, the World Bank and the International Finance Corporation (IFC) have released their new study, Paying Taxes 2012. It measures the ease of paying taxes across 183 economies worldwide, and records the taxes and mandatory contributions a medium-size company must pay in a given year. It also looks at the administrative burden of paying taxes and contributions.

The study is now in its seventh year, which PwC says allows it to draw interesting perspectives on how the world’s tax regimes have changed during this time. Among the key findings drawn is the conclusion that governments continue to reform their tax systems in order to help businesses grow.

Over the past seven years, more than 60% of economies made paying taxes easier, implementing 244 reforms. Indeed, this year alone, the most common feature of tax reform was the introduction of electronic systems. 66 economies now have online filing and payment systems.

The study also found that the Total Tax Rate has fallen by 8.5% since 2006, at a rate of more than 1% per year. The time taken to comply with taxes declined by more than 1 day per year, and now sits at a total of 54 hours. The number of tax payments required dropped by 5.

On average, a domestic medium-size company makes 28.5 tax payments per year, spends almost 7 weeks complying with its taxes, and has a tax cost of 44.8% of its commercial profit. In high income economies, a case study company makes 15.2 payments, takes 168.7 hours to comply with its main taxes and has an average Total Tax Rate of 37.4%. This compares to 38.3 payments, 271 hours and 67.8% for low income economies.

The study also discovered that value added tax (VAT) is the predominant form of consumption tax used around the world. However, VAT complicates matters, as it takes 66% as much time again to comply with VAT as it does to comply with corporate income tax.

Also uncovered was the fact that the time taken to comply with tax requirements for the model company varies between regions. It takes the least time to comply in the Organisation of Economic Development (OECD), at 195 hours. On the other hand, the longest time needed is in Latin America and the Caribbean (382 hours).

The number of payments also varies widely by region. The control case company makes the most payments in Central Europe and Eastern Europe, 37.9 a year on average and the fewest in OECD economies, 13.1 on average.

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