The latest publication of the Doing Business franchise is out: Paying Taxes 2010-The global picture.
The study measures tax systems from the point of view of a domestic company complying with the different tax laws and regulations in each economy. The case study company is a small to medium-size manufacturer and retailer, deliberately chosen to ensure that its business can be identified with and compared worldwide.
For the second year in a row Maldives, Qatar and Hong Kong have taken the top three spots as the easiest places to pay taxes. Maldives has been the top performer since the first report was published in 2007.
Some of the report's key findings include:
- 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.
PricewaterhouseCoopers contributed to the report, giving its perspective on the data via case studies in various countries. The consultancy concludes:
Tax reform remains firmly on the government agenda. Through its Doing Business indicators, the World Bank Group has recorded tax reforms in 104 economies around the world during the five years of the Paying Taxes study. The recession is not likely to lessen the pace of these changes. The downturn has reduced corporate profitability and slowed investment and transaction activity, thus reducing government tax revenues from business. The challenge for government is not only to rebuild revenues, but also to help businesses survive through a difficult time and position themselves best for recovery, while also exploring possibilities for easing complexity and administrative burden.
Benjamin Franklin once famously quipped, "In this world nothing can be said to be certain, except death and taxes." Thanks to the Doing Business team, the latter is becoming a little less painful.