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Technology Cutting Tax Compliance Burden: Paying Taxes 2018

by Mary Swire, Tax-News.com, Hong Kong

28 November 2017


The use of technology by business and government in tax compliance is driving continued simplification and reduction in the burden of tax compliance on businesses, says Paying Taxes 2018, a report by The World Bank Group and PwC.

The report finds that, for an average mid-sized business, the time to comply declined by five hours to 240 hours and the number of payments by one to 24 payments. This reduction in payments was driven largely by increased online filing and payments capabilities, new web portals, and the greater use by taxpayers of online systems, the report said, adding that many economies, particularly in the lower income range, have been slower to take full advantage of the benefits of technology.

Time needed to comply with labor and profit taxes fell by two hours (to 61 hours for profit taxes and 87 hours for labor taxes), compared with last year. A record drop in the time to comply with labor taxes was due to the increased introduction of electronic filing and payment processes, improved tax and accounting software, and pre-populated returns, the report said.

The study noted an increase in the use of real-, or near real-time information systems by tax authorities to track transactions, such as for example in Russia, South Korea, and China.

The tax tax rate was largely the same across the world for mid-sized firms, increasing by 0.1 percent points to an average of 40.5 percent. For the first time since 2004, the total tax and contribution rate (TTCR) for taxes other than labor and profit taxes increased.

The report says that post-filing processes for value-added tax (VAT) and corporate income tax (CIT) returns are among the most challenging and lengthy processes for businesses to comply with. In some cases, the length of the processes can create cash flow and administrative delays for companies of more than a year.

The report found that while 162 economies have a VAT system, a VAT refund was available for the case study company in just 107 economies. There is no VAT refund available in 51 economies, most commonly in South America and Africa. In four economies, the purchase of an industrial machine is exempted from VAT. The EU performs the best for speed of VAT refunds (and corporate income tax processes), whereas it is a mixed picture for Central America, the Middle East, and Asia Pacific, while Africa and South America lag behind.

Rita Ramalho, Acting Director, Global Indicators Group, Development Economics, World Bank Group said: "The continued reduction in the burden of paying taxes, in time and number of payments, is welcome news indeed. The use of technology can provide significant benefits for both taxpayers and tax collectors, and we look forward to its increased use in efforts to improve the ease of doing business for medium sized enterprises in countries around the world."

Andrew Packman, Leader for Tax Transparency and Total Tax Contribution at PwC, said: "Technology's impact on reducing the administrative and cost burden of tax is almost universal this year in our findings. In particular it is now embedded in driving simplification and time-saving for business. The increasing use of real-, or near real-time data is changing how tax authorities can use data, and analyze returns. This does however raise questions about data integrity and security and about how businesses can meet the increasing data obligations placed upon them."

TAGS: Russia | compliance | Asia Pacific | tax | business | tax compliance | accounting | China | Korea, South | VAT refunds | Africa | South America | Middle East | Central America | Tax

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