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PwC-World Bank Report Examines Tax System Complexity

by Ulrika Lomas, Tax-News.com, Brussels

09 November 2006

A new report published this week and compiled by the World Bank and PricewaterhouseCoopers examines the financial impact and administrative burdens imposed by tax systems throughout the world.

The report, entitled 'Paying Taxes: The Global Picture' observes that:

"Taxes are essential to finance public services but there are good and bad ways to collect them. The design of the tax system can have significant economic impacts and can influence multinationals in deciding where to invest."

"Tax regimes with relatively high marginal rates and which include a number of exemptions and allowances tend to be less economically efficient in relation to encouraging employment, saving and investment. Such regimes generally also impose higher tax compliance and administration costs. Evidence suggests that simpler tax systems promote economic growth and can help achieve a win:win for governments and industry."

It continued:

"Burdensome tax systems can be a deterrent and can lead to tax evasion. Companies in 90% of surveyed countries rank tax administration among the top five obstacles to doing business. The main factors contributing to this are:
• The large number of business taxes to pay;
• Lengthy and complex tax administration;
• Complex tax legislation; and
• High tax rates."

"To help with paying taxes and implementing reform, governments and tax authorities need to consider all aspects of a tax system. All taxes borne and collected by businesses should be recognised along with the related tax compliance costs - the Total Tax Contribution."

"Currently there is too much focus on corporate income taxes alone when considering reform. The Doing Business survey data shows that on average corporate income taxes only account for 36% of the Total Tax Rate, 11% of the number of tax payments made and 25% of the compliance time."

The report revealed that in terms of ease of tax payment, the Maldives topped the list, followed by Ireland, Oman, the United Arab Emirates, Hong Kong, Saudi Arabia, Switzerland, Singapore, St. Lucia, and New Zealand in the top ten positions.

The full text of 'Paying Taxes- The Global Picture' can be found in the Tax News Resources section.

 

 






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