Tax Reform Remains On Governments' Agenda Despite Slowdown

by Robert Lee, Tax-News.com, London

25 November 2009

Despite the economic downturn, government focus around the world has remained on tax reform, according to a new report released by the World Bank Group and PricewaterhouseCoopers.

The report, 'Paying Taxes,' finds that 45 economies made it easier to pay taxes, almost 25 % more than in the previous year.

This year’s top reformer, Timor-Leste, introduced a new tax law, streamlined the business tax regime and simplified tax administration. For the third year in a row, Eastern Europe and Central Asia had the largest number of reforms, with 10 economies reforming.

“Government efforts to streamline tax procedures and reduce time spent on compliance can make an important difference for small and medium enterprises, especially in difficult economic times,” stated Penelope Brook, World Bank Group Director of the Global Indicators and Analysis department.

“This year’s top reformer reduced compliance time by over 50% by rationalizing tax regulations, simplifying computation rules, and reducing payments.”

The report measures the ease of paying taxes across 183 economies by assessing the administrative burden for companies to comply with tax regulations, and also by calculating companies’ total tax liability as a percentage of pre-tax profits. In the past five years, the report has recorded 171 reforms affecting taxes in 104 economies worldwide.

While 20 economies have reduced corporate income tax rates, 18 simplified the process of paying taxes. On average across all of the 183 economies covered in the report, the standard case study company measured has to make 31 tax payments and spend 286 hours on calculating and paying its taxes.

The results show that corporate income tax is just one of the taxes with which business must comply. On average, the company pays 9.5 different taxes and corporate income tax accounts for only 12% of payments, 26% of the time to comply, and 38% of the tax cost.

“The global recession has meant falling tax revenues and difficult tax policy choices,” observed Susan Symons, PricewaterhouseCoopers partner.

“The challenge is ensuring sufficient public revenues for the future while incentivising investment and economic growth,” she concluded.

Recommended