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Paying Taxes 2010

The global picture



PricewaterhouseCoopers*

Bob Morris

PricewaterhouseCoopers LLP, US+1 202 414 [email protected]

Susan SymonsPricewaterhouseCoopers LLP, UK+44 20 7804 [email protected]

Neville HowlettPricewaterhouseCoopers LLP, UK+44 20 7212 [email protected]

For urther inormation or to discuss any o the ndings in this report please contact:

* In this publication, the terms “PricewaterhouseCoopers” and “PwC” reer to the network o member rms o

PricewaterhouseCoopers International Limited, each o which is a separate and independent legal entity

World Bank Group

Penelope Brook

+1 202 473 [email protected]

Sylvia Sol+1 202 458 [email protected]

Caroline Otonglo+1 202 473 [email protected]

2



Paying Taxes 2010 3

Foreword

Penelope Brook

Director o the Global Indicators and Analysis Group

World Bank Group

Susan Symons

Tax partner

PricewaterhouseCoopers LLP, UK

This is the ourth Paying Taxes publication, which isbased on data collected in connection with the ‘payingtaxes’ indicator rom the World Bank Group’s DoingBusiness project. The project assesses the regulatoryclimate which impacts a domestic, small to mediumsized business during its natural lie cycle, and Paying

Taxes is part o this overall structure. The study is uniquein that it measures the ease o paying taxes across183 economies, by assessing the time required orcompanies to prepare and le tax returns and pay taxes,and also the company’s total tax liability as a percentageo commercial prots. Paying Taxes provides a wealtho data which can help governments benchmark theirtax systems on a like‑or‑like basis. The results providea platorm or government and business to engage inconstructive discussion on tax reorm.

The Paying Taxes study, and the way in which the resultsare used, has developed since it was rst introducedto the Doing Business project. In the publication, we

have sought to draw themes rom the results, andto illustrate the ndings with analysis rom speciceconomies and regional groupings. Additional questionsare also now asked in the study, to put the indicatorresults into a broader context and provide urtherinsight into tax systems rom the view o business.This publication, as well as the ull set o results andunderlying data, is available on the World Bank Groupand PricewaterhouseCoopers websites, or governmentsand other users to explore.

This year, the study has been conducted againstthe backdrop o a global recession that has meantalling tax revenues around the world, and the needor governments to make dicult tax policy choices.The challenge is how to ensure sucient publicrevenues or the uture, while at the same time

incentivising investment and economic growth.

With reorms identied by the study in 104 economiesover a ve year period, it is clear that tax reorm is ongovernments’ agendas. 45 o these reorms, relevantor Doing Business, have been undertaken in the pastyear, including broadening the tax base, lowering taxburdens and making compliance easier. This suggeststhat tax reorm is an important part o the way inwhich governments are dealing with the economicdownturn. These reorms are discussed in more detailin the publication.

Governments continue to demonstrate their engagementon tax reorm. This is evidenced in the publication witharticles rom various economies, which give insightsinto how the Paying Taxes data has been used, andprovide details o the reorms that have been and arebeing implemented.

We welcome eedback and encourage users o thisreport to provide additional input and comments, so thatthe value o the data can be even urther enhanced orthe uture.



Paying Taxes 2010 5

Objectives and key themes and ndings rom the Doing Business Paying Taxes study 6

Chapter 1 10

Paying Taxes: Findings o the World Bank Group’s Doing Business 2010 report 10

Chapter 2 18

A PricewaterhouseCoopers commentary on the results 18

Introduction 18

Section 1 The Paying Taxes indicators 24

Section 2 Further insights on tax administration 56

Appendix 1

The data tables 76

Appendix 2

Methodology 90

The case study company 91

The ramework o the Doing Business study 92

The PricewaterhouseCoopers Total Tax Contribution (‘TTC’) ramework 96

What is a tax? 96

Payments in respect o labour 97Taxes borne and taxes collected 98

Appendix 3

Additional questions asked about the tax system and administration 100

Appendix 4

Doing Business 2010, About Doing Business 104

Contents



Objectives and key themesand ndings rom theDoing Business PayingTaxes study

This is the th year that the Paying Taxes indicator has been included inthe World Bank Group’s Doing Business project. The indicator measures theease o paying taxes or a small to medium sized domestic company, in 183economies around the world – two more than in last year’s publication.

The Paying Taxes indicator is unique in that it measures the world’s taxsystems rom the point o view o a domestic business, complying with thedierent tax laws and regulations in each economy.

The objectives o the indicator are:

• toprovidedatawhichcanbecomparedbetweeneconomies;

• tofacilitatethebenchmarkingoftaxsystemswithinrelevanteconomicandgeographical groupings, which can provide an opportunity to learn rompeergroupeconomies;and

• toenableanin‑depthanalysisoftheresultswhichcanbeusedtohelpidentiy good practices and possible reorms.

The indicator covers both the cost o taxes, which are borne by the casestudy company, and the administrative burden o tax compliance or thecompany. Both are important rom the business point o view and aremeasured using three sub‑indicators:

• theTotalTaxRate(TTR),(thecostofalltaxesborne);

• thetimeneededtocomplywiththemajortaxes(prottaxes,labourtaxes,andmandatorycontributions,andconsumptiontaxes);and

• thenumberoftaxpayments.

The results or each sub‑indicator, split by type o tax, and the ull set o

rankings are included in Appendix 1. Further details are also availableon the World Bank Group’s Doing Business project (Doing Business ) andPricewaterhouseCoopers websites. The ull methodology or the case studycompany and the indicators is explained in Appendix 2.

6



Paying Taxes 2010 7

Objectives and key themes and ndings rom theDoing Business Paying Taxes study

Chapter 1 o this study sets out the latest ndings andanalysis on the Paying Taxes indicator rom the WorldBank Group’s Doing Business report. This includes adiscussion o reorms around the world, and o optionsor ‘moving towards smart regulation’.

Chapter 2 provides a urther analysis byPricewaterhouseCoopers o the sub‑indicators,which includes a ocus on various geographical andeconomic groupings. This is ollowed by initial ndingsrom additional questions on tax systems and taxadministration. These questions are not incorporatedin the Paying Taxes results, but have been developedin response to eedback on the study, and to provideadditional insights on tax systems.

The report also includes a number o commentariesrom PricewaterhouseCoopers around the world whichillustrate how this data is being used in practice to inormand stimulate discussion with governments. Thesecommentaries also reer to some o the reorms that havebeen and are being implemented to address the issuesarising in such dialogues.

The World Bank Group engages in consultations onthe Doing Business indicators with a broad rangeo stakeholders. This year’s report benetted romtheir input. Consultations are presently ongoing onthe design o the Paying Taxes indicator. The PayingTaxes team continually welcomes input into the studyin order to ensure the relevance o the data collected,and to urther enhance its useulness or both businessand government.



8

Some o the key themes and ndings rom Paying Taxes2010 include:

• Corporateincometaxisonlyoneofmanytaxeswithwhich business has to comply. When considering theburden o taxes on business, it is important to lookat all the taxes that companies pay. In a recession,company prots, and thereore corporate income taxpayments, may all, but the cost o taxes or businessmay still increase where other taxes paid are notlinked to protability.

• Withthecurrenteconomicdownturn,thechallengeforgovernments is how to saeguard the public revenuesneeded or provision o public services and socialsaety nets, while at the same time, encouraginginvestment, growth and job creation.

• EconomieswithlowTotalTaxRatesarenotnecessarily a model or other economies. Businessunderstands the need to pay taxes, and that levyingtaxes is not an easy task or government. Governmenthas a responsibility to use taxes to ull economicand social objectives, and improve inrastructureand the quality o lie or citizens which in turn,benets business.

• Inthepastveyears,theDoing Business report hasrecorded 171 reorms aecting the Paying Taxesindicator in 104 economies around the world. Overthe past year, governments have stayed on coursewith reorm programmes. 45 economies have reducedthe tax burden on small to medium sized businesses,

or made it easier to pay taxes, with reorms made inthe year to 1 June 2009 – this is 25% more than inthe previous year. 20 economies reduced prot taxrates, the most popular reorm, closely ollowed by18 economies which ocused on making the ling andpayment o taxes easier.

• Timor‑LesteandMexicomadethemostsubstantialreorms on the Paying Taxes indicator in this year’sDoing Businessreport,whileEasternEuropeandCentral Asia is the region with the largest number oreorms or the third year in a row.

• Inmanycases,taxcomplianceimposesaheavyburden on business in terms o cost and time, and sohas the potential to be a disincentive to investmentand encourage inormality. The Paying Taxes studyshows that tax reorm has continued to remain highon governments’ agendas, generally with the aim oreducing the regulatory burden o tax complianceon business.

• Havingonetaxperbase(forexampleonprots,labour, consumption, and property), can ease the taxcompliance burden or companies. The time neededto comply can increase where there are multiple taxes.Filing and payment o labour taxes and consumptiontaxes add considerably to the time to comply. Therequirement to keep separate books or tax, otherthan those required or accounting purposes, can alsoadd to the time taken to comply.

• Manyreformsareaimedatsimplifyingthetaxlaw and making it easier or rms to comply withregulations. The ability to pay and le electronicallyhas a signicant positive impact on the ‘number opayments’indicator.Electroniclingisshowntobe well‑established in developed economies andit is increasingly being implemented in developingeconomies. This requires the buy‑in and trust o

taxpayers with regards to the tax payment system, aswell as the availability o technology.

• Respondentstothesupplementaryquestions,included in this year’s survey, identied the way inwhich tax audits are dealt with and the approacho the tax authorities in dealing with businessesas the elements o the tax system in most needo improvement.



Paying Taxes 2010 9

Objectives and key themes and ndings rom theDoing Business Paying Taxes study



Paying Taxes: Findingso the World Bank

Group’s Doing Business 2010 report

Chapter

1InEgypt,duringthe18thdynasty,thepharaohsenttaxcollectorsthreetimesa year. They were accompanied by a scribe who kept records. The scribewrote down the names o the peasants and measured the elds. On thesecond visit the scribe and the tax collectors inspected the new crops. Fromthis they calculated the taxes owed. The tax collectors made the third visitduring the harvest to collect the pharaoh’s share. The taxes were paid insacks o grain1.

Governments need revenues to provide public services to society. Forbusinesses, these services oer inrastructure, education and other amenitieskey to achieving a common goal o prosperous, unctional and orderlysocieties. Many services directly aect businesses – rom company andland registries to courts. To nance these services, the vast majority ogovernments must levy taxes. The challenge or governments is to nd a wayto do so that ensures public revenues while encouraging compliance.

Businesses rom around the world have identied taxation as an area in whichthey would most like to see their governments improve2.Howgovernmentsraise revenues can make an important dierence to business and growth.

And what can be a challenge in good times becomes even more complicatedwhen things become dicult. The global nancial and economic crisis has ledto rising government debt and unemployment around the world. The questionor many governments is how to ensure public revenues while supportingeconomic recovery by encouraging rm growth and investment.

Doing Business measures the total tax burden borne by a standard small tomedium sized business as well as the number o payments and total timespent complying with tax laws in a given year (Figure 1.3 ). Thus it comparestax systems and tracks reorms around the world rom the perspective o localsmall to medium sized businesses. It does not measure the scal health oeconomies, the macroeconomic conditions under which governments collectrevenues or the provision o public services supported by taxation.

Over the past year, as the nancial and economic crisis aected economiesaround the world, governments stayed on course with reorm programmesto lower the tax burden or businesses, broaden the tax base and makecompliance easier. More economies reormed than in any previous year. A eweconomies,suchasRussiaandKorea,reducedcorporateincometaxratesor accelerated previously planned reorm programmes as part o economicstimulus packages. In several economies small and medium sized businessesbenetted rom other crisis response measures. Australia, or example,sought to encourage investments in assets by increasing capital allowancerates3. Twelve other economies introduced similar measures, including theCzechRepublic,KoreaandLebanon.Fiveeconomiesreducedpropertytaxrates: Denmark, the Netherlands, Niger, Portugal and Singapore.

10

1 OracleEducationFoundation,ThinkQuest,“DailyLifeoftheEgyptians” http://library.thinkquest.org

2 PricewaterhouseCoopers (2008).

3 Commonwealth and Australia (2008).



11Paying Taxes 2010

Paying Taxes:Findings o the World Bank Group’s Doing Business 2010 Report

In the past, tax reorms were oten part o governmentresponses to nancial or economic crises. During the

Asian nancial crisis o the late 1990s Singapore wasone economy that undertook elaborate tax reorms tocombat the economic downturn. It lowered businesscosts through a series o tax cuts, rebates andexemptions introduced over the course o the crisis. Italso reduced the number o payments by removing thestamp duty on almost all documents4. Today Singaporeis still one o the easiest places in which to pay taxes asmeasured by Doing Business.

The size o the tax burden on businesses mattersor investment and growth. Where taxes are highand corresponding gains seem low, the incentive orbusinesses to opt out o the ormal sector increases.

A recent study shows that higher tax rates areassociated with lower private investment and ewerormal businesses. A 10 percentage point increase inthe eective corporate tax rate is associated with areduction in the ratio o investment to GDP o up to twopercentage points and a decrease in the business entryrate o about one percentage point5. Other researchsuggests that a one percentage point increase in thestatutory corporate tax rate would reduce the local protso existing investments by 1.31 percentage points onaverage6 and lead to an 18 percentage point increase inaverage debt‑to‑asset ratios (part o the reason or thelower reported prots)7. A one percentage point increasein eective corporate tax rates reduces the likelihoodo establishing a subsidiary in an economy by 2.9percentage points8.

Besides the taxes paid, there are costs o complying withtax laws and o running the revenue authority. Worldwideon average, a standard small to medium sized businessstill spends three working days a month complying withtax obligations as measured by Doing Business. Wheretax compliance imposes heavy burdens o cost and time,it can create a disincentive to investment and encourageinormality9. Particularly in developing economies,large inormal sectors contribute to the creation oan uneven playing eld or ormal small and medium

Figure 1.1Where is it easy to pay taxes – and where not?

Easiest Rank Most difcult Rank

Maldives 1 Jamaica 174

Qatar 2 Mauritania 175

HongKong,China 3 Gambia, The 176

UnitedArabEmirates 4 Bolivia 177

Singapore 5 Uzbekistan 178

Ireland 6 CentralAfricanRepublic 179

Saudi Arabia 7 Congo,Rep. 180

Oman 8 Ukraine 181

New Zealand 9 Venezuela,R.B. 182

Kiribati 10 Belarus 183

Note:Rankingsaretheaverageoftheeconomy’srankingsonthenumberofpayments, time and total tax rate.

Source: Doing Business database.

Figure 1.2104 economies reormed in paying taxes in 2004‑08

Average percentage change, 2004‑08

Note: The percentage increase in payments in low income economies is drivenby one major reorm in one economy that increased payments by 60% in 2006.Without this outlier the average percentage decrease would be 1.09%.


Income group

High

Upper middle

Lower middle

Low

Payments Time to comply Total tax rate

2004

2008 ‑ 1 0 . 3

‑ 4 . 3

‑ 7 . 7

‑ 1 7 . 8

‑ 5 . 9

‑ 1 1 . 7

‑ 1 2 . 8

‑ 9 . 3

‑ 1 5 . 9

1 . 7

‑ 4 . 6

‑ 1 0 . 6

4 Chew (2009).5 Djankov and others (orthcoming).6 HuizingaandLaeven(2008).

7 Huizinga,LaevenandNicodème(2008).8 Nicodème(2008).9 Everest‑PhillipsandSandall(2009)anddeMooijandNicodème(2008).



12

sized enterprises, squeezed between smaller inormalcompetitors and larger competitors whose greaterresources can help win a more eective audiencewith government and thus greater tax concessions.

Worldwide, economies that make paying taxes easytend to ocus on lower tax rates accompanied by widertax bases, simpler and more ecient tax administrationand one tax per tax base. They also tend to provideelectronic ling and payment systems, which reducethe tax burden or rms while lightening theiradministrative requirements.

Who reormed in 2008/09?

Between 2 June 2008 and 1 June 2009, 45 economiesmade it easier or businesses to pay taxes – almost25% more than in the previous year10.Reformsoverthis period both lowered the tax burden on businessesand simplied tax compliance processes. 20 economiesreduced corporate income tax rates, while nine reducedlabour tax rates (Figure 1.4 ). A second category oreorms ocused on making it easier to le tax returnsand pay taxes. 18 economies, more than in anyprevious year, introduced electronic ling and paymentsystems. Seven reduced the number o taxes paidby consolidating or eliminating taxes. 12 adoptednew tax laws or substantially revised existing onesto simpliy procedures and modernise tax regimes:Djibouti,theIslamicRepublicofIran,Kazakhstan,theKyrgyzRepublic,FYRMacedonia,Oman,SierraLeone, Sudan, Timor‑Leste, Tonga, Uzbekistan

and Vietnam.Timor‑Leste was the top reormer in 2008/09. A newtax law came into orce in July 2008, transormingthe tax regime or businesses. It cut the prot tax raterom 30% to 10%, allowed all depreciable assets to beully written o in the year o purchase and abolishedthe alternative minimum tax and the withholding taxon interest (Figure 1.5 ). Corporate income tax is nowpaid in quarterly rather than monthly instalments when

Number o hours peryear to prepare, le

returns and pay taxes

Firm tax liability as %o prots beore all

taxes borne

Number o tax payments per year

Figure 1.3Paying taxes: tax compliance or a localmanuacturing company

33.3%

Total tax rate

33.3%

Payments

33.3%

Time

Rankingsarebasedonthreesub‑indicators.

Figure 1.4Reducingtaxrates–themostpopularreformfeaturein 2008/09

Reducedprottax rates

Algeria, Bangladesh, Benin, BruneiDarussalam, Cape Verde, Fiji, Iceland, Israel,Kazakhstan,RepublicofKorea,Kosovo,Montenegro,Philippines,RussianFederation,Spain, St. Vincent and the Grenadines,Sudan, Timor‑Leste, Togo, Vietnam

Simplied processo paying taxes

Angola, Belarus, Belgium, Colombia, CzechRepublic,Finland,Guatemala,Jordan,KyrgyzRepublic,LaoPDR,Lebanon,FYRMacedonia, Mexico, Peru, Poland, SierraLeone, Taiwan (China), Tunisia

Revisedtaxcode

Djibouti,IslamicRepublicofIran,Kazakhstan,KyrgyzRepublic,FYRMacedonia,Oman,Sierra Leone, Sudan, Timor‑Leste, Tonga,Uzbekistan, Vietnam

Reducedlabourtax or mandatorycontribution rates

Belgium,Benin,CzechRepublic,Kazakhstan,KyrgyzRepublic,FYRMacedonia,Moldova,Montenegro, Poland

EliminatedtaxesCameroon,Djibouti,KyrgyzRepublic,South

Arica, Sudan, Timor‑Leste, Vietnam


10 This year’s report records all reorms with an impact on the paying taxes indicatorsbetween June 2008 and May 2009. Because the case study underlying the paying taxesindicators reers to the nancial year ending December 31, 2008, reorms implementedbetween January 2009 and May 2009 are recorded in this year’s report, but the impact willbe refected in the data in next year’s report.



13Paying Taxes 2010


turnover is less than $1 million, with simple rules or itscalculation. The time required or paying taxes ell by 364hours a year.

Mexico was the runner‑up reormer thanks to itsintroduction o electronic ling systems or payroll taxes,property taxes and social security. This reduced thenumber o payments in a year by 21.

ForthethirdyearinarowEasternEuropeandCentral Asia had the largest number o reorms, with 10economies reorming. Kazakhstan cut its corporateincome tax rate by 10 percentage points. Kosovo,MontenegroandRussiaalsoreducedtheircorporateincometaxrates.Kazakhstan,theKyrgyzRepublic,FYRMacedonia, Moldova, Montenegro and Poland reducedthe rates or labour taxes and mandatory contributionspaidbyemployers.Region‑wideshiftshavebecomeevident. Traditionally, employers have borne a signicantshare o the tax burden through labour taxes. This isgradually reversing, with the region accounting or 55%o labour tax rate reorms in the past two years.

Figure 1.5Major cuts in corporate income tax rates in 2008/09

Region Reduction in corporate income tax rate (%)

EastAsia&Pacic

Brunei Darussalam rom 25.5 to 23.5Fiji rom 31 to 29

Philippines rom 35 to 30Timor‑Leste rom 30 to 10Vietnam rom 28 to 25

EasternEurope&Central Asia

Kazakhstan rom 30 to 20Kosovo rom 20 to 10Montenegro rom 15 to 9RussianFederationfrom24to20

Sub‑Saharan Arica

Benin rom 38 to 30Cape Verde rom 30 to 25Sudan rom 30 to 15Togo rom 37 to 30

OECDhighincomeIceland rom 18 to 15RepublicofKoreafrom25to22Spain rom 32.5 to 30

MiddleEast&North

Arica

Algeria rom 25 to 19

Israel rom 29 to 27, and urther to 26a

LatinAmerica&Caribbean

St. Vincent and the Grenadines rom 37.5 to35, and urther to 32.5a

South Asia Bangladesh rom 40 to 37.5

a. The statutory rate changed twice over the period 2008 to 2009.




14

Electronicsystemsareincreasinglyusedintheregion. In Belarus the online tax portal has becomefullyoperationalforusebyalltaxpayers,andinFYRMacedonia electronic ling is now mandatory or alltaxes. In the past our years changes such as thesehave reduced the average number o tax payments in theregion by our and the time or tax compliance by almostsix days. Other reorms also simplied tax compliance.Kazakhstan,FYRMacedoniaandUzbekistanintroduced

newtaxcodes.SodidtheKyrgyzRepublic,anditeliminated some taxes as well.

Sub‑Saharan Arica had the second largest number oreorms, accounting or almost a th o the total. This istimely in a region where businesses still ace the highestaverage tax burden in the world (Figure 1.6 ). On average,

Arican rms must pay 68% o prots in taxes andmandatory contributions and spend 38 days a yearcomplying with 37 tax payments and lings.

Benin, Cape Verde, Sudan and Togo reduced thecorporate income tax rate by 8.75 percentage pointson average. Benin also reduced its payroll tax, by ourpercentage points. Sudan enacted a new tax code,reduced the capital gains tax by ve percentage pointsand abolished an additional tax on labour. South Aricaabolished the stamp duty, and Cameroon exempted newcompanies rom the business license tax or two years.Electroniclingbecamemorepopularacrosstheregion.

Angola and Kenya introduced electronic systems, makingit easier to pay taxes. Sierra Leone eased tax complianceand increased transparency through administrativereorms at the tax authority and publication o aconsolidated income tax act, now available online.

InEastAsiaandthePacic,BruneiDarussalam,Fiji,thePhilippines and Vietnam joined Timor‑Leste in reducingcorporate income tax rates. Vietnam cut the rate to 25%and also abolished the surtax on income rom the transerofland.LaoPDRconsolidatedthelingforthreetaxesina single tax return and improved the lodgement processand stang at the tax oces. Taiwan (China) extendedelectronic ling and payment to the value added tax.In Tonga, Timor‑Leste and Vietnam new income tax lawscame into eect.

IntheMiddleEastandNorthAfricathetrendoflowering corporate income tax rates and implementingonline systems continued. Jordan simplied tax ormsand introduced an online ling and payment system.Lebanon also introduced electronic payment. In Tunisiaas o 2009, all companies with a turnover equivalent to atleast $1.5 million must use the télédeclaration online tax

system. Algeria and Israel reduced corporate income taxrates. Oman introduced a new income tax law. Djiboutireplaced its sales tax with a new value added tax, as didtheIslamicRepublicofIran.

AmongOECDhigh‑incomeeconomies,Belgium,Finland and Spain made it even easier to le and paytaxes electronically. Iceland, Korea and Spain reducedcorporateincometaxrates.TheCzechRepublicmandated electronic ling or all taxes, reducing

Figure 1.6Overall tax burden still highest in Sub‑Saharan AricaTotalTaxRate(%ofprot)


70%

60%

50%

30%

10%

40%

20%

0%

Other taxes

Labour tax

Prot tax

M

i d d l e E a s t &

N o r t h A r i c a

O E C D : H i g h

i n c o m e

E a s t A s i a &

P a c i f c

E a s t e r n E u r o p e &

C e n t r a l A s i a

S o u t h A s i a

L a t

i n A m e r i c a &

C a r i b b e a n

S

u b ‑ S a h a r a n

A r i c a



15Paying Taxes 2010


compliance time by 317 hours, and lowered the rate orsocial security contributions rom 8% to 6.5%.

In Latin America and the Caribbean most majorreorms enhanced electronic systems. This is awelcome development, since the region’s businessesspend the greatest average time on tax payment andlings (Figure 1.7 ). Aside rom Mexico’s reorms, Perumade it easier to pay value added tax by providingtaxpayers with ree sotware. Colombia’s tax authorityupgraded its electronic payment system (MUISCA)to allow electronic ling and payment o corporateincome tax and value added tax. Guatemala introducedregulations mandating use o electronic systems or taxpayments and lings, reducing the number o paymentsby 14. St. Vincent and the Grenadines lowered thecorporate income tax rate rom 37.5% to 35% in 2008and to 32.5% in 2009.

In South Asia only Bangladesh reormed, reducing thecorporate income tax rate rom 40% to 37.5%.

Only one economy increased the corporate incometax rate: Lithuania, rom 18% to 20% in 2009.TheDemocraticRepublicofCongoincreasedthesalestax rom 13% to 15%. Two economies increased thelabour tax and mandatory contribution rates: St. Vincentand the Grenadines by one percentage point and Tunisiaby1.07percentagepoints.Romaniaincreasedtherateso three labour taxes.

Three economies introduced new taxes. BruneiDarussalam introduced a 12% building tax on commercial

buildings.RepúblicaBolivarianadeVenezuelahadanewanti‑drug tax come into eect in 2008.

Towards smart regulationIn the past ve years, Doing Business has recorded171 reorms in paying taxes in 104 economies aroundthe world – reorms aimed at making tax complianceeasier and the tax burden lighter or small and mediumsizedbusinesses.ReformersineconomiesasdiverseasEgypt,MauritiusandTurkeyhaveunderscoredtheimportance o tax reorm in enhancing economic growthand investment, increasing competitiveness, combatingunemployment and achieving good governance. Inreorming their tax systems they have sought to eliminatevarious exemptions, broaden the tax base and modernisetheir tax systems.

Easing compliance through broad‑based reorms

Many tax reorms are aimed at simpliying the tax lawand making it easier or rms to comply with regulations.

A bold step in this direction involves eliminating taxexemptions, tax holidays and other special treatmentor dierent types o businesses, to achieve equaltreatmentforallbusinesses.Eliminatingtaxexemptionscan be dicult, because they are oten used as tax

Figure 1.7MosttimeconsuminginLatinAmerica&Caribbean


194

Time (hours per year)MiddleEast&

North Arica

EastAsia&Pacic

South Asia

OECDhighincome

EasternEurope&CentralAsia

Latin America&Caribbean

Sub‑Saharan Arica

#

204

227

285

306

336

385

13

23

25

31

38

46

33

Number o taxpayments

11 Hadler,MoloiandWallace(2006).



16

incentiveswithspecicobjectives.ReformexperiencesinsucheconomiesasEgypt,Georgia,MauritiusandTurkey show that it takes political will and buy‑in romstakeholders to succeed.

Jamaica also has a lesson to share: during its 1986 fattax reorm it used arguments o airness to overcomeopposition to reorm—and eliminated 17 types ocredits and 44 allowances11.In2005Egypteliminatedall tax exemptions and introduced a fat tax o 20% oncorporate income, down rom 32% or 40%, as well aselectronic ling and sel‑assessment12. Sales tax revenuerose by 46%, and corporate tax collections by 24.7%.Mauritius shited rom a tiered rate to a single rate witha broader tax base. It also streamlined tax administrationand made it electronic. The ollowing year corporate taxcollection exceeded estimates by 13.5%13.

Georgia’s tax reorm o 2008 was multi‑aceted, targetingdierent taxes simultaneously. It lowered the corporatetax rate, abolished the social tax and introduced onlineling, reducing both the number o tax payments and thetimeneededtocomply.Easiercompliancealsomadeenorcement less burdensome. Surveys o businessesshowed that the average number o visits or requiredmeetings with tax ocials ell rom eight in 2005 to only0.4 in 200814.

Making systems electronic

Almost 70 o the 183 economies covered by DoingBusiness oer some orm o electronic tax ling andpayment options to businesses (Figure 1.8 ). In 55

economies the electronic systems are used by asignicant share o businesses. Not surprisingly, amongOECDhigh‑incomeeconomiesallbutonepermitrmsto le and pay taxes electronically. But the trend is alsopicking up among developing economies. In the past veyears, 31 have introduced airly comprehensive electronicsystems. Another 13 are introducing electronic ling orpayment or have just done so and are encouraging wideruse by taxpayers.

Many economies are eager to make use o technologyto ease the paying o taxes – and with good reason.I properly implemented, and adopted by businesses,electronic tax systems speed up processing, improvedata collection and reduce error rates. In the UnitedStates in 2009, the error rate was less than 1% orelectronically prepared and led returns but about 20%or paper returns15. But taxpayers can be slow to take

up the new technology. In many developing economiesaccess to the internet remains an obstacle. But adoptiono new systems can be slow or reasons that cutacross economies at all levels o development. Mostcritically, taxpayers need to trust the payment system.This requires high‑quality security systems to protectdata. Also required are laws addressing data protectionand privacy concerns and allowing electronic signatures.Electronicpaymentcanbeimplementedinseveralways,including through the internet. Another way is through

11 Hadler,MoloiandWallace(2006).12 World Bank (2006).13 Cuttaree and Trumbic (orthcoming).

14 WorldBankEnterpriseSurveys(http://www.enterprisesurveys.org).15 KimDixon,“ElectronicTaxFilingJumps19Percent–IRS,”Reuters,April30,2009,http://

uk.reuters.com/article/idUKN3032076020090430

Figure 1.8Going electronic – more economies put taxsystems onlineShare o economies with online tax ling and payment %


New in 2008 (%)

As o 200790%

100%

80%

70%

60%

50%

20%

40%

10%

30%

0%

S u b ‑ S a h a r a n

A r i c a

E a s t A s i a

& P a

c i c

S o u t h A s i a

L a t i n A m e

r i c a

& C a r i b b

e a n

M i d d l e E a

s t &

N o r t h A r i c a

E a s t e r n E u r o p e

& C e n t r a l A s i a

O E C D h i g h

i n c o m e

4.36.5 12.5

15.8

29.2

9.4

28.1

14.8

37

96.3



17Paying Taxes 2010


Figure 1.9Who makes paying taxes easy and who does not –and where is the total tax rate highest and lowest?

Payments (number per year)

Fewest Most

Maldives 1 Côte d’Ivoire 66

Qatar 1 Serbia 66

Sweden 2 Venezuela,R.B. 71

HongKong,China 4 Jamaica 72

Norway 4 KyrgyzRepublic 75

Singapore 5 Montenegro 89Mexico 6 Uzbekistan 106

Timor‑Leste 6 Belarus 107

Kiribati 7 Romania 113

Mauritius 7 Ukraine 147

Time (hours per year)

Fastest Slowest

Maldives 0 Mauritania 696

UnitedArabEmirates 12 Ukraine 736

Bahrain 36 Venezuela,R.B. 864

Qatar 36 Belarus 900

Bahamas, The 58 Nigeria 938

Luxembourg 59 Armenia 958

Oman 62 Vietnam 1,050

Switzerland 63 Bolivia 1,080

New Zealand 70 Cameroon 1,400

Macedonia,FYR 75 Brazil 2,600

Total tax rate (% o proft)

Lowest Highest

Timor‑Leste 0.2 Tajikistan 85.9

Vanuatu 8.4 Mauritania 86.1

Maldives 9.1 Uzbekistan 94.9

Namibia 9.6 Belarus 99.7

Qatar 11.3 Argentina 108.1

UnitedArabEmirates 14.1 CentralAfricanRepublic 203.8

Saudi Arabia 14.5 Sierra Leone 235.6

Bahrain 15.0 Burundi 278.6

Georgia 15.3 Gambia, The 292.4

Kuwait 15.5 Congo,Dem.Rep. 322.0


automatic bank transers, popular across all regions andincome levels, mainly because taxpayers perceive it asless prone to security risks.

In Lebanon taxpayers can make electronic paymentsat any post oce. In Tunisia the government initiallyintroduced an intermediate option allowing online lersto print a receipt number and make their payment inany tax oce. The past year’s reorm consolidatedelectronic payment and ling through the télédeclaration online system.

Another issue is access to the system. To encourageuse o new technology, Peru and South Arica provideree sotware that makes the ling process automatic16.France eased access while maintaining security byscrapping its electronic verication sotware. Taxpayerscan now veriy their identity with the numbers on theirannual declaration and their notice o assessment. InChile taxpayers can use their universal identicationnumber and a password.

Faster reunds and processing times or onlinetransactions are key incentives to encourage use o newtechnology. Australia, Ireland, Taiwan (China), the UnitedKingdom and the United States oer such inducements.South Arica waived late penalties or online lers in 2007.France introduced tax credits or individual taxpayersling their returns electronically, though in the uture thiswill apply only to rst‑time electronic lers. Sharing gainsrom administrative eciency is a way to encouragetaxpayers to use the system.

16 Wongtrakool (1998).



A PricewaterhouseCooperscommentary on the results

Chapter

2Introduction

The current environment

The economic downturn experienced over the past 12 to 18 months hasbeen particularly severe. It has become more than just a matter o survivingaperiodofextremeupheavaluntilconditionsreturntonormal.Rather,thereis an expectation that the economies emerging rom the downturn might bedierent to those which went into it, and that governments are likely to bemuch more active players in the private sector. Stabilising nancial systemsin the wake o the credit crunch, managing publicly owned stakes in nancialservices companies, and coordinating better internationally on global issuessuch as climate change and energy inrastructure, all mean signicant changeor economies around the world.

The economic recession has caused great uncertainty in the global marketsresulting in a perceived need or signicant regulatory reorm, includingthe reorm o tax systems. This will aect the cost o doing business.For developing countries, there is the added concern that as the developedworld seeks to protect its economies and maintain competitiveness, there willbe an adverse impact on world trade and international investment, and so ontheir ability to economically prosper and grow.

Levying taxes is not easy, and the present economic circumstances havemade it even more dicult. Governments have to use the tax systemto provide and manage public nances to und their necessary publicexpenditure programmes, including those required to meet social objectives,and also to promote business investment and economic growth. What isimportant is how the tax system ulls these objectives. The tax systemshouldencourage,andnotdiscouragebusinessgrowth.Highertaxesshouldcontribute to improving the quality o lie or citizens, and tax administrationshould be as proessional and ecient as possible. Last year’s report set outthe possible hallmarks o a good tax system and these are summarised again

on page 23.Tax reorm remains rmly on the government agenda. Through its DoingBusiness indicators, the World Bank Group has recorded tax reorms in104 economies around the world during the ve years o the Paying Taxesstudy. The recession is not likely to lessen the pace o these changes. Thedownturn has reduced corporate protability and slowed investment andtransaction activity, thus reducing government tax revenues rom business.The challenge or government is not only to rebuild revenues, but also tohelp businesses survive through a dicult time and position themselvesbest or recovery, while also exploring possibilities or easing complexityand administrative burden.

18



19Paying Taxes 2010

A PricewaterhouseCoopers commentary on the results

About the Paying Taxes study

The Paying Taxes study is part o the World Bank Group’sDoing Business project (see Appendix 4). Doing Businessprovides a quantitative measure o the regulationsapplied to domestic, small and medium sized enterprises,rom 10 business aspects, including Paying Taxes.The Paying Taxes indicator looks at the tax systems in183 economies, to assess how they apply to and aecta standard case study company (TaxpayerCo), acilitatingthe comparison o the world’s tax systems using aconsistent set o assumptions. The objective is to ensurethat the results can be measured on the same basis oreach economy, to enable comparisons to be made. Thestudy provides quantitative data to inorm and stimulatediscussion, enabling governments to benchmark their taxsystems against others, and to identiy possible priorityareas or reorm.

It should be noted that the process to generate thePaying Taxes results is an intensive and rigorous one.Expertcontributorsfromeacheconomyprovidedatain a standard ormat which is sense‑checked andvalidated by the World Bank Group team. Ater veyears o the study, the data is well established. Anyamendments must be evidenced by changes in the law oradministration and discussed with all contributors in theeconomy. The annual data gathering process or PayingTaxes is summarised in Figure 2.1.

The use o a case study company with a standard actpattern does o course bring limitations. The size othe company (60 employees) may be considered large

in some countries, and modest in others, potentiallygenerating issues around the availability o specialregimes or small and medium sized enterprises. Thelocation is in the most populous city, which tends to beexpensive rom a tax perspective in some economies.The type o business may have an impact, as additionaltaxes or incentives are oten available or speciedactivities. Also, the act that the indicator addresses onlycertain aspects o tax administration and not others (e.g.the approach o the tax authority), could be considered

limiting. Nevertheless, this study is unique in that itcovers so many economies, acilitating benchmarkingo those that participate, and also because it providesa view o the world’s tax regimes rom the point o viewo the company. The act pattern chosen is there toacilitate the collection o data, which can be comparedacross a large number o economies. There is a wealtho data available to the users o the study, with theresults covering three sub‑indicators relating to PayingTaxes(theTTR,thenumberoftaxpayments,andthetime to comply), or three main types o tax and in 183economies. All o this data is available on the World BankGroup and PwC websites17.

As mentioned above, the study measures threeseparate aspects o paying taxes. Two o these relateto the tax compliance burden and one to the cost o thetax burden. All three are equally weighted to arrive at anoverall ranking. Thereore, the results are weighted tothe tax compliance burden and this is one reason whyit is important to look at each sub‑indicator separately.

Another reason is that each sub‑indicator measures adierent aspect o the tax system, generating importantndings or each aspect that are not necessarily revealedintheoverallranking.Forexample,alowtaxcost(TTR)does not necessarily translate into a low complianceburden. Nigeria is an economy where the data showsarankingof49foritslowTTR(32.2%),butwherethenumber o hours required or compliance is relatively highat 938, giving a low ranking o 178 or the time to comply.

An example at the other end o the scale is SwedenwhichhasahigherTTR(54.6%)andalowranking(144),but where it is relatively easy to comply with the system

requiring only 122 hours which gives a high ranking o34 or the time to comply. Sweden is an example o aneconomy with an ecient tax system, and where hightaxes fow through to give high value social services anda better standard o living.

It is also important to appreciate how and why economiesmay move up and down in the rankings. The ranking oran economy may all, despite there being no change inits underlying data. This is generally due to the act that

17 www.doingbusiness.orgwww.pwc.com/payingtaxes



20

Feedback o nal results to government representatives.

Figure 2.1Flowchart to summarise the annual Paying Taxes process

I n p u t r o m t h e u s e r s o

t h e p u b l i c a t i o n a n d o t h e r i n t e r e s t e d

p a r t i e s i n c l u d i n g i n t e r n a t i o n a l o r g a n

i s a t i o n s a n d i n s t i t u t i o n s

D i a

l o g u e w i t h g o v e r n m e n t s o n t h e r e s u

l t s o r i n d i v i d u a l e c o n o m i e s a n d r e g

i o n s

April to July

September

November

February

QuestionnaireisreviewedbytheWorldBankGroupandPwCPayingTaxesteams. Improvements to indicator and non‑indicator questions implemented.

Clearance o revised questionnaire by World Bank Group management team.

Distribution o the questionnaire by the World Bank Group team to thecontributors in each economy, including PwC.

Completion o the questionnaire by contributors with a acility to raise querieswith the World Bank Group.

Reviewofthequestionnairessubmitted,bytheWorldBankGroupteam.Identication o issues arising rom the data, and investigation o these with

the contributors. (Typically, there are our rounds o interaction betweencontributors and the World Bank Group team).

Any suggested changes to the indicators are investigated urther with thecontributors and then veried with other third party contributors. The change isonly made i it is substantiated. Finalisation and input o the data into the WorldBank Group model. Calculation and nalisation o the indicators and rankings.

Clearance o these with the World Bank Group management.

Drating o the World Bank Group Paying Taxes chapter or inclusion in theDoing Business report and, clearance with World Bank Group management.

Launch o the Doing Business report and data on the website.

Independent PwC analysis o indicator and non‑indicator data to determine aPwC perspective. Focus on geographical and economic groupings.

Drating o the Paying Taxes report.

RegionallauncheventsforthePayingTaxesreport.

Feedback o the nal results to the contributors.



21Paying Taxes 2010


there have been reorms in other economies. In addition,the distribution o the results is also important. For eacho the sub‑indicators there is a ‘clustering’ o results,with a large number o economies alling within a certainbanding. For economies within this banding, a smallimprovement in their results can result in a signicantmovement up the rankings. For example, this yearMadagascarhasreduceditsTTRby3.6%andimprovedits ranking or this indicator by 13 places. For countriesin the more sparsely populated parts o the distribution,signicant reorm and large improvements may see onlymodestmovements.Thisyear,theCzechRepublichasreduced its hours to comply substantially by 317 hoursrom 930 to 613, but this has only improved the rankingor this sub‑indicator by three places, up rom 174 to 171.

Everyyear,thePayingTaxesresultsarediscussedwithgovernments, business and other stakeholders aroundthe world, stimulating many useul discussions on taxsystems and reorm.



Section 1

The Paying Taxes indicators

Section 1 o this chapter is a commentary on some othe key issues that the Paying Taxes data highlightsthis year. The ndings reinorce the messages that havebeen addressed in previous editions o Paying Taxes,underlining their relevance. A number o new themesare also identied that can be drawn rom comparingthe data with other indices, such as the United NationsHumanDevelopmentIndex.

It is emphasised that economies at the top o the globalrankings are not necessarily the best examples o whatmight be considered to be an ideal tax system. Whiletherearethreeeconomiesinthetopten(HongKong,Singapore and Ireland) which are worth considering ascountries which have ollowed a policy o low corporatetaxes to stimulate business investment, there are alsove oil‑rich states and two small island states whichhave economic environments which are not the norm.However,experienceshowsthatgovernmentsusethePaying Taxes results to benchmark their tax systemsagainst neighbouring countries, or those that theyconsider economic peers. For example, the NetherlandsmightbenchmarkprimarilyacrosstheEUcountries,whileChile might benchmark against its neighbours, including

Argentina, Brazil, Peru and Bolivia. This section thereoreexplores a number o dierent regional and economicgroupings, to show how the data can be presented inways which may be considered most relevant.

Section 2

Further insights on tax administration

The Paying Taxes results do not measure all aspects otax administration. Over the last two years, a list o urtherquestions has been developed to collect additional datato address other relevant issues. Useul input has beenreceived rom business, governments and internationalorganisations on these questions. These additionalquestions have been included in this year’s questionnaire,and some o the results are analysed and discussed inSection 2 o this chapter.

The answers to these questions are not used in thecalculation o the sub‑indicators but, they do providesome useul urther insights on the impact o tax systems.The questions are grouped around:

• clarityandaccessibilityofthetaxrules;

• howcentralised/decentralisedthetaxsystemis,andwhetherthisimpactstaxadministration;

• theapproachofthetaxauthorities;and

• dealingwithtaxaudits.

A list o the additional questions is included in Appendix 3. Several o the additional non‑indicatorquestions invite the contributor to express a view. Itis acknowledged that the results to these questions

represent only opinion, and that opinions on these pointscanvary.However,itisclearfromourdiscussionswithinterested parties that these additional aspects o the taxsystems are important. Input into how this aspect o thestudy can continue to be developed is welcomed.

What this chapter covers

22




What makes a good tax system?Some possible hallmarks

23Paying Taxes 2010

Clear purpose

1 Raisesrevenuetofundpublicexpenditure.

2 Balances the budget (over a period o time).

3 Meets social objectives.

4 Improves human development.

Strategic

5 Stable and consistent, enabling long‑termbusiness investment.

6 A air value or natural resources.

7 Encouragesinternationaltrade.

8 Encourageschangeinbehaviourwhichsocietyis agreed upon.

Coherent and efcient

9 Minimises the administrative burden.

10 Clear and understandable rules.

11 Consistent with wider (non tax) law andinternational principles.

12 Consultation on policy and administration.

Fair and transparent

13 Based on law rather than the practice otax authorities.

14 Consistently enorced.

15 Independent and eective route or resolving disputeswith the tax authority.

16 Mutual trust and respect between taxpayers and thetax authority.

Note: A PricewaterhouseCoopers discussion o the possible hallmarks o a good tax system.



24

The study has again involved gathering data on the taxaairs o a case study company rom contributors ineach o the economies. This year, the study covered183 economies (two more than last year). Contributorsreview the nancial statements and a list o transactionso a standard small to medium sized case studycompany, and generate inormation to calculate resultsor three sub‑indicators related to the ease o payingtaxes. These are:

• thetotaltaxcost;• thetimetakentocomplywiththethreemajor

taxes;and• thenumberoftaxpayments.

These are equally weighted to produce an overallranking or each economy, or the ease o paying taxes.These rankings are included in Appendix 1 o this report.The rankings o each o the individual sub‑indicators arealso disclosed. It is important to look at each o theseseparately, as they measure dierent aspects o thetax system.

The total tax cost indicator calculates a Total TaxRate(TTR)usingtheprinciplesofthePwCTotalTaxContribution methodology. This is a measure o the costo all taxes borne by the company when paid, includinglabour taxes and contributions borne by the employer,property taxes, indirect taxes, and environmental taxes,as well as corporate income tax. Taxes collected onbehal o government, but not borne by the company,donotimpacttheTTR.Thisisthecaseformostconsumption taxes (including sales taxes and value

added tax18

), and taxes and contributions deducted romemployees’ salaries. It is important to note, however, thatthese taxes collected generate administrative obligationsand thereore, the time to comply and paymentsindicators do collect and refect data on these taxes.

The time to comply indicator measures the time neededto prepare, le and pay (or withhold) three major typesoftaxesandcontributions;corporateincometax,value

added (or sales) tax, and labour taxes (including payrolltaxes and social security contributions).

The number o tax payments indicator refects the totalnumber o taxes and contributions paid by the casestudy company during the course o a year, refecting themethod o payment, the requency o payment and thenumber o agencies involved.

The detailed methodology and assumptions used are setout in Appendix 2.

Overall results

Figure 2.2 sets out the global average result or eacho the indicators, analysed by each type o tax. It alsoincludes the range o results. TaxpayerCo has a globalaverageTTRof48.3%,needs286hourstocomplywith its tax aairs, and makes 31 tax payments. Furtheranalysis o regional and individual economy results is setout below.

Section 1 The Paying Taxes indicators

Chapter

2

Figure 2.2The global average or each indicator

TTR % Hours Payments

Prot taxes 18.2 74 3.7

Labour taxes andcontributions

16.1 105 11.9

Other/ Consumption 14.0 107 15.4

Total Tax 48.3 286 31.0

Range 0.2 – 322 0 – 2,600 1 – 147

Note: The table shows the average result or all economies in the study.Source: Doing Business database.

18 In general in this report VAT is used as a shorthand to reer to the similar consumptiontaxes such as value added tax and goods and services tax (GST).



25Paying Taxes 2010

Section 1The Paying Taxes indicators

Corporate income tax is only part o the burdeno taxes

A consistent message o the Paying Taxes study eachyear, is that corporate income tax19 is only part o thetax burden on business. The data rom this year’s studyshows the same position. Figure 2.3 shows that, onaverage, or all 183 economies in the study, corporateincome tax accounts or 12% o the tax payments madeby the case study company (13% in 2009), or 26%o the compliance time (26% in 2009), and or 38% otheTTR(37%in2009).Whenconsideringreform,itisimportant or governments to take into account all o thetaxes that companies pay.

The number o taxes paid by business

The message that corporate income tax is only one omany taxes is illustrated by looking at the number otaxes that the case study company is required to complywith (both those it collects on behal o government andthose which are borne by the company). The global

average number o taxes is 9.5 (see Figure 2.4 ) althoughthis varies signicantly around the world.

Figure 2.5 shows the average total number o taxesor our case study company, or a number o dierentregional groupings. The average varies rom just overnineforeconomiesinCentralAsiaandEasternEurope,to 11.4 or those in the G20. The average number o prottaxes is between one and 1.5 or all o the groupingsshown here. This pattern is consistent with that seen inprevious years.

Prot taxes include corporate income tax and other taxescalculated by reerence to prot, such as the trade tax inGermanyandfederalincometax(IRES)inItaly.Corporateincome tax remains a very common tax. Only eighteconomies out o the 183 in the study do not have acorporate income tax within their tax regime.

The impact o the recession on the tax costor business

The recession has shown corporate income taxto be a volatile tax. As prots have allen, so havecorporate income tax receipts. In the UK, or example,government receipts or corporation tax are estimatedto have allen by 7.5% between 2008 and 2009,and are projected to all by a urther 20% between2009 and 201020. For business, however, the totaltax cost has increased when compared with prots,as the other taxes which are paid but not calculatedby reerence to prots, have not allen to the sameextent. This impact o the recession is not refected inthe results or TaxpayerCo in the Paying Taxes studyastheprotmarginremainsxedat20%.However,this increased cost can be seen in the results o theannual study which PwC carries out in the UK orTheHundredGroupofFinanceDirectors(FTSE100companies), using the PwC Total Tax Contributionramework. In the 2007 study21,theaverageTTRfora company was 36.2% (very close to the UK resultor TaxpayerCo in Paying Taxes). In the 2008 study22,protsfellandtheTTRincreasedto38.2%.The2009study is still under analysis, but the initial indicationsarethatprotshavefallenfurtherandtheTTRhasagain increased.

Figure 2.3Corporate income tax is only part o the burden

Note: The chart shows the average result or all economies in the study.Source: Doing Business database.

Prot taxes

Labour taxes

Other taxes

Payments Time TTR

50% 37% 29%

38%

12%

37%33%

26%

38%

Figure 2.4Global average number o taxes levied on our casestudy company

Note: The chart shows the average result or all economies in the study.


Global average number o taxes = 9.5

Property Prot

Labour

Consumption

Other

1 1.3

2.0

1

4.2

19 The % or Corporate Income Tax (CIT) also includes other taxes calculated by reerence toprot.However,CITisthepredominanttaxonprotandonlyeighteconomiesinthestudydo not have CIT.

20 UKHMTreasuryBudget2009:theeconomyandpublicnances–supplementarymaterial.

21 Total Tax Contribution – PricewaterhouseCoopers LLP (UK) 2007 survey or TheHundredGroup.

22 Total Tax Contribution – PricewaterhouseCoopers LLP (UK) 2008 survey or TheHundredGroup.



26

Labour taxes include a variety o taxes and contributionsthat relate to employment. Payroll taxes in Australiaare an example o labour taxes and contributionson employers. In some economies, a single socialcontribution is levied, partly on the employer andpartly on the employee, such as the National InsuranceContributions paid in the UK. In other economies, suchas France, there are several separate contributionssuch as old age and health insurance, unemploymentinsurance, accident insurance, and others. Taxes andmandatory payments relating to wages and salariesare oten handled by a dierent authority to the maintax authority, and are typically governed by separatelegislation. This contributes to challenges regardingtheir measurement, together with the objection thatsuch levies are refected in the cost o labour. But, aswith other taxes borne by the company, these taxesand mandatory payments are compulsory, paid togovernment (and other legally designated agencies),and impact the company when paid. Labour taxesand contributions, which are the employers’ cost, arethereforeincludedintheTTR,andalsointhecomplianceburden. The time spent administering the employee’sshare is included in the time to comply.

Taxes on property include local taxes on property, suchas business rates in the United Kingdom, and taxes onthe transer o property, such as stamp taxes on realestate ound in many economies.

Consumption taxes include VAT and other sales taxes.VAT is the most dominant orm o consumption taxaround the world – in some orm or other it is usedin 78% o economies. The United States is the onlyOECDandG8membereconomythatdoesnothaveaVAT system.

Other taxes include environmental taxes, such as landlltax, which is levied in the UK, and uel tax which is raisedin many countries, and also various other taxes, such asthose raised on cheque transactions, which are common

in South America.Within regions, there are wide variations in the number otaxes. In the Asia‑Pacic region, two economies providea good example. The Philippines has 16 dierent taxes.In addition to corporate income tax, it has a propertytax, our labour taxes and 10 other taxes includinga community tax, an environmental tax and a tax oncheque transactions, amongst others. In Singapore,TaxpayerCoissubjecttojustvetaxes;ataxon

corporate income tax, GST, a social security contribution,a property tax and a road tax. This is consideredgood practice – i.e. to have one tax per base, in orderto minimise the administrative burden on business.The details are shown in Figure 2.6.

The Total Tax Rate (TTR)

TheTTRmeasuresthetaxcostforTaxpayerCo.The methodology requires that all taxes borne are addedtogether and expressed as a percentage o the protbeore all o those taxes. This prot beore all taxes borneis called the commercial prot in the World Bank Groupmethodology. The World Bank Group methodology alsorequires the inclusion o certain mandatory contributionspaid to government which do not necessarily t within thestrict denition o a tax24.

A measure o the tax cost is included in the Paying Taxesstudy, as this is an important consideration or business.TheWorldBankGroup’sEnterpriseSurveys 25, whichcollect inormation about the business environment– how it is perceived by individual rms, how it changesover time and about the various constraints to rms’perormance – show that or those surveyed, tax ratesand tax administration are among the top ve constraintstodoingbusiness.Everyyear,PwCcarriesoutaglobal

Figure 2.5 Average number o taxes to comply with – by region23

Note: The chart shows the average result or the economies in each region.


Prot taxes

Labour taxes

Other taxes

14

12

10

6

2

8

4

0

C e n t r a l A s i a a n d


A r i c a n U n i o n

W o r l d A v e r a g e

A s i a P a c i f c

L a t i n A m e r i c a &

C a r i b b e a n

E u r o p e a n U n i o n

O E C D

G 2 0

23 Asia Pacifc includes :HongKong,Singapore,KoreanRepublic,NewZealand,Malaysia,Thailand, Indonesia, Vietnam, Australia, Philippines, Japan, China.Latin America and the Caribbean includes: The Bahamas, St. Lucia, Trinidad andTobago, St. Vincent and the Grenadines, Dominica, Grenada, Belize, St. Kitts andNevis,Haiti,Suriname,AntiguaandBarbuda,Colombia,PuertoRico,Honduras,

Nicaragua,CostaRica,Guyana,Chile,ElSalvador,DominicanRepublic,Paraguay,Uruguay,Guatemala,Peru,Jamaica,Argentina,Panama,Mexico,Ecuador,Venezuela,Bolivia, Brazil.

Central Asia and Eastern Europe includes:Montenegro,Kosovo,KyrgyzRep,Turkey,Tajikistan,Moldova,Albania,Kazakhstan,Serbia,Russia,Uzbekistan,Macedonia,

Azerbaijan, Georgia, Ukraine, Belarus, Armenia, Croatia.24 Please see Appendix 2 or a more detailed description o the methodology including the

denition o a tax.

25 WorldBankEnterpriseSurveys(http://www.enterprisesurveys.org).



27Paying Taxes 2010


Sales taxes

Sales taxes are a good example o the issues that haveto be considered in making the distinction betweentaxes which are borne by TaxpayerCo, and thereoreincludedintheTTR,andtaxeswhicharecollectedbyTaxpayerCo, and included only in the two complianceindicators.

Below are our types o ‘sales’ taxes that have dierenttreatments or the data, and thereore impact theresults in dierent ways:

1 Sales taxes that are charged only at the nal pointo sale to the consumer, are not normally taxesborne by a company, as they are suered only bythe nal consumer. This type o sales tax is treatedas a ‘tax collected’.

2 Value added tax is also normally a tax collected.It is a tax which is separately identied in the pricechargedtothepurchaser;theinputtaxpaidbytheseller can be set o by the business against theoutputtaxchargedonthesale;itisthenetamountthatisaccountedfortothetaxauthorities.Eachofthese attributes point to VAT being a tax collected.

The exception to this is where VAT incurred isirrecoverable, in which case that component willconstitute a ‘tax borne’. The case study companydoes not generally have irrecoverable VAT, althoughthere are some exceptions.

3 Cascade style sales taxes, seen or example insome Arican economies, add additional costs toeach consumer, so that an element o them is borneby each company in a chain o supply. These taxesare a charge to the prot and loss statement, andthereore aect the protability o a company, while VAT and sales tax on nal products generally do not.For the purposes o the data, these taxes are ‘taxesborne’ to the extent that they are taxes incurred onpurchases made by the company.

4 Turnover taxes are a ‘tax borne’, as they aregenerally calculated as a percentage o acompany’s turnover, and paid to the tax authorities.They become part o a company’s costs and aecta company’s protability.

Figure 2.6The number o taxes compared in the Philippinesand Singapore

Taxe base Philippines Singapore

ProtCorporate incometax

Corporate incometax

LabourEmployerscompensation

Social Securitycontribution

Healthinsurance

Housingdevelopment und

Social security

Property Realpropertytax Property taxStamp duty

Consumption VAT GST

Other Cheque transactions

BIRcerticate

Community tax

Environmentaltax

Local business tax

Insurance tax

Vehicle tax Roadtax

Tax on interest

surveyofCEOsseekingtheirviewsonbusinessissues.In the 2008 survey, 1,124 business leaders around theworld were interviewed. One o the questions asked waswhich aspects o a country’s tax regime were importantin infuencing their investment decisions. Over 70%said that the total amount o taxes they pay was criticalor important26.

AsanexampleoftheTTRcalculationFigure 2.7 showsthe calculation or Chile.

As shown previously (in Figures 2.2 and 2.3 ), the averageTTRforalleconomiesinthestudyis48.3%,ofwhich

corporate income tax makes up 38% o the total, labourtaxes account or 33%, and other taxes 29%.

Figure 2.8comparesthemake‑upoftheaverageTTRfora number o geographical and economic groupings. Forall groupings, corporate income tax counts or less thanhalfoftheTTR.Thepercentagemadeupbylabourtaxesvaries between regions, with the highest percentageintheEU(64.4%),andthelowestintheAfricanUnion(21.1%). Conversely, the average percentage accounted

26 12thAnnualGlobalCEOsurvey–RedeningSuccess–publishedbyPwCin2009.



28

forbyothertaxesislowintheEU(7.7%),andisthehighest in the Arican Union (44.3%).

Figure 2.9showstheaverageTTRbyregionalgrouping.

TheAsiaPacicregionhasthelowestTTRofthegroupingsshown,whiletheEUhasanaverageTTRwhich is below the world average. The highest averageTTRisfoundintheAfricanUnion.

PwC Global Total Tax Contribution study or themining sector

In 2008, PwC carried out the rst global TTC studyor large mining companies27. The results show thatwhen considering what mining companies contributein the countries where they extract natural resources,it is important to look at all the dierent taxesincluding mining taxes and royalties and licence eesin addition to corporate income tax. On average inany country, corporate income tax was less than hal(48%) o the taxes and contributions borne by miningcompanies. On average the companies in the studypaid an amount equal to 12.5% o their turnover togovernment in taxes and other contributions borne.

Note: The chart shows the average global result or companies thatparticipated in the study.

Source: PricewaterhouseCoopers Global study or the mining sector.

People taxesProduction taxes

Property taxes

Mining taxes

Royalties,licenceees and resource

rents

Other contributionsCorporate income

tax

Other prot taxes11%

10%

4%5%

3%

13%

6%48%

Taxes and contributions borne by the global miningindustry by percentage

Figure2.7–TheTTRcalculationforChile‘000 peso ‘000 peso

Prot beore total tax borne(Commercial prot)

213,752

Municipal tax 1,799

Unemployment insurance contribution 5,845

Accident insurance contribution 2,313

Property tax 4,513

Vehicle license 96

Fuel duty 1,151

Tax on cheque transactions 29

Total (15,746)

Prot beore tax 198,006

Corporate income tax on PBT aternecessary adjustments

(38,259)

Prot ater tax 159,747

Total Tax (15,746 + 38,259) 54,005

TTR = Total Tax/ Commercial proft 25.3%

27 Total Tax Contribution – PricewaterhouseCoopers Global study or the mining sector.




29Paying Taxes 2010

Chile – A leader in South America

Sandra Benedetto, PricewaterhouseCoopers (Chile)

In December 2008, the Latin American launch o ‘PayingTaxes 2009 – The global picture’ was held in Chile.There was signicant media coverage, interest romthe business community, and also rom the Chileantax authorities. The report was presented by FranciscoSelame, lead partner o Tax and Legal Services atPricewaterhouseCoopersChile,andRicardoEscobar,DirectoroftheChileanInternalRevenueService.The event included commentaries and analysis ocusingon Chile’s leading position in the region as well as a widerbenchmarking with other economies around the world.

The Paying Taxes study has become an objectiveparameter to demonstrate the leading position o thecountry in the region, with regards to the ease o payingtaxes. Taking into consideration previous reports, theresults show that Chile has a stable tax system which hasnot been subject to major changes.

The indicator or Chile which requires some attentionis the time to comply with taxes, which stands at 316hours per year. This is strongly aected by the structureo the social security system, which it seems demandsmore administrative work than in many other economies,especially because the Chilean system is privatised.In this system, the social security contributions are

administeredmainlybytwotypesofprivateentity;thePensionsFundsAdministrators(‘AFP’)”;andtheHealthInstitutions(‘ISAPRE’).Therearenumerousentitiesinthesystem and every employee is aliated to one “AFP” andone“ISAPRE”.Theemployersareobligedtopaysocialsecurity contributions to the entity that is chosen byeach employee.

Paying Taxes has proved to be an objective tool thatallows us to assess the Chilean perormance in taxadministration matters in comparison to the rest o theworld, and in particular, with other countries o the region.

In addition to the results rom the Paying Taxes study,there has been signicant interest in Chile in a separatepiece o work conducted by PricewaterhouseCooperswith the mining industry (also reerred to on page28 o this report). This looked at taxes and othercontributions paid to government by mining companiesaround the world to provide greater transparency overthe contribution made to the public nances in thecountries where the mining companies operate. This isan important sector o the Chilean economy and thestudy has made it possible, or the rst time, to havereal data around the composition o all o the taxes andcontributions paid.

TotalTaxRate: 25.3%

Number o hours: 316

Number o payments: 10



30

Figure 2.10focusesonthepositionfortheEU,andthere are several points to note. Compared with previousstudies,theaverageTTRfortheEUhasfallenslightlyoverall rom 46% to 44.5%. Two countries in particular –Germany and Italy – have cut their corporate incometax rates.

WhiletheaverageprottaxpercentagefortheEUis12.4%, it varies signicantly across the region, rom2.2% in Latvia and 4.1% in Luxembourg, to 21.9% inthe United Kingdom and 22.9% in Italy. In this regard, it

is important to recognise that these variances refect notonly dierences in the statutory rate, but also the variousdetailed rules and allowances that apply in each systemor calculating the tax base. Luxembourg has a statutoryrate or TaxpayerCo o 22.9%, but the availability oinvestment tax credits oset the corporate income taxliability. The UK has a main statutory rate o corporationtax o 28%, which has been reduced rom 30% (eectiverom 1 April 2008). The corporate income tax rate or theUKintheTTRisnot,however,thisstatutoryrate,inview

Figure 2.8ComparisonofTotalTaxRatesbyregion–percentage make‑up

Note: The chart shows the average result or the economies in each region and orthe world average or all economies in the study.


Prot taxes

Labour tax

Other taxes

100%

80%

60%

20%

40%

0%

A r i c

a n U n i o n

E u r o p e

a n U n i o n

A s

i a P a c i f c

G 2 0

C e n t r a l . A s i a &

E a s t e r

n E u r o p e

L a t i n A

m e r i c a &

C

a r i b b e a n

O E C D

W o r l d

A v e r a g e

Figure 2.9ComparisonoftheTotalTaxRatesbyregion



Prot taxes

Labour taxes

Other taxes

70%

60%

50%

30%

40%

20%

10%

0%

A s i a P a c i f c

E u r o p e a n

U n i o n

O E C D



L a t i n A m e r i c a

& C a r i b b e a n


G 2 0


PwC Total Tax Contribution (TTC) studies

In addition to the Paying Taxes study with theWorld Bank Group, PricewaterhouseCoopers alsoundertakes empirical studies, collecting tax‑relateddata rom large corporations around the world.

It is interesting to look at some o the comparisons.PwC’sworkintheUKwithTheHundredGroupofFinance Directors (an organisation whose membersarebroadlyintheFTSE100,i.e.thelargestlistedcompanies in the UK), shows that, on average, largecompanies bear nine UK taxes and collect our more.For the Paying Taxes case study company, the gureis seven UK taxes borne and two taxes collected. IntheUS,PwC’sworkwiththeBusinessRoundTable 28 (aCEOleadershipgroup,whosemembersarethelargest Fortune companies), shows an average o16 taxes borne and 10 collected. The case studycompany bears 11 and collects two. The dierentialsseen may arise rom a business landscape, which orlarger companies, is more complex. The case studycompany operates in a sole location, whilst largercompanies will oten operate in more than one place.Their results refect the many dierent taxes that theywill be subject to at the state and municipal levels.

28 TotalTaxContribution–HowmuchdolargeUScompaniespayintaxes?(February2009).



31Paying Taxes 2010


o various additions and allowances which are applied tothe prot beore tax – and also because TaxpayerCo isa small company in the context o the UK, and marginalsmall companies relie applies to reduce the rate applied(27.5%) in the specic circumstances o TaxpayerCo.

The average rate o labour taxes or the employer in theEUis28.6%andisthehighestoftheregionsshown.This contributes to the level o social payment and socialsupport services which generally exists in the region.The question being asked in some economies (see thediscussion in Paying Taxes 2009 regarding Belgium), iswhether the high cost represents value or money.

Italy provides a good example (Figure 2.11 ) o how labourtaxesandcontributionscanbethemajorpartoftheTTRor our case study company. They account or 63% otheTTR.Thisproportionhasincreasedfromlastyear,inview o the reduced gures or local corporate income tax(IRAP)andthefederalcorporateincometax(IRES),anda

consequentialfallintheproportionoftheTTRrelatedtothese taxes.

DenmarkisaEuropeaneconomywhichshowsan apparent low percentage or labour taxes andcontributionsatjust7.5%oftheTTR( Figure 2.10 ).However,theTTRonlyreectsthosepaymentsborneby the employer. In Denmark, the employees o our casestudy company bear taxes on their wages and salarieswhich are almost 18 times those levied on the employer.

This is evidenced in Figure 2.12.

This chart also shows that the level o taxes andcontributions on employment in Italy and Denmark isbroadly similar, but the split between employer andemployee is quite dierent. This illustrates the potentialimpact o government policy choices on the results,and also the limitation o the methodology in thiscircumstance. It would not be desirable or an economyto seek to improve their results simply by shiting theburden rom the employer to the employee. Figure 2.12 also shows the total employment taxes and contributions(whether paid by the employer or the employee), asa percentage o wages and salaries (the employment‘tax wedge’).

IntheEU,theTTRrangesfrom20.9%inLuxembourgto 68.4% in Italy, and there is some conormity in theelements o its make‑up between corporate income tax,labour taxes and contributions, and other taxes.

In the Arican Union, the range is even wider and theelements are more diverse (see Figure 2.13 ). The averageTTRat67%isthehighestforanygrouping,andranges rom 9.6% in Namibia to 322% in the CongoDemocraticRepublic.

TheaveragerateofprottaxishigherthaninEuropeat 23% (compared to 12.4%), while labour taxes andcontributions are much lower, at 14% (compared to

Figure 2.10TheTotalTaxRatesfortheEU29

Note:ThechartshowstheTTRfortheeconomiestheEUsplitbyeachtypeoftax.


Prot taxes

Labour taxes

Other taxes

70%

60%

50%

30%

40%

20%

10%

0%

B u l g a r i a

L u x e

m b o u r g

D

e n m a r k

I r e l a n d

C y p r u s

N e t h e r l a n d s

F i n l a n d

P o r t u g a l

S w e d e n

P o l a n d

S l o v a k R e p u b l i c

R

o m a n i a

A u s t r i a

L

i t h u a n i a

E s t o n i a

L a t v i a

G

e r m a n y

S p a i n

U n i t e d K

i n g d o m

C z e c h R e p u b l i c

B e l g i u m

F r a n c e

S l o v e n i a

G r e e c e

H u n g a r y

I t a l y

Figure 2.11TheTotalTaxRateforItalybypercentage

Note:ThechartshowsthecomponentsoftheTTRforItalysplitbypercentage.


Social securitycontributions

Other

Tax on chequetransactions0.01%

Tax on real estate(ICI)1.25%

Chamber ocommerce duties0.2%

Fixed tax on legaland scal registries0.01%

Fuel tax1.5%

Stamp duty onproperty transer0.03%

Corporate incometax(IRES) Regional

tax onproductiveactivities

(IRAP)

Mandatorycontribution

or worktermination

(TFR)

51%

3%

24%

10%12%

29 Malta is not covered in the Paying Taxes study and is thereore not included in theEUgrouping



Italy – Government’s goal is to simpliy the tax system

Fabrizio Acerbis, TLS – Associazione Proessionale di Avvocati eCommercialisti (member frm o PricewaterhouseCoopers Tax & Legal Services Network)

The individual rankings show that the Italian system issomewhat complex, rom the business point o view, incomparison to other economies, particularly in terms o

labour tax and social security obligations. This can beattributed to the number o compliance requirements,the dierent levels o government, and the breadth oinormation required by competent Authorities.

The characteristics o the Italian system are refected,in particular, in the obligations o withholding agents.The system is based on the employer acting as awithholding agent or tax and social security contributionpurposes. This mechanism makes it easy or theauthorities to collect the taxes due, and rees employeesfromindividualobligation.However,itfocusesalmostallo the onerous obligations relating to employment incomeon the employer.

The study shows the signicant Italian tax wedge onlabour (this is also illustrated in Figure 2.12 o this report),creating a notable gap between the cost or the employerand the net income received by employees. The dierentitems related to the employees o the company, includeindividual taxes, (central tax and local taxes) as wellas social security contribution charges (retirement,unemployment, redundancies, amily charges, etc.). As aconsequence, it is clear that dealing with taxes, or ourcase study company, involves many complexities.

These characteristics o the Italian system areappropriately represented by the impact o employmenttaxesandcontributionsontheTTR,andthenumberofhourstocomplyforItaly.However,withregardstotheTTR,itisofnotethattheindemnityforworktermination(‘TFR’at8.5%intheTTR),isincludedinthestudy and its classication as a tax or contribution, isnot straightorward.

With regards to the impact o corporate income tax(‘IRES’)ontheTTR,ItalyisalignedwithmostotherEuropeancountries.Forthisyear,itshouldbenotedthattheimpactofIRESontheTTRwasreduced.Thisismostly due to the reduction o the statutory tax rate, rom33% to 27.5%.

WithreferencetoRegionalTaxonProductiveActivities(‘IRAP’),thisisalocaltaxwhichisapeculiarityoftheItaliantaxsystem.TheimpactofthistaxontheTTRis

higherthanits3.9%statutoryrate(6.7%intheTTR),because labour expenses are only partly deductible.The impact o this tax has decreased, however, since lastyear, as the statutory tax rate has reduced (rom 4.25% to3.9%), and because the deductibility or labour expenseswas increased.

As indicated, the number o authorities imposing taxes onbusiness is another important actor o complexity in theItalian system. There is uncertainty around measures thatmay be introduced at the local level ollowing changes indomestic legislation.

Effortshavebeenmade,asinothercountries,tosimplify

the tax system by simpliying payments and lings. A unique, standardised model or the payments exists,making it possible or taxpayers to oset almost alltaxes and contributions. Deadlines or ling returns arealigned, and online ling o payments and tax returnsis mandatory or business taxpayers, which assists thecontrol procedures o the authorities.

It is to be noted that the present Italian Government,since its appointment in May 2008, has identiedsimplication o the tax system as one o its main tasks,and eorts have already been made to acilitate andaccelerate the relationship between the taxpayer andthe tax administration. As part o this eort, certainmeasures, (e.g. the introduction o a book solely to giveguidance on labour and social security contributions,and the reduction in the number o existing laws), havebeen implemented and should secure benets rom2009, whilst other measures have been announced whichmay improve the position urther over the next two tothree years.

TotalTaxRate: 68.4%

Number o hours: 334


32



33Paying Taxes 2010


Figure 2.12EmploymenttaxesborneandcollectedinItalyand Denmark

Labour taxesborne

Labour taxescollected

Note: These charts show the employment taxes or Italy and Denmark split between taxes borne and collected, and also the ‘tax wedge’which is the employment taxes as a percentage o wages and salaries or each economy.


¤

1,000,000

500,000

0

Italy Denmark

Tax Wedge60%

40%

20%

0%

Italy Denmark

Figure 2.13TheTTRintheAfricanUnion

Note:ThechartshowstheTTRfortheeconomiesintheAfricanUnionsplitbyeachtypeoftax.


Prot taxes

Labour taxes

Other taxes

100%

90%

80%

60%

70%

50%

40%

30%

20%

10%

0%

2 0 3 . 8 %

2 3 5 . 6 %

2 7 8 . 6 %

2 9 2 . 4 %

3 2 2 %

N a m i b i a

Z a m b i a

M a d a g a s c a r

Z i m b a b w e

C a m e r o o n

M a l i

S o u t h A r i c a

E t h i o p i a

C ô t e d ’ I v o i r e

B u r k i n a F a s o

T u n i s i a

B o t s w a n a

L e s o t h o

C o m o r o s

E g y p t , A r a b R e p u b l i c

T o g o

A n g o l a

R w a n d a

N i g e r i a

T a n z a n i a

G u i n e a ‑ B i s s a u

C o n g o

, R e p u b l i c

L i b e r i a

M a u r i t i u s

M a l a w i

S e y c h e l l e s

G a b o n

E q u a t o r i a l G u i n e a

C h a d

G h a n a

M o z a m b i q u e

S e n e g a l

N i g e r

A l g e r i a

B e n i n

U g a n d a

S u d a n

S ã o T o m é a n d P r i n c i p e

C a p e V e r d e

E r i t r e a

M a u r i t a n i a

B u r u n d i

G a m b i a

S w a z i l a n d

D j i b o u t i

K e n y a

G u i n e a

C e n t r a l A f r i c a n R e p u b l i c

S i e r r a L e o n e

C o n g o

, D e m

. R e p .



34

Figure 2.14ImpactofthesalestaxsystemontheTTRinAfrica

Cascading

sales taxTTR %

Sales tax TTR

(%)

Proportion o

TTR (%)

Burundi 278.6 250.4 90

CongoDemocraticRepublic

322.0 249.7 78

Gambia 292.4 221.0 76

Sierra Leone 235.6 221.0 94

Note:ThetableshowstheTTRforfoureconomiesinAfricawhichhaveacascadingsalestax,andtheproportionoftheTTRattributabletothesalestax.


28.6%). Several economies have very low levels o labourtaxesandcontributions.EconomiessuchasLesothoandEthiopiahavenosuchpaymentsleviedontheemployer, while others such as South Arica have a lowlevel (2.4%). This, perhaps, leads to the question o howa higher level o social support can be unded in some

Arican economies.

A eature o some Arican tax systems is the high levelof‘othertaxes’.InthecountrieswiththelargestTTRs,the cascading sales taxes are a eature. Burundi, CongoDemocraticRepublic,GambiaandSierraLeoneallhavethese taxes (see Figure 2.14 ).

Figure 2.15showsthedistributionofresultsfortheTTRindicator. It is apparent rom this chart that there is astrong concentration o economies in the range 31% to55%(108economies),withonly37withTTRsbelow31%and38withTTRsinexcessof55%.

Countries at the low end o the distribution includeisland‑states such as the Maldives, and oil‑rich statessuchasSaudiArabiaandQatar.Smallereconomiesalso appear in this group, such as Luxembourg andHongKong,wheretaxpolicyhasbeenusedtoattractbusiness investment.

InthehighTTRbracket,thereisagainasignicantvariation in the types o economy. They include Franceand Belgium, where the labour taxes and contributionslevied on the employer are the major component (aimedat providing high levels o social services), and alsothe economies in Arica, which have high levels oconsumption taxes borne by TaxpayerCo, in the orm ocascading sales taxes.

Tax and Development30

The Paying Taxes methodology gives a higher rankingin the tax cost sub‑indicator, to economies with a lowerTotalTaxRate.However,asmentionedintheintroduction

to this chapter, it does not ollow that economies withlowTTRsarenecessarilyamodelforothereconomies.What is important is how the tax system helps to ulleconomic and social objectives and whether higher taxesfow through to a better quality o lie or citizens.

Toexaminethispointfurther,theresultsontheTTRindicator were compared with the results or the sameeconomiesontheUnitedNationsHumanDevelopmentIndex(HDI)31.TheHDIisasummarymeasureofhumandevelopment based on lie expectancy, literacy rateandstandardofliving(GDPpercapita).HDIresultsarebanded into three groupings – economies with highhuman development, medium human development and

low human development.17ofour183economieshavelowTTRs(below30%),butalsohavehighdevelopmentontheHDIindex.ThisincludessixMiddleEastoil‑richeconomies,wheregovernment is less dependent on taxes. It also includesve economies where government policy has beento keep corporate income tax low, to attract businessinvestment (see Figure 2.16 ).

Figure 2.15DistributionoftheTotalTaxRate

Note:ThechartshowsthedistributionofresultsfortheTTR.


35

30

25

15

20

10

5

0

0

‑ 5

4 1 ‑ 4 5

2 1 ‑ 2 5

6 1 ‑ 6 5

9 1 ‑ 9 5

1 6 ‑ 2 0

5 6 ‑ 6 0

8 6 ‑ 9 0

3 6 ‑ 4 0

7 6 ‑ 8 0

6 ‑ 1 0

4 6 ‑ 5 0

2 6 ‑ 3 0

6 6 ‑ 7 0

9 6 ‑ 1 0 0

1 1 ‑ 1 5

5 1 ‑ 5 5

8 1 ‑ 8 5

3 1 ‑ 3 5

7 1 ‑ 7 5

> 1 0 0

N u m b e r . o e c o n o m i e s

TTR%

30 PwC discussion paper on tax and development (orthcoming). 31 UNDPHumanDevelopmentreportfor2007/2008.



36

Where TTRs exceed 100%

The assumptions which are built into the Paying Taxescase study are such that the company, wherever it islocated, has a xed rate o gross prot margin (20%).WhereaneconomyhasaTTRinexcessof100%,itmeans that TaxpayerCo would need a prot marginabove that level in order to pay all o its taxes.

Where the company bears cascading sales taxes on

its transactions (which are not calculated by reerencetoprot),TTRsexceed100%.Examplesofthiscanbe seen in Figure 2.14. The company would need toamend its pricing, to earn a gross prot margin, wellin excess o 20%, to enable it to pay these taxes. Forexample, in Burundi the gross prot would need to be32.1%. The case study does not allow or this.

These economies are in the top quartile or both theTTRrankingandforthetimetocomply(seeFigure2.17 ). Although other actors are clearly involved, it willbe interesting to consider whether the tax system mayhave contributed to the high human development results.Figure 2.16showsthatapartfrominHongKong(China),corporate income tax (and other prot taxes) is less thanhalftheTTR,andTaxpayerCoalsopaysemployersocialcontributions and other taxes.

In contrast, there are 22 economies, all in Arica, whichhavealowHDIresult.ForsomeoftheseeconomiestheTTRislowandinothershigh.Therangeisfrom16.1%inZambiato322%inCongoDemocraticRepublic(see Figure 2.18 ).SixoftheseeconomieshaveaTTRbelow 35%.

What is interesting is that although the average rate orcorporate income tax or these six economies, at 20.6%,is close to the world average o 18.2%, employer taxesand social contributions are ar less, at 5.3%, comparedto the world average o 16.1%. Four economies haveTTRsinexcessof100%,mainlyduetocascadingsalestaxes.ForeconomieswithlowHDI,aquestiontobeasked is whether the tax system can be used to stimulatebusiness investment and acilitate entry to the ormaleconomy to lead to increased tax revenues. Another iswhether there are other systems which can be looked toas a model.

PwC Total Tax Contribution (TTC) studies and TTR

In addition to our contribution to the Paying TaxesStudy, PwC also carries out Total Tax Contributionstudies with large companies in a number o countriesaroundtheworld.ThechartshowstheaverageTTRor companies included in each country in thesestudies. It is interesting to note the similarities andthe dierences between these results and those oPaying Taxes.

InBelgium,asinthePayingTaxesstudy,thehighTTRis heavily infuenced by labour taxes. In Australia, thelabour tax percentage is less than in Paying Taxessince the superannuation guarantee is not included(see page 97 in Appendix 2). It is important to notethat these TTC results will be heavily infuenced by themix o industry sectors or companies in each study.Inourexperience,theTTRisinuencedmorebyindustry sector than by size, as there are oten taxeswhich impact only certain sectors.

Note:ThechartshowstheaverageTTRforeachcountrysplitbyeachtype

o tax.Source: PwC Total Tax Contribution studies32.

PwCTotalTaxContribution(TTC)studiesandTTR

Corporate income tax

Labour taxes

Other taxes borne

60%

2 5 . 3 % 3

0 . 2 %

3 1 . 0 %

3 1 . 8 %

3 5 . 1 %

3 5 . 4 % *

3 8 . 2

%

4

2 . 8 %

5 2 . 1 %

50%

30%

40%

20%

10%

0%

C a n a d a

S w i t z e r l a n d

I n d i a


A u s t r a l i a

S o u t h A r i c a

U K

U S

B e l g i u m

32 TotalTaxContribution:PricewaterhouseCoopersandtheFederationofEnterprisesinBelgium2007 Survey. / Total Tax Contribution: Canada’s Tax regime: complexity and competitivenessindifculttimes.PricewaterhouseCooperssurveyforCanadianCouncilofCEO’s.PublishedMay 2009 / Total Tax Contribution: PricewaterhouseCoopers survey or the Federationo Indian Chambers o Commerce and Industry. Published March 2009 / What is your

company’s Total Tax Contribution? 2008 survey results PricewaterhouseCoopers survey in Australia. Published February 2009. / Total Tax Contribution: PricewaterhouseCoopers LLP

(UK)2008SurveyforTheHundredGroup.PublishedFebruary2009./TotalTaxContribution:HowmuchdolargeU.S.companiespayintaxes?PricewaterhouseCooperssurveyintheU.S.PublishedFebruary2009./TotalTaxContribution:Howmuchtaxdomajorcompaniesin Switzerland pay? PricewaterhouseCoopers survey in Switzerland. Published October 2009.

/Total Tax Contribution: What is the actual contribution o large companies to the scus.

PricewaterhouseCoopers survey in South Arica. Published May 2009.



37Paying Taxes 2010


The time to comply

The time to comply measures the tax compliance burdenor TaxpayerCo. It covers three major types o taxes– corporate income taxes, labour taxes and contributions,

and consumption taxes. The World Bank Doing Business team asks contributors to estimate the hours neededto comply and also to analyse these between threeactivities;‘preparation’,‘ling’and‘payment’.Inevitably,there is a degree o judgement involved in the compilationo the data, as measurement relates to a case studycompany, not a real situation. Considerable eort goesinto checking and conrming that the methods used areconsistent, including verication by several contributors,especially where amendments are proposed in light o

changes to the tax system. It is also worth noting that,during the ve years o the Paying Taxes study, the timeto comply has naturally been a ocus o governmentattention and the results have been discussed in detail inmany countries. Brazil and Mexico are two examples.

As an example o the calculation o the time to complyFigure 2.19 shows the calculation or Latvia. It alsoshows the detail which is available. Contributors areasked to identiy the key steps in the process or eacho the areas o activity – prepare, le and pay. In Latvia,labour taxes and contributions take up the largest amounto time. Out o a total o 165 hours, 48 are spent on thepreparation and maintenance o mandatory records,which are only required or tax purposes, including payrollpaper les. The experience around the world is that therequirement to keep extra books can add signicantly to

the time to comply. VAT is the next most time consumingat 83 hours, which includes 24 hours spent analysingaccounting inormation to identiy tax sensitive items,including the validation o suppliers’ VAT numbers.

As shown previously in Figure 2.2, the average time tocomply or all economies in the study is 286 hours owhich 26% is spent on corporate income tax, 37% onlabour taxes and contributions, and 37% on consumptiontaxes. Figure 2.20 compares the average time to

Figure 2.17EconomieswithlowTTRandhighHDI

TTR TTR rankTime to

comply

Time to

comply rank

HongKong,China

24.2% 22 80 14

Ireland 26.5% 26 76 11

Luxembourg 20.9% 17 59 6

Singapore 27.8% 29 84 17Switzerland 29.7% 37 63 8

Note:ThetableshowstheTTRandTTRrankingforveeconomieswithalowTTRandhighHDIandalsothetimetocomplyandrelatedranking.


Figure 2.16TTRcomparison–countrieswithlowTTRandhighHDI

Note:ThechartshowstheTTRforvecountrieswithlowTTRsandhighHDIssplit by each type o tax.


Prot taxes

Labour taxes

Other taxes

0%

10%

20%

30%

L u x e m b o u r g

S i n g a p o r e

H o n g K o n g

,

C h i n a

S w i t z e r l a n d

I r e l a n d

R w a n d a

M a l a w i

Figure 2.18TTRcomparison–countrieswithlowHDI

Note:ThechartshowstheTTRfor22economieswithlowHDIsplitbytypeoftax.


200%

2 0 3 %

2 3 5 %

2 7 8 %

3 2 2 %

150%

50%

100%

0%

Z a m b i a

T a n z a n i a

B

e n i n

N i g e r i a

N i g e r


E t h

i o p i a


E r i t r e a

G u i n e a

B u r u n d i

S e n

e g a l

C e n t r a l A f r i c a n R e p

u b l i c

M o z a m b

i q u e

M a l i

C o n g o

, D e m .

R e p

.


A n

g o l a


C h a d


Labour taxes

Other taxes borne



Czech Republic – Paying Taxes and the economic downturn: two drivers ortax reorm

Lenka Mrázová, PricewaterhouseCoopers (Czech Republic)

Everyyear,theresultsofthePayingTaxesreportfortheCzechRepublicattracttheattentionoftheCzechmedia, as well as the ocial authorities, particularlythe Ministry o Finance and the Ministry o Industryand Trade. In response to the results o the study, theMinistry o Finance initiated a process to undertake aregulatory impact analysis, to assess the eectivenessand administrative burden o the Czech tax system, andto identiy potential or reorm.

The report led to intense discussions between PwC andrepresentatives rom the Ministry o Finance. At the timeo publishing the 2009 results, Peter Chrenko, DeputyMinisterofFinanceintheCzechRepublic,stressedthat:“The Ministry takes the challenge to create a moderntax system with simplied administration very seriously.We are working on three key projects to reduce the taxcompliance burden: a new tax administration code, asingle revenue agency to administer all taxes, customsand social and health insurance, and a new Income TaxCode. These reorms, i approved, would certainly reducethe time required to comply with the tax legislation,allowing companies to ocus more time and energy ontheircoreactivities.However,asthesereformswillnotbelaunched beore 2010, we are very keen to understandthe Doing Business methodology and use it as abenchmark to identiy and introduce some quick winsimmediately and reduce the time needed by at least 30%or the next year.”

It is pleasing to see that the initial goal or reducing thetime to comply has been achieved. The 2010 resultsshow that the time needed to comply with the Czech taxsystem has decreased considerably. This is largely due tothe introduction o electronic ling or VAT as o January2008, and the introduction o a fat personal tax ratewhich, to some degree, has also helped to simpliy theprocess o employee tax calculation or the company.

As has been seen across the world, tax policy has beenused as an important instrument to aid recovery rom theeconomicdownturn.IntheCzechRepublic,importantchanges have been made to corporate income tax, VAT,and social security insurance to assist businesses insurviving the downturn. For example, the acceleration odepreciation o tangible xed assets and leasing costs,the creation o tax‑deductible provisions or receivablesrom debtors in bankruptcy, and or input VAT to beclaimed on the purchase o passenger cars used orbusiness activities.

While it might be dicult or governments to decreasetax rates, reducing the administrative burden is alwaysconsidered to be a win‑win measure, delivering benetsto both government and business. This year, electronicdata boxes are being introduced or all legal entities toprovide a key interace with state authorities. The aimo these boxes is to reduce the administrative burdenor businesses and to encourage taxpayers to do mosto their lings and communication with authoritieselectronically, as well as to encourage state authorities touse modern means o communication. Another importantchange is the new Tax Code, which was passed in thesummer and will become eective as o 2011.

Mr. Chrenko has indicated that the comprehensive taxreorm currently being prepared will achieve the ullbenets in the long term. Challenges still lie in improvingthe mechanisms or the calculation and collection o

labour taxes, especially social security, as these comprisethe largest part o both the total tax rate and the timeneeded to comply with the tax system.

TotalTaxRate: 47.2%

Number o hours: 613


38



39Paying Taxes 2010


Figure 2.19 Analysis o hours to comply in Latvia

Preparation

Corporate

income

taxes

Labour

taxes

Consumption

taxes

Data gathering rom internalsources (or exampleaccounting records).

8 48 18

Additional analysis oaccounting inormation tohighlight tax sensitive items.

8 12 24

Actual calculation o taxliability including data

inputting into sotware/ spreadsheets or hardcopy records.

2 24 12

Preparation and maintenanceo mandatory tax recordsi required.

6 48 12

Total 24 132 66

Filing

Completion o taxreturn orms.

2 12 6

Time spent submitting ormsto tax authority, which mayinclude time or electronicling, waiting time at tax

authority oce etc.

1 3 3

Total 3 15 9

Paying taxes

Calculations o tax paymentsrequired including, inecessary, extraction o datarom accounting records, andtime spent maintaining andupdating accounting systemsor changes in tax ratesand rules.

1 12 6

Analysis o orecast dataand associated calculationsi advance paymentsare required.

2

Time to make the necessarytax payments, either onlineor at the tax authority oce(include time or waiting inline and travel i necessary).

1 6 2

Total 4 18 8

Grand Total 31 165 83

Note: This table shows the calculation o the hours to comply split between thetypes o tax and between the processes or prepare, le and pay.


R w

a n d a

M a l a w i

Figure 2.18TTRcomparison–countrieswithlowHDI

Note:ThechartshowstheTTRfor22economieswithlowHDIsplitbytypeoftax.


200%

2 0 3 %

2 3 5 %

2 7 8 %

3 2 2 %

150%

50%

100%

0%

Z a

m b i a

T a n z a n i a

B

e n i n

N i g e r i a

N i g e r

S i e r r a L

e o n e

E t h

i o p i a


E

r i t r e a

G u i n e a

B u r u n d i

S e n e g a l

C e n t r a l A f r i c a n R e p

u b l i c

M o z a m b

i q u e

M a l i

C o n g o

, D e m .

R e p

.


A n g o l a

B u r k i n a

F a s o

C h a d


Labour taxes

Other taxes borne

PwC Total Tax Contribution Studies and timeto comply33

The2008TTCstudy,undertakenforTheHundredGroup in the UK, collected data on the cost ocomplying with the UK tax system. The companiesparticipating in the study reported that, on average,12.7 ull time employees were required to deal with taxcompliance. 43% o time spent related to corporateincome tax, 28% to employment taxes, and 20% toVAT, with the remaining 9% relating to ‘other’ taxes’.The data provided was translated to a monetarycost, and added to spend on external providers orcompliance services. This cost equated to 1.57%o the total taxes borne, eectively representinga surcharge o this amount on the tax bills o thecompanies in the study.

PwCTTCstudieswithTheHundredGroupshowthat,whiletheTTRisnotnecessarilyaffectedbythesizeofthe company, the time spent on tax compliance andthe related cost can be signicantly more, in absoluteterms, the larger and more complex the company is.

33 TotalTaxContributionPricewaterhouseCoopersLLP(UK)2008SurveyforTheHundredGroup. Published February 2009.



40

comply or a number o geographical and economicgroupings. TaxpayerCo needs the least amount o timeinthedevelopedeconomiesinOECDandtheEU,withan average number o hours to comply below the worldaverage, and needs the most time in Latin America andthe Caribbean.

As mentioned above, the data collected enables ananalysis o the hours spent on compliance between thatrequired or preparation, ling and payment. Figure 2.21 shows this split or those economies where compliancewith labour taxes and contributions takes over 300hours. It shows that time to prepare is generally themost burdensome part o the process and, as shown orLatvia in Figure 2.19, the preparation and maintenanceo mandatory books or tax can contribute substantiallyto this.

Note: The chart shows the average result or the economies in each region andor the world average or all economies in the study.


Figure 2.20Comparison o the number o hours to comply by region

400

300

100

200

0

Corporate income tax time

Labour tax time

Consumption tax time

O E

C D


E u r o p e a n U n

i o n

A r i c a n U n

i o n

A s i a P a c i f c



G

2 0

L a t i n A m e r i c

a &

C a r i b b e a n

N u m b e r o h o u r s

Figure 2.22NumberofhourstocomplyacrosstheEU

Note:ThechartshowsthehourstocomplyfortheeconomiesintheEUsplitbyeach type o tax.



Labour tax time


350200250

650

150

550

200

600

100

500

50

450

0

400

L u x e m b o u r g

B e l g i u m

F i n l a n d

U n i t e d K i n g d o m

A u s t r i a


P o l a n d

I r e l a n d


S l o v e n i a

S w e d e n

G e r m a n y

P o r t u g a l


E s t o n i a

L i t h u a n i a

L a t v i a

I t a l y

F r a n c e

R o m a n i a

H u n g a r y

B u l g a r i a

D e n m a r k

S p a i n

C y p r u s

G r e e c e


Note: This chart shows the hours to comply with labour taxes split betweenbetween the time to prepare, le and pay.


Figure 2.21Hourstocomplywithlabourtaxesandcontributions

Prepare

File

Pay

V e n e z u e l a

500

800

400

700

300

600

100

200

0

J a m a i c a

U k r a i n e

N i g e r i a

V i e t n a m

B o l i v i a

B r a z i l

C a m e r o o n



Brazil – The Public System o Digital Bookkeeping (SPED) – a new challenge

Carlos Iacia, PricewaterhouseCoopers (Brazil)

The Paying Taxes reports have been very useul and havereceived considerable comments in Brazil over the lastew years. The media coverage has been extensive, andthe press has repeatedly ollowed the results presented inthe report. Additionally, Brazilian tax scholars have usedthe results in their studies and have commented on themduring their lectures.

Our main issue, which is the time spent by taxpayersto comply with all the obligations imposed by the taxauthorities, remains unchanged in the results o thisyear’s Paying Taxes survey.

The Brazilian Federal Government has already reactedto the results and has taken actions towards changingthis scenario. Besides the potential or a new tax reormand simplication project, which is still under discussionin the National Congress, a new tax procedure has beenintroduced that may impact the study results in thenear uture.

The new procedure is the Public System o DigitalBookkeeping (Sistema Público de Escrituração Digitalor ‘SPED’),whichhasthreedimensions:e‑Invoicing,DigitalTax Bookkeeping, and Digital Financial Bookkeeping.

SPED’smainpurposeistointegrateFederal,StateandMunicipal tax agencies through digital inormation fows,by uniying the activities o receiving, validating, storing,and authenticating the books and documents that

comprise the commercial and tax ledgers.Through this system, Brazilian companies willprepare e‑Invoices, e‑Tax Bookkeeping, e‑FinancialBookkeeping,e‑BillsofLading,e‑FinancialRecords,thee‑General Ledger, the e‑Taxable Income Book, and thee‑Tax Books.

The e‑Invoicing and the Digital Tax and FinancialBookkeeping Systems have already been adopted bylarger companies, and soon all companies will have toimplement this new technology.

SPEDhasdemandedadditionaleffortfromBraziliancompanies, in order to ensure compliance with all theprocesses, to integrate their systems and to ully preparetheir sta or the new systems.

Weexpectthat,throughSPED,inthemediumorlong‑term, the time spent by taxpayers to comply withtheir tax obligations will reduce, as it will eliminatepaperwork, as well as uniy and rationalise theinormation demanded by the Federal, State andMunicipal tax authorities.

Another change to mention is the introduction o newaccounting procedures, enacted by ederal laws 11,638and 11,941, which will undamentally change Brazilianaccounting standards to acilitate convergence withInternationalFinancialReportingStandards(IFRS).

Although this change is not intended to cause any impacton the tax system, such tax neutrality is guaranteedby law only until the implementation o new tax rules.It will only be rom the moment when such new rulesare implemented that we will be able to detect thereal impact o the new accounting procedures on thecorporate tax burden.

TotalTaxRate: 69.2%

Number o hours: 2,600


41Paying Taxes 2010




42

Peru – The Doing Business indicators help government ocus on key areasor reorm

Miguel Mur – PricewaterhouseCoopers (Peru)

InJuly2009,thePeruvianMinisterofEconomy,LuisCarranza, publicly announced the launch o a specialgovernment initiative aimed at making Peru one o theworld’s leading countries in attracting investment. As parto this plan, Peru should aim to make use o the resultso the World Bank Group’s Doing Business surveys inthe years to come, by engaging in reorms to make iteasier or entrepreneurs to start and operate businessesin the country in several areas, including the ease oincorporating companies, obtaining construction permits,international trade incentives, property registration and,not surprisingly, the ease o paying taxes.

With the reorms set out in the plan, and the stricteconomic policies that have been implemented orseveral years now, it is hoped that Peru can secureeconomic growth ranging between 6% and 7% per year.

The latest update to the Paying Taxes study comes at agood time, and provides a ocus on how the indicatorshave moved rom last year.

Last year’s results showed that the time to comply wasthe area which requires most attention in Peru. Thetime that corporate taxpayers need to spend in orderto properly comply with sel‑assessment or the varioustaxes (mainly income tax, VAT and payroll contributions)was high at 424 hours. This year, in view o the availabilityo the Peruvian Tax Authority’s VAT sotware, which isnow widespread across all businesses, ling has been

made simpler and aster, and the hours required haveallen to 380.

Paying Taxes has been helpul in identiying the problemsin the tax system that the Government is now trying toovercome, and it can be expected that the PeruvianGovernment will continue to rely on the results rom thislatest update to the study to pin‑point those areas o ourtax system that require urther attention.

The tax authorities have recently indicated that they wantto be able to reduce the time that it takes to comply withpaying taxes by a urther 100 hours. Further reorms haverecently been undertaken by the Peruvian government,such as the implementation o internet/online acilitiesor the determination and payment o taxes, and thedecentralisation o Tax Administration oces, to helptaxpayers settle their tax obligations more easily.

Areas perhaps still to look at are or taxpayers to bebetter inormed o the criteria adopted by the Tax

Administration and the Tax Court when addressing taxissues. Better inormation on such criteria would improveeciency, and this is key in helping to reduce the timerequired to comply with tax obligations.

TotalTaxRate: 40.3%

Number o hours: 380




43Paying Taxes 2010


Figure 2.23 Analysis o hours to comply with VAT in the CzechRepublicandIreland

PreparationCzech

RepublicIreland

Data gathering rom internal sources.

76 23

Additional analysis o accounting inormation.

Calculation o tax liability includingdata inputting.

Preparation and maintenance o mandatorytax records i required.

Filing

30 4

Completion o tax return orms.

Submission o orms to tax authority, whichmay include time or electronic ling, waitingtime at tax authority oce etc.

Paying taxes

72 3

Calculations o tax payments requiredincluding extraction o data rom accountingrecords, and maintenance o accountingsystems or changes in tax rates and rules.

Analysis o orecast data and associatedcalculations i advance payments arerequired.

Making tax payments, either online or at thetax authority oce which may include time orwaiting in line and travel.

Total 178 30

Note: The table shows the calculation o the hours to comply or VAT splitbetween the processes or prepare, le and pay.


Figure 2.22showsthetimetocomplyacrosstheEU.TheaveragefortheEUis232hours,comparedtolastyear’s gure o 257, with most time being spent onlabour taxes (117 hours), ollowed by consumption taxes(73 hours), and the smallest number on corporate incometax (42 hours).

The high number o hours spent on compliance withlabourtaxesandcontributionsinsomeEUeconomiesmay refect, in part, the numerous dierent paymentswhichhavetobecalculatedandpaid.InHungary,forexample, there are seven dierent labour taxes andcontributions;communitytax,rehabilitationcontribution,two payments or healthcare, pensions, unemployment,andtraining.InFinland,thereareve;socialsecurity,pension insurance, unemployment insurance, accidentinsurance, and lie insurance.

A urther point to note is the wide range in the numbero hours that it takes our case study company to complywithVAT(consumptiontax)intheEUeconomies.This is a tax which, although it stems rom a commonlegalframework,assetoutintheEuropeandirectives,canbeappliedquitedifferentlyineachEUeconomy,and the detail will depend more directly on domesticlegislation. The number o hours needed ranges rom22 in Finland and 30 in Ireland to 178 in the CzechRepublicand288inBulgaria.Thebreakdownofthehours to comply with VAT or Ireland and the CzechRepublicarecomparedin Figure 2.23.

In Ireland, TaxpayerCo is required to le VAT returns everyother month. In relation to each return, the entire processo preparation ling and payment takes around vehours. The inormation required is readily available romthe company’s accounting system, and the preparation,submission and payment can all be done online usingtheRevenue’sonlinetaxling/paymentsystem.IntheCzechRepublic,VATreturnsarerequiredeverymonth.Signicant records need to be maintained in supporto the return (up to 19 pages), and a company such as

TaxpayerCo will not usually invest in the sotware requiredto acilitate the automatic uploading o data into theonline ling system. Instead, the company will manuallyenter the gures. So, there are twice as many returnsintheCzechRepublicand,foreach,theentireprocesstakes around three times as long as in Ireland.



44

In the Arican Union, TaxpayerCo takes an average o 307hours to comply with its tax aairs, which is close to theworldaverageof286.However,therangeofhoursacrossthis group is large ranging rom 76 in the Seychelles to1,400 in Cameroon.

Apart rom Brazil, our case study company in Cameroon

spends the most time o any economy in the world onits tax compliance, and ranks 182 on this indicator. Itspends 700 hours on labour taxes and contributions, 500on corporate income tax and 200 on consumption taxes(see Figure 2.25 )

As mentioned above, the administrative burden asmeasured by the time to comply, is not necessarilylinkedtotherateoftaxpaidasmeasuredbytheTTR.TheTTRinCameroonisjustabovetheworldaverageat 50.5%. It is interesting to compare Cameroon’sgures with Burundi, which is one o the countries onthe Arican continent that has a cascading sales tax and

consequently,aTTRinexcessof100%,at278.6%.90%o this is attributable to the cascading sales tax. Thehours to comply in Burundi are, by contrast, below theworld average at 140.

N i g e r

Figure 2.24Number o hours to comply across the Arican Union

Note: The chart shows the hours to comply or the economies in the Arican Union split by each type o tax.


900

800

700

500

600

400

300

200

100

0

M o z a m b i q u e

E q u

a t o r i a l G u i n e a

U g a n d a

C o m o r o s


B u r u n d i

S u d a n

E r i t r e a

S e y c h e l l e s

B e n i n

Z a m b i a

T a n z a n i a

S w a z i l a n d

M a l i

M a l a w i

E t h i o p i a

G h a n a

C a m e r o o n

C a p e V e r d e


B o t s w a n a


D j i b o u t i

T o g o

L i b e r i a

S o u t h A r i c a

M a d a g a s c a r

T u n i s i a

C h a d

Z i m b a b w e

A n g o l a

R w a n d a

G a b o n

M a u r i t i u s

S ã o T o m é a n d P r i n c i p e


C e n t r a l A f r i c a n R e p u b l i c

N i g e r i a

C o n g o

, D e m

. R e p

.

A l g e r i a

N a m i b i a

C o

n g o

, R e p u b l i c

L e s o t h o

E g y p t , A r a b R e p

.

M a u r i t a n i a

G a m b i a

S e n e g a l

G u i n e a

K e n y a


Labour tax time


N u m b e r o

h o u r s

9 3 8 1 4 0 0



Mexico – Evolution o electronic means o payment

Carlos Montemayor, PricewaterhouseCoopers (Mexico)

The Paying Taxes results or Mexico have been o greatinterest to the Mexican tax authority. The indicator orthe time to comply has been o particular concern. Since

late 2007, signicant eort has been put into analysingand evaluating areas o opportunity, with the goal oachieving a reduction in the amount o time that it takesto comply with tax regulations. These activities had beenmainly ocused on ederal taxes (i.e., income tax andvalue‑addedtax).However,despitetheseefforts,thetime to comply with income tax obligations has increaseddue to the enactment o the fat rate business tax, as thishas to be determined on a cash basis, with a separatebase, whilst the income tax has to be determined on anaccrual basis.

More recently, the Mexican Social Security Institute(‘IMSS’) and the Mexico City State Treasury authorities

have also ocused on the amount o time taken to complywith labour taxes and the measures that could be takento reduce the number o hours in this respect. Overall, thenumber o hours to comply has allen.

A striking result or Mexico this year can be seen inthe number o payments indicator where the numberhas reduced to six, rom 27 last year. This refects the

electronic systems which are now widely available oruse with social security payments, payroll taxes and alsoproperty taxes. Improvements in the technology oered

by the banks, and taxpayers’ increasing condence inelectronic means o payment, have helped ensure thatmost tax payments made by taxpayers, with 50 or moreemployees, are now ully perormed through electronicmeans. Payment o social security contributions and theMexico City State tax are also now possible without theneed to join the line at the bank’s premises.

The Mexican government’s interest in the ease o payingtaxes and reorm continues, and a separate exerciseconducted by PwC with the authorities is reerredto on page 48 o this report. The Tax AdministrationService (‘SAT’), the authority in charge o collecting andadministering all ederal taxes (i.e. income tax, fat rate

business tax and value‑added tax), continues to leadinitiatives to secure technological improvement, whiletheIMSS,theEmployees’HousingFund(‘INFONAVIT’)(both or social security contributions) and certain StateTreasuries (or State Taxes), such as the Mexico CityState Treasury, are also involved in this process, aligningimprovements with those initiated by SAT.

TotalTaxRate: 51%

Number o hours: 517


45Paying Taxes 2010




46

South Arica – A strong track record o reorm

Paul de Chalain, PricewaterhouseCoopers (South Arica)

Paying Taxes 2010 reveals that continued reormaecting the total tax rate or business, has helped South

Arica to maintain its overall high ranking o 23rd place.The number o taxes paid by the case study company,and the time taken to comply with major taxes, remainedthe same while other economies have reduced hours andpayments. The time taken to comply and the total taxrate place South Arica in the same league, in this area,as developed countries such as Germany and Spain,and ahead o other emerging countries such as Turkey,Indonesia and Korea.

The results o last year’s Paying Taxes study were wellpublicised with the launch in Johannesburg, and theseparate empirical work conducted by PwC in its TotalTax Contribution study, has been widely published inSouth Arica. The messages rom these studies are notout o consonance with the South Arican government’sagendaanditsproposalsforfurthertaxreforms;theneedto simpliy the tax system, with particular emphasis oneasing compliance or business.

Highcompliancecosts–primarilyduetothecomplexityo tax legislation – remain an issue. On average, Total TaxContribution survey participants regard South Arican taxlegislation as complex. The study ound that considerableemphasis is being placed on operational, rather thanstrategic, tax eectiveness. Criteria other than thoserelating to strategic perormance (i.e. meeting compliancedeadlines, ‘no surprises’, results o tax authority audits,

as opposed to management o cash and the eectivetax rate) are, in the main, being applied in evaluating thetax unction. The small amount o time being spent ontax planning and mitigation, compared to the substantialamount o time being spent on tax compliance and taxaccounting within the corporate environment, indicatesthat tax specialisation in the South Arican corporateenvironment is in the early stages o development.

Recenttaxreformsincludethereductionofthecorporateincome tax rate, the introduction o a new electiveturnover‑based tax or qualiying small businesses,a broad‑based drive towards electronic ling, andsimplication o tax returns. To ollow, in the next yearor so, is the proposed replacement o secondary tax oncompanies with a dividend withholding tax.

The reduction o the total tax rate should not be the mainobjective o tax reorms. As another area o reorm, socialsecurity has already been raised as a priority by NationalTreasury. The area o retirement savings (pension unds,etc) receives special attention, and the promotion o agreener economy now also occupies a rm position highup on National Treasury’s agenda. Several incentives inthis respect have also been introduced. Although South

Arica’s ranking o 23 out o 183 countries is encouraging,and reliance on large companies’ total tax contribution isillustrated in Total Tax Contribution studies, considerationshould be given to urther reorms to benet alleconomically–active South Aricans.

Looking orward, tax revenues in South Arica are comingunder extreme pressure, and it is expected that this willbe refected in the 2009 Total Tax Contribution survey.This is a global trend – Total Tax Contribution studies inother tax jurisdictions have already refected reducedprotability and lower transaction activity. This mayinfuence tax reorms over the short term.

TotalTaxRate: 30.2%Number o hours: 200Number o payments: 9



47Paying Taxes 2010


Figure 2.25HourstocomplyinCameroonsplitbetweenprepare,leand pay

Note: The chart shows the hours to comply or each type o tax split betweenprepare, le and pay.


700

600

500

300

400

200

100

0

Prepare

File

Pay

Corporate incometax time

Labour taxes time VAT


Figure 2.26BurundiandCameroon,TTRandhourstocomply compared

Note:ThechartshowstheTTRandthehourstocomply.


Burundi

Cameroon

300%

250%

200%

100%

150%

50%

0%

1600

1400

1000

1200

800

600

400

200

0

N um b er of h o ur s

TTR% Hours

This is a good illustration (see Figure 2.26 ) o the need tolook at each o the individual indicators, which allows theseparate issues around tax cost and compliance cost tobe identied and addressed.

Looking just at the continental economies o South America, the average number o hours spent on taxcompliance, at 638, is by ar the highest or any region.Figure 2.27 shows that ve o the 12 countries spendin excess o 400 hours on compliance, with Boliviarequiring just over 1,000 hours, and Brazil, the highest,with 2,600 hours. Consumption taxes are a major part othe time to comply or all o these economies. In Brazil,it takes TaxpayerCo almost 10 times the world average tocomply with corporate income tax, 4.5 times to complywith labour taxes and contributions and 13 times orconsumption taxes. While the number o hours requiredto comply has remained at consistently high levels orBrazil, the government is taking action to introducereorms, simplication and new procedures. It is hopedthat these improvements will have an impact on thePaying Taxes results in the uture. (Further details on theposition in Brazil are explored in the article on page 41).

Figure 2.27HourstocomplyinSouthAmericaneconomies

Note: The chart shows the hours to comply or the economies in South Americasplit by each type o tax.



Labor tax time


600

1200 2 6 0 0

400

1000

200

800

0

C o l o m b i a

S u r i n a m e

G u y a n a

U r u g u a y

P e r u

C h i l e

A r g e n t i n a

E c u a d o r

P a r a g u a y

V

e n e z u e l a

B o l i v i a

B r a z i l



48

Mexico – a separate exercise undertaken withthe Government

In Mexico, the time taken to comply with corporateincome tax and VAT has been a particular area oocus. Detailed discussions have taken place betweenPwC Mexico, as one o the contributors to PayingTaxes, and the Mexican tax authorities. The estimatedhours have been reviewed in detail and benchmarkedagainst both real taxpayers in Mexico, and alsoagainst other taxpayers in the Paying Taxes study,including Australia, Ireland, New Zealand, Singaporeand the UK.

Figure 2.28Hourstocomplyintheworld’slargesteconomies

Note: The chart shows the hours to comply or the economies in the G8 split byeach type o tax.



Labour tax time


250

400

200

350

150

50

300

100

0

U n i t e d

K i n g d o m

U n i t e d

S t a t e s

C a n a

d a

F r a n

c e

G e r m a

n y

R u s s i a

I t a l y

J a p

a n


Figure 2.29Distribution o the hours to comply

Note: The chart shows the distribution o results or the hours to comply.


35

30

25

15

20

10

5

0

0 ‑ 5 0

4 0 1 ‑ 4 5 0

2 0 1 ‑ 2 5 0

6 0 1 ‑ 6 5 0

3 5 1 ‑ 1 0 0 0

1 5 1 ‑ 2 0 0

5 5 1 ‑ 6 0 0

9 0 0 ‑ 9 5 0

3 5 1 ‑ 4 0 0

8 0 1 ‑ 8 5 0

5 1 ‑ 1 0 0

4 5 1 ‑ 5 0 0

2 5 1 ‑ 3 0 0

6 5 1 ‑ 7 0 0

> 1 0 0 1

1 0 1 ‑ 1 5 0

5 0 1 ‑ 5 5 0

8 5 1 ‑ 9 0 0

3 0 1 ‑ 3 5 0

7 0 1 ‑ 8 0 0

N u m b e r o e c o n o m i e s

Number o hours

In contrast Figure 2.28 shows that the world’s largesteconomies (the G8) have an average o 219 or thenumber o hours to comply, which is 67 less than theglobalaverage.The30OECDcountrieshaveanaveragetime o 212 hours. This suggests that these developedeconomies can provide a useul source o benchmarkingand best practice or other economies.

Figure 2.29 shows the distribution o results or thetime to comply indicator. Similar to the distribution orTTR,itisapparentfromthischartthatthereisastrongconcentration o economies in the range rom 101 hoursto 350 hours. 122 economies are in the cluster, with21 economies taking less than 101 hours, and 40 takingmore than 350 hours.

Economiesatthelowendofthedistributionincludetheisland states such as St Lucia, and the oil‑rich statessuchasUAE,SaudiArabiaandOman,whichhavealow number o taxes and thereore low compliance time.They also include some smaller economies such asLuxembourg,HongKong,SingaporeandIrelandwhichuse the tax system to encourage business investment.Economiesatthehighendofthedistributionaremainlyconcentrated in three regions: Arica, Central Asia andEasternEurope,andSouthAmerica.



49Paying Taxes 2010


Figure 2.30South Arica as an example o the number opayments indicator

World Bank

Indicator Actual Payments

Corporate income tax 13 payments(online lling)

VAT 112 payments(online lling)

Secondary tax oncompanies – Dividend tax

1 1 payment per dividend

Property tax 1 12 payments (online)

Skills developmentcontribution 1 12 payments (online)

Unemployment insurancecontribution

1 12 payments (online)

Occupational insurancecontribution

1 1 annual payment

Vehicle tax 1 1 annual payment

Fuel tax 1Tax embedded paid to3rd party

Total 9

Note: The table shows the actual number o payments made and how thistranslates to the World Bank indicator.


Figure 2.31Comparison o the number o payments by region



Prot taxes

Labour taxes

Other taxes

55

15

50

10

45

5

35

40

0

30

25

20

O E C D

A s i a P a c i f c

G 2 0


E u r o p e a n U n i o n

L a t i n A m e r i c a &

C a r i b b e a n




N u m b e r o p a y m e n t s

Figure 2.32ThenumberofpaymentsfortheEU

Note:ThechartshowsthenumberofpaymentsfortheeconomiestheEUsplitbyeach type o tax.



1 1 3

45

30

15

0

S w e d e n


I t a l y

P o r t u g a l

B e l g i u m

C y p r u s

L a t v i a

E s t o n i a

S p a i n

F r a n c e


F i n l a n d

G r e e c e

U n i t e d K i n g d o m


B u l g a r i a

A u s t r i a

C r o a t i a

S l o v e n i a

L u x e m b o u r g

P o l a n d

D e n m a r k

L i t h u a n i a

I r e l a n d

H u n g a r y

Prot taxes

Labour taxes

Other taxes

R o m a n i a

The number o payments

The ‘number o tax payments’ indicator refects thetotal number o taxes and contributions paid, themethod o payment, the requency o payment andthe number o agencies involved, or our case studycompany. It includes payments made by the companyon consumption taxes, such as sales tax or valueadded tax. Although these taxes do not aect theincome statements o the company, they add to theadministrative burden o complying with the tax system.The indicator takes into account electronic payment andling. Where ull electronic payment and ling is allowed– and it is used by the majority o small to medium sizedbusinesses – the tax is counted as paid once a year, eveni the payment is more requent. For taxes paid throughthird parties, such as uel tax paid by the uel distributor,only one payment is included. To illustrate the number opayments calculation, Figure 2.30 shows South Arica byway o an example.

As shown in Figure 2.31, the average number opayments or all economies in the study is 31. Four othese relate to prot taxes, 12 to labour taxes and 15 to‘other taxes’. The company makes most payments inrelation to ‘other taxes’ (50%) ollowed by labour taxes(38%) with only 12% o payments relating to corporateincome tax.



50

Figure 2.31 compares the result or a number ogeographicalandeconomicgroupings.EconomiesinCentralAsiaandEasternEuropemakethemostpayments (an average o 53), with economies in theOECDmakingthefewestpayments(anaverageof14).

Figure 2.32 shows the position on the number opaymentsindicatorfortheEU.At18,theaveragenumbero payments is just over hal the world average. TheEUdemonstratesthepositiveimpactthattheabilityto pay and le online has on the results. Only the oureconomies with the largest number o payments do nothave electronic ling or all their main taxes: Cyprus,SlovakRepublic,PolandandRomania.InSweden,our case study company can pay all o its main taxes(corporate income tax, labour taxes, VAT and propertytaxes) in a single online payment, earning Sweden thehighestrankingintheEU,andrankingnumberthreeouto all 183 economies.

Figure 2.33showsthatinCentralAsiaandEasternEurope,theaveragenumberofpaymentsis53.Thereare nine economies in the region, with more than 50payments required, and three with more than 100. Inthe region, the number o payments ranges rom ninein Kazakhstan to 147 in the Ukraine. These economiesprovide a good example o the impact o electronic lingand payment on the results (see Figure 2.34 ). There aremultiple payments made by TaxpayerCo in the Ukraine,and the lack o an online ling capability means that these

The benefts o electronic fling

In 2009, PricewaterhouseCoopers LLP (UK) carriedout a survey o UK privately‑owned business34.391 privately‑held companies participated in thesurvey, ranging rom the very small (with less than 10employees, and turnover o less than £5 million), tothose with around 250 employees and £200 millionin turnover. The survey included questions on theuse and benets o e‑ling tax returns. 78% o thesurvey participants said their business did use theHMRevenueandCustomsfacilitytolecorporateincome tax, employment taxes or VAT returns online.

When asked what benets they elt they had receivedby ling online, 64% said it was quick, 54% said itwas easier, and 47%, more convenient. All o thesepercentages showed a considerable increase overthose in a similar survey two years beore. 27%, alsosaid it gave greater accuracy, and 23% that it wasmore secure. Only 13% said they saw no benets.

The survey provides evidence thereore thatcompanies do use online ling in the UK, and see thebenetsofdoingso.Electroniclingandpaymentcan, o course, also benet government by reducingthe cost o processing returns and payments.

34 EnterprisingUK–Avoiceforprivatebusiness–publishedbyPricewaterhouseCoopersLLP (UK) October 2009.

Figure 2.33The number o payments or Central Asia andEasternEurope

Note:ThechartshowstheTTRfortheeconomiesacrossCentralAsiaandEasternEuropesplitbyeachtypeoftax.



Prot taxes

Labour taxes

Other taxes80

140

60

120

40

100

200

K a z a k h s t a n

S e r b i a

G e o r g i a

R u s s i a

K y

r g y z R e p u b l i c

A z e r b a i j a n

T u r k e y

M o n t e n e g r o

K o s o v o

M a

c e d o n i a

, F Y R

A r m e n i a

U k r a i n e

A l b a n i a

U z b e k i s t a n

B o s n i a a n d

H e r z e g o v i n a

M o l d o v a

B e l a r u s

T a j i k i s t a n

CentralAsiaandEasternEurope



Spain – A decentralised tax system, but reductions in the TTR and number ohours improve the ease o paying taxes

Jaume Cornudella i Marquès and Eva Mur Mestre, Landwell (Spain)

The Spanish corporate income tax rate has reducedby 5% in the last two scal years, to reach the 30%statutory tax rate applicable or 2008 onwards. While this

reduction has been oset, in part, by the steady reductionin tax incentives or investment, it has contributed to thefallintheTTRforSpain.TheTTRis,however,stillhighincomparisontootherOECDcountries.

Electroniclingoftaxreturnshassteadilybecomecompulsory or all companies and at most levels o taxadministration. This act, together with the developmento specic sotware to assist with tax compliance, hassignicantly reduced the time spent on preparing andling tax returns and paying taxes, placing Spain in amore competitive position than previously.

Recentreformofthetaxsystemhasbroughtnew

incentives (additional fexible allowances), to promoteemployment and investment in new xed tangibleassets. These incentives are conditional on maintainingan average sta level or a two year period. Thenance bill or the budget, recently approved by theSpanish government, continues the theme o protectingemployment, with a temporary reduction to 20% inthe corporate income tax rate, or companies with lessthan 25 employees and a turnover o less than 5 millionEuros,providingtheymaintainorincreasetheirnumbero employees. The nance bill also contains several taxincreases to address current government budget decitissues, with increases in the general VAT rate rom 16%to 18% and in the lower rate rom 7% to 8%.

NewSpanishGAAP,inspiredbyIFRS,cameintoforceon 1 January 2008. To try and ensure that these changesdo not increase the tax compliance burden the Spanish

legislature has implemented numerous amendments orcorporate income tax. Despite this signicant eort, thetransition to the new accountancy rules has not alwaysbeen neutral rom a tax point o view. For example, orcertain companies which own stock in other entities,there is an impact on the depreciation available or taxpurposes. The reorm has also required a special eortrom the taxpayers to ensure that the new obligations andrequirements are ullled.

The existence o three dierent levels o taxation –national, regional, and local or municipal – together withthe special nancing system which entitles the threeprovincesoftheBasqueCountry(Álava,Guipúzcoaand

Vizcaya) and Navarra to maintain their own historicaltax systems, adds to the complexity o the Spanishtax system. Government is keen to look at ways oeasing the compliance burden. The administration in

Álava is currently working together with Ibermática andPricewaterhouseCoopers in a project to help transormthe tax administration through the centralisation oall inormation or all taxpayers, including specialisedtraining or tax agents and a substantial technicalmodernisation o the system.

51Paying Taxes 2010




52

are all recorded separately or the purpose o the numbero payments indicator. In Kazakhstan, there are alsomultiple payments or most o the taxes but, or seven othem, there is an online ling and payment capability. Theother two taxes are embedded in payments made to thirdparties and so are also only recorded as one payment orthis indicator.

Figure 2.35 shows the distribution o results or thenumber o payments indicator. The position here issomewhat dierent to the other two indicators as there isno single cluster. There are two peaks shown by the chartwith 66 economies in the 7 to 21 range, and 46 in the 31to 42 range.

There are eight economies at the low end o thedistribution with less than seven payments. They includeanislandstate,theMaldives,andanoil‑richstate,Qatar,

Figure 2.34Comparison o the payments required in Ukraineand Kazakhstan

Ukraine Kazakhstan

Corporate income tax 5 1(12 actualpayments –online ling)

Advance corporate income tax 1

Pension und contributions 24

Social security contributions/ Social tax

24 1(12 actualpayments –online ling)

Unemployment contributions 24Work, accident insurance undcontribution

24

Vehicle tax 4 1(2 actualpayments –online ling)

Fuel tax 1(Embeddedinpayments tothird parties)

Land tax 12 1 (Online ling)

Municipal tax 12

Property tax 1(4 actualpayments –online ling)

Advertising tax 1 1

(12 actualpayments butembedded inpayments tothird parties)

Environmentaltax 4 1(4 actualpayments –online ling)

Value Added Tax 12 1(12 actualpayments –online ling)

Total 147 9

Note: The table shows the number o payments required or each tax and thereasons or only showing one tax where there are actually multiple payments.


Figure 2.35Distribution o the number o payments

Note: The chart shows the distribution o results or the number o payments


25

15

20

10

5

0

0 ‑ 3

2 5 ‑ 2 7

1 3 ‑ 1 5

3 7 ‑ 3 9

5 5 ‑ 5 7

1 0 ‑ 1 2

3 4 ‑ 3 6

5 2 ‑ 5 4

2 2 ‑ 2 4

4 6 ‑ 4 8

4 ‑ 6

2 8 ‑ 3 0

1 6 ‑ 1 8

4 0 ‑ 4 2

5 8 ‑ 6 0

6 1 ‑ 6 3

6 4 ‑ 6 6

6 7 ‑ 6 9

> 6 9

7 ‑ 9

3 1 ‑ 3 3

4 9 ‑ 5 1

1 9 ‑ 2 1

4 3 ‑ 4 5

N u m b e r o e c o n o m i e s

Number o payments



53Paying Taxes 2010


Figure 2.36The most common process o ling tax returns and themost common process o payment

% o economies

By post

Other

In person

Electronicling

0% 10% 20% 30% 40% 50% 60% 70%

Methods o ling tax returns

Note: These charts show the answers given or all economies that responded.Some economies gave more than one option in answer to the questions.


% o economies

Cash

Cheque

Other

Bank transer

Internet

0 10% 20% 30% 50%40% 60%

Methods o paying taxes

but also Sweden, where our company can pay all o itsmain taxes (corporate income tax, labour taxes, VAT andpropertytaxes)inasingleonlinepayment.Economiesatthe high end o the distribution are mainly concentrated intwo regions in the Arican Union, and in Central Asia andEasternEurope.

In order to calculate the results or the number opayments, contributors to the Paying Taxes study areasked the ollowing questions, and have the option ogiving more than one answer:

• Whatisthemostcommonprocessoflingtaxreturnsin your economy or a company such as TaxpayerCo?(electronic ling, by post, in person at the tax oce,or other).

63% o the economies in the study say that they le theirreturns in person, 36% use electronic ling and 20% usethe post.

• Whatisthemostcommonprocessoftaxpaymentinyour economy or a company such as TaxpayerCo?(cheque, bank transer, cash, via the internet, or other).

53% o the economies in the study say that they pay theirtaxes by cheque, 47% use bank transers, 23% use theinternet and 14% still use cash.

Figure 2.36 shows the answers to these questions, whichindicate that electronic means o ling and payment isstill not used in many economies.



54

Summary

• ThePayingTaxesstudyisuniqueinthatitmeasuresthe world’s tax systems rom the point o viewo business.

• Thestudyprovidesawealthofdataforgovernments,enabling them to benchmark their tax system inrelation to taxes levied on business. It also showsthe importance o benchmarking the results againstarelevantpeergroup.Economiesatthetopoftherankings do not necessarily provide a good model.

• ThePayingTaxesresultsshowthatcorporateincometax is only one o many taxes that business has tocomply with. When considering the burden o taxes onbusiness, it is important that governments consider allthe taxes that companies pay.

• PayingTaxesmeasuresboththetaxcostforacasestudycompany(theTotalTaxRate)andthecomplianceburden. It is important to consider both aspects o thecompany’s tax aairs. It is also important to look at theresults or each o the sub‑indicators separately, sincealowTTRdoesnotnecessarilytranslateintoeaseofcompliance, and a high tax cost does not necessarilymean a heavy administrative burden.

• Labourtaxesandsocialcontributionsareincludedinthe results, notwithstanding that they are sometimesviewed as part o the cost o labour rather than as atax.PayingTaxesincludesintheTTRalltaxesandmandatory contributions which are a cost to thecompany and aect its results at the time o payment,including employer labour taxes and contributions.

Administering employee taxes is also included in thetime to comply.

• Ingeneral,thepreparationtimerequiredfortaxreturns,i.e to gather and analyse data etc., is the most timeconsuming part o the compliance process.

• Itisconsideredgoodpracticetohaveonetaxperbase (or example on prots, labour, consumption,and property). This eases the tax compliance burdenor companies. The Paying Taxes results show that thetime needed to comply can increase where there aremultiple taxes. Labour taxes and consumption taxesadd considerably to the time to comply.

• Therequirementtokeepseparatebooksfortax,otherthan those required or accounting purposes, can alsoadd to the time to comply.

• Theabilitytopayandleelectronicallyhasasignicantpositive impact on the number o payments indicator.World Bank Group suggests that electronic ling andpayment o taxes is o benet or both government andbusiness.

• Businessunderstandsthatitneedstopaytaxesandthat levying taxes is not an easy task or government.What is important, is how the tax system ullseconomic and social objectives, and whether highertaxes fow through to inrastructure, social services anda better quality o lie or citizens.



55Paying Taxes 2010




56

As mentioned in the introduction to this section, incollecting data or this year’s Paying Taxes study,contributors were asked to provide additional data,which is not used in calculating the indicators, but whichprovides additional useul insights into tax systems.These questions have been developed over the last twoyears, with the help o interested parties, and their inputis most appreciated. Below is a selection o the questionsand the answers received. Further input into how thisaspect o the study can be enhanced to meet the needso users is invited.

A list o the additional questions is included in Appendix3. The questions are grouped around our aspects o thetax system:

• clarityandaccessibilityoftaxrules;• howcentralised/decentralisedisthetaxsystemand

whetherthisimpactstaxadministration;• theapproachofthetaxauthorities;and• dealingwithtaxaudits.

Clarity and accessibility o the tax rules

Contributors were asked to express a view on thecomplexity and clarity o tax rules in their country. It is,without doubt, helpul to taxpayers that the rules beas simple and clear as possible. Where rules are bynecessity complicated, to deal with the complexity omodern business and economies, it is essential that taxauthority guidance is helpul and easily available.

Figure 2.37 shows the responses to the question “In youropinion, how simple or complicated are the tax rules inyour country?” Just over a quarter o respondents, 28%(5% + 23%) gave a 1 or 2 marking, regarding their tax

systems as simple or very simple. 12% (9% + 3%) gave a4 or 5 marking, regarding their tax system as complicatedor very complicated. 42% o contributors gave a middlemarking and 18% did not answer the question.

Figure 2.38 shows the responses to the question “In youropinion, how clear or ambiguous are the tax rules in yourcountry?”Hereahigherpercentage,22%(18%+4%)regarded their rules as ambiguous (4 or 5 marking) anda lower percentage, 20% (18% + 2%) as clear (1 or 2marking). A similar percentage gave a middle marking ordid not answer the question.

Section 2

Further insightson tax administration

Chapter

2• Inyouropinion,howsimpleorcomplicatedare

the tax rules in your country?Scale o 1 to 5 (1 is simple and easy to understand

and 5 is very complicated even or a tax expertto understand).

• Inyouropinion,howclearorambiguousarethe

tax rules in your country?Scale o 1 to 5 (1 is very clear, 5 is ambiguous andsubject to dierent interpretations).

• Inyouropinion,howhelpfulareanyguidancenotes which the tax authority publishes to assisttaxpayers in your country?Scale o 1 to 5 (1 is very helpul, 5 is not at allhelpul / none are published).



Egypt – New tax laws and a change in mindset help reorm

Sheri Mansour, PricewaterhouseCoopers (Egypt)

An important role at PwC, in recent years, has been toprovide accurate data and inormation or input to theannual report, published by the World Bank Group, onDoing Business and Paying Taxes. It is noticeable, thatEgypt’srankhasbeenimprovingyearafteryear.Therearemanyreasonsbehindthesuccessofreforms;onebeing the change in mindset o the dierent stakeholdersin the tax system and, in particular, the mindset o the Tax

Authority. In the Paying Taxes 2010 data, the number ohours has reduced by 231 hours, refecting the increaseduse o accounting sotware, and eorts made to increasefamiliaritywiththe2005taxlegislation,whiletheTTRhas reduced due to increases made to the social securitybands. As is the case or many other economies, theEgyptianeconomyhasnotbeenshieldedfromtheeffectso the global nancial crisis and the related economicslow‑down which has hindered economic development.PricewaterhouseCoopersEgypthasbeenworkingverycloselywiththeEgyptianTaxAuthoritytobeawareofthe strategies that are being considered to deal withthis crisis.

ThenewEgyptianTaxlawintroducedin2005playedamajorroleinencouraginginvestmentinEgypt,andthishas helped mitigate the threats posed by the currentglobal nancial crisis. Further actions taken since include:

• TheMinistryofInvestmenthasintroducedafurtherincentive to decrease the rental value o industrialprojects, established according to the public ree zone

system, to $2 per metre instead o $3.50 per metre orone year.

• TheMinistryofFinancehasalsoproposedanewValue Added Tax (VAT) law, to replace the currentsales tax. The eect o the new VAT will be to benetthe end consumer by lowering the cost o the nalproduct. The new tax law has still to be approvedby the parliament and this is expected by the endo 2009.

• TheTaxAuthorityisofferingSmallandMediumEnterprises(SMEs)anopportunitytojoinanew‘SMEDepartment’toenablethemtoqualifyforadditional incentives.

• Otherpossibleinitiativesincludetheimpositionofhigher taxes on tobacco to help nance the newhealthcare system.

The International Monetary Fund (IMF) has releasedastatementinconclusiontotheirstaffvisitstoEgyptonJuly2009.ItsuggeststhatEgypthasweatheredthe impact o the global nancial crisis relatively well,and that the scal and monetary policies adopted havehelped to cushion the impact o the global slowdownoneconomicactivityinEgypt,describingtheoverallperformanceoftheEgyptianeconomyduring2008/2009as ‘avourable’.

As we look orward, it can be expected that the ongoingeconomic downturn will cause companies to ace urtherperiods o losses or reduced prots. The decision‑makersin business will need to rethink their strategic orientationand how they can ‘spice up’ their business models.This crisis can be viewed as an opportunity or optimisingthe business structure and achieving competitiveadvantages or the uture. The Tax Authority is alsolooking to treat the crisis as an opportunity, by lookingat the potential or new procedures, methodologiesand documentation or specic issues such as

transer pricing.WebelievethatEgypt’sPayingTaxesrankingcouldimprove urther in the coming years, with major changesto the regime which have been acilitated by a change inthe mindset o the people and o the authorities.

TotalTaxRate: 43%

Number o hours: 480


57Paying Taxes 2010

Section 2Further insights on tax administration



58

The Netherlands – A debate in parliament and important changes to come

Suzanne Boers and Proessor Roland Brandsma, PricewaterhouseCoopers (theNetherlands)

Paying Taxes 2009 was successully launched in theDutchParliamentinTheHague.Theeventincludedadiscussion o the results by the Finance Committee and aresolution to aspire to improve the Dutch overall rankingby 10 places.

The Dutch government has oten expressed its wish toreduce the administrative burden o the tax system, andthis has resulted in a signicant reduction o the timetocomplyindicator.Eventhoughthenumberofhourshas improved signicantly, the ranking has improvedby only one place in view o other countries makingsimilar improvements. This shows that there is urtherwork to be done here. The number o tax payments hasremainedunchangedfromlastyear,whiletheTTRshowsa slight increase.

A number o plans aimed at reducing the administrativeburden o business are in the pipeline, which willhopeully have a measurable eect in the uture.

In his speech at the launch o the 2009 Paying TaxesreportinTheHague,StateSecretaryofFinance,JanKees de Jager, expressed his intention to look into thebest practices o some o the higher ranked countries,such as Ireland, Denmark and Norway, in order toexamine whether these practices could also be adoptedin the Netherlands. Furthermore, immediately ater thelaunch o the 2009 Paying Taxes report, three members

o the Dutch Parliament proposed a motion, which wascarried by a majority o the Parliament, to harmonisethe denition o wages or the various labour and socialcontributions. These major simplications are intendedto be implemented in 2010. These actions, in responseto the Paying Taxes 2009 results, demonstrate that theDutch government is willing to make a urther eort toreduce the administrative burden or business.

Other measures that have been introduced in 2009, withregard to the reduction o the administrative burden,consist o a simplication o the newly introducedpackaging tax, a relaxation o the administrativerequirements or employers with regard to newly hiredemployees, and the possibility to le electronic requestsor postponement and electronic estimates or corporateand personal income tax purposes.

As in other countries, the Dutch government has alsoresponded to the world‑wide credit crunch, introducinga number o scal measures to stimulate the economy.These measures are, among other things, aimed atstimulating entrepreneurial investments and improvingthe cash fow position o businesses that are aectedby the economic downturn. The measures include anaccelerated depreciation programme or certain newinvestments, a temporary extra reduction o the averagecorporate income tax rate through a broadening o therst tax bracket o 20%, and relaxed provisions orprovisionally carrying back tax losses.

The Dutch government is also planning a signicantamendment to the Corporate Income Tax Act to improvethe participation exemption regime, and amendmentsshould come into eect rom January 2010.

Given the plans in the pipeline or simplication othe Dutch wage taxes and improvement o the Dutch

corporate income tax, it can be concluded that we arecurrently experiencing the calm beore the storm, andthat the most important tax changes are still to come.

TotalTaxRate: 39.3%Number o hours: 164Number o payments: 9



59Paying Taxes 2010


Figure 2.37In your opinion, how simple or complicated are thetax rules in your country?

Note:Resultsfromalleconomiesinthestudy.

Source: PwC analysis of non‑indicator data.

18%5%

23%

42%

9%

3%

1 Very simple

2 Simple

3 Moderate

4 Complicated

5 Very complicated

6 No data supplied

Figure 2.39comparestheresultsfortheEuropeanUnionand the Arican Union or the question “In your opinion,how helpul are any guidance notes which the taxauthority publishes to assist taxpayers in your country?”IntheEU,onlyoneeconomy(4%)respondedthattheydid not consider the guidance notes helpul as comparedto 14 countries (28%, 14% + 14%) in the Arican Union.

Government transparency is an important indicator oproessionalism and a counter–balance to regulation.Contributors were asked “Can you easily access apublished statement o the actual tax revenues in yourcountry?” Figure 2.40 shows that 32 economies (17%)answered ‘No’ to this question, and a urther 32 (17%)did not respond, perhaps suggesting they did not ndit easy to answer the question. Figure 2.40 also gives abreakdown o the ‘No’ responses by region, showing thathal are rom the Arican Union economies, and nearly aquarter rom Latin America and the Caribbean.

Figure 2.38In your opinion, how clear or ambiguous are the taxrules in your country?

Note:Resultsfromalleconomiesinthestudy.


19%

2%

18%

39%

18%

4%

1 Very clear

2 Clear

3 Moderate

4 Ambiguous

5 Very ambiguous

6 No data supplied

Can you easily access a published statement o theactual tax revenues in your country?



60

1 Very helpul

2Helpful

3 Moderate

4 Not helpul

5 Not at all helpul

6 No data supplied

Figure 2.39In your opinion, how helpul are any guidance noteswhich the tax authority publishes to assist taxpayersin your country?

Note:Resultsforalleconomiesintheregions.


14%

23%

16%

19%

14%14%

4%7% 7%

45%

37%

EU

Arican Union

Figure 2.40Can you easily access a published statement o theactual tax revenues in your country?

17%

66%17%

Yes

No

No data supplied

Arican Union

Asia

MiddleEast

Latin America andthe Caribbean

South Pacic

6%

54%

9%

9%

22%

‘No’ responses by region

Note:Resultsforalleconomiesinthestudy/‘No’responsesbyregion.


Please indicate the levels o government in yourcountry that can levy taxes

Federal levelYes/No

State/provincial/territory levelYes/No

Local/municipal levelYes/No

How centralised or decentralised is the tax system? Tax systems around the world vary in their degree ocentralisation. Some, like the UK, are quite centralisedwith all taxes levied centrally (with the exception o a localproperty tax). Others are quite decentralised, with taxesadministered at the national, regional, provincial and locallevels. The question arises: do decentralised tax systemsadd to the burden or taxpayers?

Figure 2.41 shows the responses to the question “Please

indicate the levels o government in your country thatcan levy taxes”. 26% o contributors indicated that theirtax system is quite centralised with only one level ogovernment levying taxes. 21% showed their tax systemsas decentralised with three levels o government able tolevy taxes. 36% reported two levels o government, and17% did not respond to the question.



62

Kenya – a sustained eort required to keep pace with global change

Rajesh Shah, PricewaterhouseCoopers (Kenya)

The Paying Taxes report was received avourably lastyear, as the report recognised the reorms that the KenyaRevenueAuthority(KRA)hadundertaken,particularlywith regard to electronic ling. Paying Taxes was useulor identiying areas o diculty, as well as areas oimprovement, and or oering advice based on globalbest practices.

The Government is keen to improve the businessenvironment, and recognises that one o the keyareas which require reorm is the tax laws and theadministration o these. In response to this, it has set upa tax harmonisation committee.

A number o other successul reorms have been made,but the key is to make sure that the users (i.e., privatesector participants) understand and use them.

An eort to sort out the perennial VAT reund backlogis still ongoing and more eort is required towards taxharmonisation or streamlining tax exemptions within theEastAfricanCommunity.

Despite the reorms that have been undertaken, Kenya’sease o paying taxes rank slipped rom 158 to 164. Onaverage, businesses are required to make 41 paymentsper year – a process that consumes 417 hours o labourannually. The total tax rate or businesses, including taxeson prots, labour tax and other taxes and contributions,is 49.7% o prots. These indices have not changedsignicantly in three years.

It is clear that in order to improve its position relativeto others, Kenya needs to put more ocused eort intoreorms compared to other countries.

TotalTaxRate: 49.7%

Number o hours: 417




63Paying Taxes 2010


Decentralised tax systems may increase the burden otax administration or business, and this was tested bycomparing the average time to comply (rom the time tocomply indicator) or economies reporting one, two, andthree levels o government levying taxes. Figure 2.42 shows the results. The time to comply increases onaverage, with more levels o government.

Also considered was whether decentralised tax systemsincrease the degree o complexity in the eyes o thecontributors. Figure 2.43 compares the responses to thequestion: “In your opinion, how simple or complicated arethe tax rules in your country?” or economies reportingone, two, and three levels o government levying taxes.It appears that very centralised systems, with one level ogovernment, are perceived as slightly less complex, butthe degree is not marked. The average increase in time tocomply, or decentralised tax systems, is more marked.

28 economies indicated that indirect taxes areadministered by a separate tax authority to corporateincome tax. 116 economies responded ‘No’ to thequestion, and 39 did not provide a response.

Figure 2.44 compares the average time to comply withconsumption taxes, (taken rom the time to complyindicator), or economies where these taxes areadministered by the same or separate tax authorities.

On average, the time to comply rises by 16 hours, or14%, where there is a separate tax authority.

1 level o government

2 levels o government

3 levels o government

4 No data supplied

Figure 2.41Please indicate the levels o government in yourcountry that can level taxes – ederal/national level,state/regional level, local/municipal level

26%

36%21%

17%

Note:Resultsforalleconomiesinthestudy.


Figure 2.42 Average time to comply or economies with 1/2/3levels o governments that can levy taxes

400

0

350

250

200

300

150100

50

1 2 3Levels o government

A v e r a g e h o u r s t o c o m p l y

Note:Resultsforeconomiesbylevelsofgovernmentthatcanlevytaxes.


Figure 2.43 Average degree o complexity or economies with1/2/3 levels o government that can levy taxes

3.5

3.0

2.0

1.5

2.5

1.0

0.5

01 2 3

Levels o government

C o m p l e x i t y o t a x e s

Note:Resultsforeconomiesbylevelsofgovernmentthatcanlevytaxes.


Please indicate i certain taxes are administered bya separate tax authority.

Are indirect taxes administered by a separate taxauthority rom corporate income tax?Yes/No

Is social security / social contribution administeredseparately?Yes/No



64

106economiesresponded‘Yes’tothequestion,indicating that social security / social contributions are

administered by a separate tax authority rom corporateincome tax. 43 responded ‘No’ to the question and 34did not reply.

Figure 2.45 compares the average time to comply withlabour taxes and contributions (taken rom the timeto comply indicator), or economies where these areadministered by the same or separate tax authorities.The average time taken is only slightly dierent, witha small increase (three hours or 2%) where there is aseparate authority.

Separateauthority orindirect taxes?

Average hoursto comply –consumptiontaxes

Yes 128

No 112

Dierence 16

Figure 2.44Please indicate i certain taxes are administered bya separate tax authority rom corporate income tax –indirect taxes

140

0

120

80

60

100

40

20

Yes No

Comparison o time to comply with consumption taxes

T i m e t o c o m p l y

Note:Resultsforeconomieswhichprovideddata.


Separateauthorityor socialsecurity?

Average hoursto comply –labour taxes

Yes 110

No 107

Dierence 3

Figure 2.45Please indicate i certain taxes are administered bya separate tax authority rom corporate income tax –social security

0

120

80

60

100

40

20

Yes No

Comparison o time to comply with labour taxes and social contribution

T i m e t o c o m

p l y



Figure 2.46Over and above the books that are kept oraccounting purposes, are there additional books thatmust be kept only or tax?



22%

60%

18%

Yes

No

No data supplied

500

300

200

400

100

0

Additionalbooks or tax

Average hoursto comply

Yes 427

No 261

Dierence 166

Figure 2.47 Are there additional books which must be kept bycompanies only or tax purposes?

T i m e

t o c o m p l y

Yes No

Comparison o time to comply



Over and above the books which are kept oraccounting purposes, are there additional bookswhich must be kept by companies in your countryonly or tax purposes?

The approach o the tax authorities

The requirement to keep extra books solely or tax, overand above those required or accounting purposes, canadd to the burden o tax administration or business.



China – corporate income tax reorm and a all in the TTR

Rex Chan, Pricewaterhousecoopers (China)

Reduction o the Total Tax Rate – China’s CorporateIncome Tax (‘CIT’) Reorm 2008: this year there hasbeenasignicantreductionintheTotalTaxRate.Themain contributing actor to this change is the reductiono CIT, resulting rom the implementation o the new CITLaw in 2008.

As introduced in the last report, the new CIT Lawhas consolidated two separate enterprise incometax regimes, or domestic enterprises and oreigninvestment enterprises, into a single regime. It hasreduced the standard tax rate rom 33% to 25%, andoered an even lower tax rate or qualied small andthin‑prot companies (20%), and or qualied high/newtechnological enterprises (15%). Being a qualied smalland thin‑prot company, the applicable CIT rate orTaxpayerCo is 20%.

In addition to the above, the new CIT Law has changedcertain deduction limitations on expenses. Specic toTaxpayerCo’s case, the changes are refected in theollowing aspects:

• Salaryexpenses.UndertheoldCITregimefordomesticenterprises,thedeductionlimitwasRMB1,600 per headcount per month. The new CIT hasremoved this limit and allowed a ull deduction o thesalary expenses actually incurred.

• Pre‑operatingexpenses.UndertheoldCITregime

or domestic enterprises, pre‑operating expensesshould be capitalised and amortised evenly over veyears or CIT calculation, although it is expensedin the accounting books once the enterprise startsoperation. The new CIT law has removed thisdierence, between book and tax, and allowed aone‑o deduction o the pre‑operating expenses.

• Businessentertainmentexpenses.UndertheoldCIT regime or domestic enterprises, the deductionlimit o business entertainment expenses should be

calculated at 0.5% o annual operating revenue withinRMB15million,plus0.3%oftheportionofannualoperatingrevenueexceedingRMB15million.Thenew CIT law allows the deduction at the lower o 60%o the actual incurred amount and 0.5% o annualoperating revenue.

The reduction o eective tax rate and taxable incomehas led to a lower CIT liability, and thereore, a lower CITrate as indicated above.

China’s Turnover Tax Reorm 2009: China has beenactively reinorcing the reorm o its tax system in recentyears. At the end o 2008, the Chinese Ministry oFinance and State Administration o Taxation issued theamendedPRCProvisionalRegulationsonValueAddedTax (‘VAT’), Business Tax and Consumption Tax, eective1 January 2009, among which, the long‑awaited andproposed transormation o a production‑oriented VATsystem to a consumption‑oriented VAT system has drawna great deal o attention rom taxpayers, especially in timeo global nancial crisis.

Under the old VAT regime, the recovery o input VATincurred in the purchase o xed assets was disallowed.The input VAT would be capitalised as costs o xedassets, which creates the problem o multiple taxation.The VAT transormation is not only aiming to reduce thetax burden on investing in equipment, but also achievingmultiple objectives, such as encouraging domestic

consumption, promoting advancement o technology,guiding structural developments, and stimulatingeconomic growth as a whole.

A all in the number o payments: It is also worth notingthat the number o payments or China has allen thisyear, in view o an enhanced use o electronic ling orstamp duty and land tax.

TotalTaxRate: 63.8%

Number o hours: 504


65Paying Taxes 2010




66

India – The Paying Taxes study is an important reerence point or tax reorm

Rahul Garg, PricewaterhouseCoopers (India)

The Paying Taxes study, prepared by the World BankGroup and PricewaterhouseCoopers, is one o the scalreerence points that applies inormation scientically.The survey is an important reerence document orcomparison o countries at a global level, and the trends,in terms o reorm, are becoming important. The WorldBank Group, with the support o PwC, also conducteda sub‑national survey on Doing Business in India whichcovered 17 states and included the subject o PayingTaxes. This was endorsed by the Ministry o Commerceand Industry in the Government o India. The surveyprovides a platorm or procedural/economic reormsin all o the states, vis‑à‑vis the states which haveadopted good practices, promotes healthy competition,and provides benchmarks or urther improvement.The results o the sub‑national study have reinorcedthe Government engagement with the teams which helpcompile the paying taxes data.

The Paying Taxes study results have consistently showedahighTTRandahighnumberofpaymentsforIndia.The hours to comply are just below the world average.The results have prompted government to look atpossible reorm and this is beginning to show positiveresults. Looking at the indirect tax regime, at the launcho the initial survey, the Central Sales Tax (CST) wascharged at 4%, and contributed to 28% o the Total TaxRateforIndia.Thesurveyhighlightedthecascadingimpact o CST. There has been reorm in this respect,with a reduction in the applicable rate to 2%, and a target

o reducing it to nil with the introduction o Goods andService Tax (GST) by April 1, 2010.

There have also been initiatives or direct taxes thattake notice o the Paying Taxes ndings on compliance.For example, all direct tax payments or corporates cannow be made online. Also, rom this year, the processingo the tax returns or all corporate taxpayers acrossthe country shall be done at a central location throughthe mandatory e‑ling process. In the Finance Act o2009, the Government o India has provided or theintroduction o document identication numbers or allcorrespondencewiththeRevenueauthorities,inaneffortto streamline compliance procedures. Furthermore, thereis a proposal to issue a unique transaction number to allthe assessees so that the due credit or withholding taxcan be electronically given with eect rom 1 April 2010.

The Indian Government has released a drat o thenew direct tax code, with the aim o simpliying the taxprovisions and compliance procedures. We hope thatthe direction given by the survey continues to be a useulinput, and that this will be refected in uture PayingTaxes studies.

TotalTaxRate: 64.7%

Number o hours: 271




67Paying Taxes 2010


Figure 2.46 shows the responses to this question. 22%o the contributors responded that extra books must bekept only or tax, 60% said not and 18% did not reply tothe question.

Venezuela is an example where the requirement to keepextra books adds to the time to comply. O the total o864 hours needed or preparation o tax returns, 348hours (40%) comes rom this requirement.

Figure 2.47 compares the average time to complyforeconomieswhichanswered‘Yes’and‘No’tothisquestion. The average time increases by 63% or thoseeconomies required to keep additional books.

Figure 2.48How long is it likely to take in practice or a companyto receive a reund?

100%

30%

10%

0%

90%

70%

60%

80%

50%

40%

20%

No data supplied

More than 1 year6 to 12 months

3 to 6 months

1 to 3 months

Less than one month

L a t i n A m e r i c a a n d

t h e C a r i b b e a n

E U


O E C D

G l o b a l

Note:Resultsforalleconomiesinthestudyandforselectedregions.


In a typical situation, how long is it likely to take,in practice, or a company to receive a VAT orwithholding tax reund in your country (time romclaiming a reund to receiving the cash)?

• lessthanamonth

• 1to3months

• 3to6months

• 6to12months

• morethanayear

Howlongittakesforataxpayertoreceivearefundcould be seen as one useul test o the eciency o taxauthorities. This is also important or business in viewo the impact on corporate liquidity and the time valueo money on delayed reund processing. Figure 2.48compares the responses to this question overall, with theresponses or selected regional groupings.

O the 183 economies, 30% reported that, in a typicalsituation, a VAT or withholding tax reund should bereceived in less than a month, or within one to threemonths. Some 22% said it would be likely to take morethan a year.

In some regional groupings, the typical time was notablyquicker, in others slower. 65% o respondents in theOECD,and63%intheEU,saidthetypicaltimetakenis less than three months. In the Arican Union however,19% reported a typical time o less than three months,and 30% indicated more than a year. In Latin Americaand the Caribbean, the gures were 19% or less thanthree months and 32% or more than a year.



68

A tax audit can be the most dicult interaction thata business has with the tax authorities. Clearly taxauthorities need to audit taxpayer returns but audits canbe lengthy, dicult to deal with and require additionaltaxpayer resource. It is important thereore that, soar as possible, audits are targeted and carried out asquicklyandefcientlyaspossible.Howtaxauthoritiesdeal with an audit can be a test o how good theirtax administration is.

Contributors were asked to indicate how, in theirexperience, companies are selected or a tax audit.They were provided with a list o options and asked toselect all the relevant options, and number them in order,rom the most common to the least common.

Selection o companies or a tax audit, based on riskassessment, is oten considered a best practice ortax authorities. In this method, tax authorities targettheir resource to audit companies or issues which areconsidered to present the biggest risk o non‑complianceor loss o tax revenues. Out o the 145 economies thatresponded to this question, 47 selected risk assessmentas a common method (rst or second choice).

Contributors were also asked to give their opinion onhow easy it is to deal with a tax audit in their country.Figure 2.49 shows the global distribution o results.14% (1% + 13%) o economies regarded dealing with atax audit as very easy or easy, and 29% (24% + 5%) asdicult or very dicult. 37% gave a middle marking and20% did not respond to the question.

Figure 2.49In your opinion, how easy is it or a company to dealwith a tax audit in your country?

1%

20%13%

37%

24%

5%

1 Very easy

2Easy

3 Moderate

4 Dicult

5 Very dicult

6 No data supplied



In your experience, how are companies selected ora tax audit? Please select all relevant methods andnumber them rom the most common to the leastcommon, where 1 is the most common.

• riskassessment

• bysize

• bytypeofbusiness

• whentheyaskforarefund

• randombasis

• other,pleasespecify

In a typical situation or a large company, how longis a tax audit likely to take in your country (rom rstinormation request to substantive resolution)?

• lessthan3months

• lessthan1year

• 1to2years

• 2to5years

• over5years

• continuousaudit

In your opinion, how easy is it or a company to dealwith a tax audit in your country?Scale o 1 – 5 (1 is very easy, 5 is very dicult).

Dealing with tax audits



United States – a relatively high burden o proft taxes

Peter Merrill, PricewaterhouseCoopers (US)

For small companies that are the ocus o Paying Taxes,the United States compares avourably with othercountries in terms o ease o compliance, ranking inthe top quartile or annual number o tax payments andthe second quartile or the number o hours requiredtocomplywithtaxes.However,thetotaltaxburdenonU.S.companiesmeasuredbytheTotalTaxRate,46.3%,compares unavourably with other countries, ranking inthe third quartile or 118 out o 183 countries. Thus, orsmall businesses that operate within a single locality,the U.S. tax system imposes a relatively high rate o tax,although compliance costs are relatively low.

The composition o U.S. taxes varies markedly romglobal patterns. Labour taxes as a share o prots beoretotal taxes are 9.6%, which is relatively low comparedto the global average o 16.1%. By contrast, taxes onprot (as a share o prots beore total taxes) are 27.9%,which is quite high, relative to the global average o18.2%. Other taxes (as a share o prots beore totaltaxes) are also quite high in the United States primarilydue to property taxes, which are typically imposed at thelocal level.

AccordingtoOECDdatafor2009,thecombinedU.S.ederal and average state/local corporate income taxrate is 39.1%, over 50% higher than the 25.9% averagefortheother29OECDmembercountries.Thehighcorporate income tax rate is only slightly oset by theDomestic Production Activities Deduction (DPAD), which

eectively reduces the ederal corporate income tax rateon qualied income rom certain property manuactured,produced, grown or extracted in the United States byabout two percentage points.

TheU.S.InternalRevenueService(‘IRS’)isundertakingresearch on measurement o corporate tax compliancecosts.Aspartofthisproject,theIRSisreviewingthe methodology or measuring tax compliancecosts used in Paying Taxes, as well as the resultso Total Tax Contribution studies conducted byPricewaterhouseCoopers in Australia, South Arica,and the United Kingdom.

PricewaterhouseCoopers surveyed 40 o the largestcompanies in the United States as part o a Total TaxContribution study conducted in conjunction withBusinessRoundtable,aCEO‑ledorganisation.Thestudyshows that, in addition to income taxes, corporationsbear a wide variety o non‑income taxes that have littlevisibility in nancial statements, but which add $62 o taxliability or every $100 o corporate income taxes paidby survey participants. These non‑income taxes includecustoms duties, state and local property and grossreceipts taxes. Companies also serve as tax collectorsor government, remitting $169 o sales, excise,withholding and other taxes imposed on customers andemployees, or every $100 o corporate income taxespaid by survey participants.

TotalTaxRate: 46.3%

Number o hours: 187


69Paying Taxes 2010




70

Malaysia – The government task orce on tax reorm uses Paying Taxes asa ramework

Chuan Keat Koo, PricewaterhouseCoopers (Malaysia)

Ater the ormation o Malaysia, a consolidated IncomeTax Act was introduced in 1967. The basic principleso income taxation embodied in that Act remain thesame and in orce to this day. As Malaysia entered thenew millennium, calls or reorms to the taxation systemwere made by the business community. Also, a series oarticles by PricewaterhouseCoopers, published in August2004,inaleadinglocalbusinesspublication,TheEdge,advocated an urgent need to initiate tax reorm measureswith simplication o the legislation and procedures as thebasic objectives.

In the 2005 Budget Speech, which was presented in theMalaysian Parliament in September 2004, the FinanceMinister (who was also the Prime Minister) announced theestablishmentofaTaxReviewPanel(TRP).Thispanelwastasked with reviewing the whole system o direct and indirecttaxation, with a view to introducing tax reorms aimed atsimpliying the legislation, and procedures to ensure that thetax system is ecient and business–riendly, as well as toimprove clarity and transparency o tax administration. Sincethen,theTRPhasbeenactivelyengagedinne‑tuningthetax system rom both the legislative and administrative/ procedural aspects.

The tax reorm process received an added boost in 2007with the establishment o the Special Task Force to FacilitateBusiness(orPEMUDAH)thatreportsdirectlytothePrimeMinister.PEMUDAHresultedfromtherecognitionofaneedor a concerted cross‑ministerial initiative to eect greater

improvement in the way government regulates businesses.The Task Force comprises 23 highly respected individualsrom both the private and public sectors. Using the WorldBank Group’s Doing Business 2007 report as a ramework,PEMUDAHhasfocusedonprocessesandprocedurestoimprove the public delivery system and enhance Malaysia’sbusiness environment, including its tax competitivenessand eciency.

WithinPEMUDAH,theFocusGrouponPayingTaxeshasadopted the key ndings reported in the Paying Taxes2009 report as the benchmark or setting its targets orimprovements to the tax administration system, or bothdirect and indirect taxes. Proposals or specic initiatives are

aimed at raising the bar and improving Malaysia’s positionrelative to other countries in the report or the coming year.

Using key indicators rom Paying Taxes (number opayments;timetoprepare,leandpay;TotalTaxRate)the Focus Group has proposed and initiated severalimprovements in tax administrative procedures in 2008 orboth direct and indirect taxes, which included the ollowing:

• launchof‘e‑Daftar’(‘e‑Registration’)bytheInlandRevenueBoard(‘IRB’),whichenablescompaniestosubmit their estimates and revisions o corporate taxliabilityonline;

• theIRBprovidedatimelineforrespondingtotaxpayer’sappealsandobjections;

• companiesarenowallowedtomakepaymentsat the nearest Customs oce instead o only atcontrolledstations;

• specicExciseFormscanbedownloadedfromtheRoyalMalaysianCustom’swebsite,andformscanbesubmitted through diskette, CD or thumb drive.

It was strongly advocated by PricewaterhouseCoopers,in its tax reorm series in August 2004 (along with otherstakeholders), that the introduction o a consumption taxshould be seriously considered as an alternative means oraising tax revenues. As a result, it was also subsequentlyannounced in the 2005 Budget that a Goods and ServicesTax (‘GST’) will be introduced, the implementation dateo which has yet to be determined. The advent o GST

will also mean the introduction o new tax administrativeprocedures. In such circumstances, tax administrators needto careully consider and plan relevant procedures or newtaxes, in order to manage their impact on the ease o taxcompliance. Paying Taxes 2009 showed that Malaysia’soverall ranking improved signicantly to 21 (rom 60) and,while this position has slipped slightly in Paying Taxes2010, Malaysia has conrmed its position in the top quartileoverall.However,comparedtoothereconomiesintheregion(notably,Singaporewhichranksve,andHongKongwith a ranking o three), there is obviously some distanceto go beore Malaysia can boast o being ‘among the best’.The target which the Focus Group on Paying Taxes has setitsel – to be ranked within the ‘Top 10’ – is a clear refection

o the commitment to improving the ease o paying taxesin Malaysia.

TotalTaxRate: 34.2%

Number o hours: 145




71Paying Taxes 2010


Figure 2.50 compares the responses to this questionor the 47 economies indicating risk assessment as acommon method o selection or a tax audit, with the98 economies who did not. It is clear that audits are moreoten perceived as being dicult in economies using amethod other than risk assessment. 44% (36% + 8%)responded that it was dicult or very dicult in theseeconomies compared to only 23% (21% + 2%) where arisk assessment method is used. This is also higher thanthe 29% (24% + 5%) o economies globally which statethat it is dicult to deal with a tax audit.

Figure 2.51 shows the global distribution o responses tothe question: “In a typical situation or a large company,how long is a tax audit likely to take?” 17% o economiesreported that an audit was likely to take less than threemonths, and a urther 41% less than a year. 20% saidmore than a year, and 22% did not respond to thequestion. For taxpayers, any delay in closing a tax auditis a concern, not only in view o the potential impact onincome statements, but also because o the uncertaintythat it creates.

1%

Figure 2.50In your opinion, how easy is it or a company to dealwith a tax audit in your country?

8%

2%

3%

2%

12%

40%36%

19%

56%

21%

1 Very easy

2Easy

3 Moderate

4 Dicult

5 Very dicult

6 No data supplied

Riskassessmentselection

Otherselection

Note:Resultforeconomiesprovidingdataonhowcompaniesareselectedforatax audit.


Figure 2.52Is there an independent body to which a taxpayercan appeal?

19%

76%

5%

Yes

No

No data supplied



Figure 2.51In a typical situation or a large company, how long isa tax audit likey to take?

1%

17%22%

41%16%

3%

Less than 3 months

Less than one year

1 to 2 years

2 to 5 years

Over 5 years

ContinuousNo data supplied



Is there an independent body (such as a tribunalor court) to which a taxpayer can appeal against adecision o the tax authorities?

Yes/NoIn your opinion, how eective is the independentappeal process in your country?Scale o 1 to 5 (1 is very ecient, 5 is very inecient)



72

Figure 2.54In your opinion, how eective is the independentappeal process

8%

32%

52%

10%

26%

22%

12%

6%

24%

8%

1 Very ecient

2Efcient

3 Moderate

4 Inecient

5 Very inecient

No data supplied

EuropeanUnion

Arican Union

Note:Resultsforalleconomiesintheregionreportinganindependentappeal body.

Source: PwC analysis of non indicator data.

Figure 2.53In your opinion, how eective is the independentappeal process?

8%3% 7%

19%

41%

22%

1 Very ecient

2Efcient

3 Moderate

4 Inecient

5 Very inecient

No data supplied

Note:Resultsforeconomiesreportinganindependentappealprocessinthe study.


Figure 2.54comparestheresponsesfromtheEuropeanUnion and the Arican Union. Two countries in theEuropeanUnionregardedtheprocessasinefcient,compared to 18 in the Arican Union who ranked itinecient or very inecient.

As shown in Figure 2.52, contributors in 10 (5%)economies stated that there is no independent body towhich a taxpayer can appeal. A urther 35 did not replyto the question. The 10 economies are located in Central

AsiaandEasternEurope,theMiddleEast,Africa,Asiaand Latin America and the Caribbean.

Clearly, an eective independent appeal process isan important aspect o good tax administration andit is also important rom the taxpayers’ perspective.Figure 2.53 shows the views o these contributorsreporting an independent appeal body with 30% (22%+ 8%) regarding the appeal process as inecient orvery inecient.



73Paying Taxes 2010


Please rate on a scale o 1 to 5 (1 or best and 5 orneeding most improvement) the ollowing aspectso the tax rules in your country

• clarity,accessibilityandstabilityofthetaxrules

• levelsofgovernmentandtaxauthority

• approachofthetaxauthority

• dealingwithtaxauditsanddisputes

• other,pleasespecify

Figure 2.55Best and worst aspects o the tax system

100

30

10

0

90

70

60

80

50

40

20

Needs mostimprovement

Needs improvement

Average

Good

Best

C l a r i t y , a c c e s s i b

i l i t y

a n d s t a b i l i t y o t a x

r u l e s

D e a l i n g w i t h

t a x

a u d i t s a n d d i s p u t e s

L e v e l s o

g o v e r n m e n t a n d

t a x

a u t h o r i t y

A p p r o a c h o t a x

a u t h o r

i t i e s



Best and worst aspects o the tax system

Figure 2.55 makes interesting reading. Around theworld, our contributors rank dealing with tax audits anddisputes as the aspect o their tax system which in theirview, needs improvement. 39% say that this area needsimprovement, or needs most improvement.

This is ollowed by the approach o the tax authorities(32%) and clarity, accessibility and stability o tax rules(24%). Levels o government and tax authority is the areathey are most satised with. 55% say it is a good or bestaspect o their tax system.



Summary

The last ew pages have looked at the contributors’responses to some o the additional questions that wereasked as part o the Paying Taxes study this year. The dataprovided in response to these questions is not used tocalculate the results or the Paying Taxes indicator, butcould be used, or example, to provide additional insightsinto tax systems, and to help governments review theirown system and prioritise areas or reorm.

Some o the areas highlighted in this commentary include:

• overafthofcontributors( 22% ), regarded the tax rulesin their country as ambiguous.

• insomecountries,theguidancenotespublishedbytaxauthorities are not considered helpul.

• contributorsinoverathirdoftheeconomies(34% ) could not point us to a published statemento government tax revenues, as a sign otransparent government.

• decentralisedtaxsystemsdonotseemtoaddtocomplexity, but do tend to increase the time to comply

or business.

• arequirementtokeepextrabooks,solelyfortax,canadd signicantly to the compliance time.

• generallyspeaking,itseemstobequickertoreceiveatax reund in the more developed economies.

• taxauditsareseenaslessdifcultwhentaxauthoritiesuse a risk assessment method o selection.

• in28%ofoureconomies,contributorseithersaidthereis no independent appeal process (5%), or where thereis a process, they regarded it as inecient (23%).

• dealingwithtaxauditsanddisputes,andtheapproach o tax authorities, are seen as the aspectso tax systems around the world which mostneed improvement.

Going orward, the aim is to urther develop this part o thestudy and enhance the value or users. As always, input isinvited and welcomed.

74



75Paying Taxes 2010




76

The data tables

Appendix

1Index to the Appendix

1.1 Summary o the rankings including:

• Easeofpayingtaxesrankings • Individualindicatorrankingsfortaxpayments

• Individualindicatorrankingsfortimetocomply • IndividualindicatorrankingsforTotalTaxRate

1.2 Tax payments – the details

1.3 Time to comply – the details

1.4 TotalTaxRate–thedetails



Paying Taxes 2010 77

Appendix 1The data tables

Rankings

Economy Ease o

paying

taxes

Tax

payments

Time to

comply

Total Tax

Rate

Aghanistan 55 14 119 71

Albania 138 142 99 113 Algeria 168 114 161 168

Angola 139 96 116 143

Antigua and Barbuda 128 164 81 94

Argentina 142 21 162 178

Armenia 153 152 179 69

Australia 47 37 24 127

Austria 102 76 64 146

Azerbaijan 108 76 151 89

Bahamas, The 42 55 5 121

Bahrain 13 87 3 8

Bangladesh 89 72 127 64Belarus 183 181 177 177

Belgium 73 35 53 150

Belize 57 129 48 34

Benin 167 163 107 170

Bhutan 90 59 118 88

Bolivia 177 136 181 172

Bosnia and Herzegovina 129 154 159 27

Botswana 18 63 42 14

Brazil 150 30 183 167

Brunei Darussalam 22 48 46 40

Bulgaria 95 55 172 45

Burkina Faso 144 144 107 111

Burundi 116 100 42 181

Cambodia 58 128 66 19

Cameroon 170 133 182 137

Canada 28 21 30 103

Cape Verde 110 164 20 133

Central Arican Republic 179 160 165 179

Rankings

Economy Ease o

paying

taxes

Tax

payments

Time to

comply

Total Tax

Rate

Chad 133 160 34 155

Chile 45 30 130 24China 125 9 165 160

Colombia 115 68 82 171

Comoros 41 68 20 92

Congo, Dem. Rep. 157 100 128 183

Congo, Republic 180 171 170 164

Costa Rica 154 136 124 145

Côte d’Ivoire 152 174 107 110

Croatia 39 55 73 50

Cyprus 37 90 49 33

Czech Republic 121 37 171 122

Denmark 13 21 41 36Djibouti 65 119 26 77

Dominica 68 126 31 73

Dominican Republic 70 21 133 80

Ecuador 77 14 169 61

Egypt, Arab Rep. 140 93 163 102

El Salvador 134 157 131 62

Equatorial Guinea 163 144 126 154

Eritrea 110 59 85 173

Estonia 38 30 16 131

Ethiopia 42 63 75 43

Fiji 81 107 50 93

Finland 71 14 98 125

France 59 9 40 165

Gabon 107 88 116 109

Gambia 176 152 151 182

Georgia 64 59 154 9

Germany 71 52 73 112

Ghana 79 107 88 52

Appendix 1.1Easeofpayingtaxesrankings

(Please see Appendix 2 o this report or an explanation o the methodology.)



78

Rankings

Economy Ease o

paying

taxes

Tax

payments

Time to

comply

Total Tax

Rate

Greece 76 30 88 124

Grenada 82 95 42 115Guatemala 108 84 142 90

Guinea 171 164 157 135

Guinea‑Bissau 130 144 82 116

Guyana 113 114 125 79

Haiti 99 136 56 84

Honduras 145 147 88 128

Hong Kong, China 3 4 14 22

Hungary 122 43 137 151

Iceland 31 96 42 23

India 169 168 114 162

Indonesia 127 154 106 76Iran 117 76 142 106

Iraq 53 41 129 32

Ireland 6 21 11 26

Israel 83 107 95 51

Italy 136 48 138 166

Jamaica 174 177 156 139

Japan 123 41 144 147

Jordan 26 88 22 41

Kazakhstan 52 21 114 66

Kenya 164 133 158 134

Kiribati 10 9 31 47

Korea, Rep. 49 43 101 48

Kosovo 50 107 60 31

Kuwait 11 48 29 10

Kyrgyz Republic 156 178 79 153

Lao PDR 113 114 148 56

Latvia 45 9 121 54

Lebanon 34 63 67 38

Rankings

Economy Ease o

paying

taxes

Tax

payments

Time to

comply

Total Tax

Rate

Lesotho 63 72 133 15

Liberia 85 100 55 104Lithuania 51 37 63 99

Luxembourg 15 76 6 17

Macedonia, FYR 26 129 10 12

Madagascar 74 82 78 81

Malawi 24 63 54 25

Malaysia 24 37 47 58

Maldives 1 1 1 3

Mali 158 167 107 140

Marshall Islands 94 72 36 163

Mauritania 175 126 174 175

Mauritius 12 9 58 21Mexico 106 7 167 138

Micronesia 86 72 36 152

Moldova 101 150 93 42

Mongolia 69 141 70 20

Montenegro 145 179 149 35

Morocco 126 92 147 96

Mozambique 98 122 95 59

Namibia 97 122 150 4

Nepal 124 114 141 78

Netherlands 33 21 61 82

New Zealand 9 14 9 53

Nicaragua 165 173 97 158

Niger 141 133 107 119

Nigeria 132 119 178 49

Norway 17 4 18 95

Oman 8 43 7 18

Pakistan 143 147 168 46

Palau 91 63 36 169





Rankings

Economy Ease o

paying

taxes

Tax

payments

Time to

comply

Total Tax

Rate

Panama 173 168 164 136

Papua New Guinea 96 107 71 97Paraguay 110 119 135 63

Peru 86 21 153 86

Philippines 135 147 72 132

Poland 151 129 155 98

Portugal 80 14 135 100

Puerto Rico 104 52 86 161

Qatar 2 1 3 5

Romania 149 182 79 108

Russia 103 35 131 129

Rwanda 59 114 56 44

Samoa 67 122 88 16São Tomé and Principe 160 136 160 123

Saudi Arabia 7 43 13 7

Senegal 172 168 173 117

Serbia 136 174 121 57

Seychelles 34 52 11 105

Sierra Leone 161 93 146 180

Singapore 5 6 17 29

Slovak Republic 119 96 103 130

Slovenia 84 76 104 75

Solomon Islands 48 107 14 70

South Arica 23 21 77 39

Spain 78 14 84 148

Sri Lanka 166 172 102 159

St. Kitts and Nevis 100 84 52 142

St. Lucia 40 100 19 60

St. Vincent and the

Grenadines

62 100 28 91

Sudan 93 136 67 68

Rankings

Economy Ease o

paying

taxes

Tax

payments

Time to

comply

Total Tax

Rate

Suriname 32 55 76 30

Swaziland 54 107 23 72Sweden 42 3 34 144

Switzerland 21 84 8 37

Syrian Arab Republic 105 68 139 101

Taiwan, China 92 59 123 87

Tajikistan 162 160 88 174

Tanzania 120 150 65 114

Thailand 88 82 105 74

Timor‑Leste 19 7 120 1

Togo 155 157 107 141

Tonga 30 68 61 28

Trinidad and Tobago 56 129 26 55Tunisia 118 76 93 157

Turkey 75 48 87 107

Uganda 66 100 58 65

Ukraine 181 183 175 149

United Arab Emirates 4 43 2 6

United Kingdom 16 14 25 67

United States 61 30 69 118

Uruguay 159 157 139 120

Uzbekistan 178 180 145 176

Vanuatu 20 96 31 2

Venezuela 182 176 176 156

Vietnam 147 100 180 85

West Bank and Gaza 28 90 51 13

Yemen 148 142 100 126

Zambia 36 122 39 11

Zimbabwe 131 154 107 83



80

Number o payments Rank

Economy Total tax

payments

Proft tax

payments

Labour tax

payments

Other

taxes

payments

Tax

payments

rank

Aghanistan 8 1 0 7 14

Albania 44 13 12 19 142

Algeria 34 4 12 18 114

Angola 31 4 12 15 96

Antigua and

Barbuda

56 13 24 19 164

Argentina 9 1 1 7 21

Armenia 50 13 12 25 152

Australia 12 1 4 7 37

Austria 22 1 4 17 76

Azerbaijan 22 1 12 9 76

Bahamas, The 17 0 12 5 55

Bahrain 25 0 24 1 87

Bangladesh 21 6 0 15 72

Belarus 107 24 24 59 181

Belgium 11 1 2 8 35

Belize 40 12 12 16 129

Benin 55 5 24 26 163

Bhutan 18 2 12 4 59

Bolivia 42 1 12 29 136

Bosnia and

Herzegovina

51 12 12 27 154

Botswana 19 6 0 13 63

Brazil 10 2 2 6 30

Brunei

Darussalam

15 1 12 2 48

Bulgaria 17 2 1 14 55

Burkina Faso 46 2 24 20 144

Burundi 32 1 16 15 100

Cambodia 39 12 12 15 128

Cameroon 41 13 12 16 133

Canada 9 2 3 4 21

Cape Verde 56 4 24 28 164


Economy Total tax

payments

Proft tax

payments

Labour tax

payments

Other

taxes

payments

Tax

payments

rank

Central Arican

Republic

54 4 24 26 160

Chad 54 12 24 18 160

Chile 10 1 1 8 30

China 7 2 1 4 9

Colombia 20 2 1 17 68

Comoros 20 2 0 18 68

Congo, Dem.

Rep.

32 1 16 15 100

Congo, Republic 61 5 37 19 171

Costa Rica 42 5 12 25 136

Côte d’Ivoire 66 3 24 39 174

Croatia 17 1 12 4 55

Cyprus 27 4 12 11 90Czech Republic 12 1 2 9 37

Denmark 9 3 1 5 21

Djibouti 35 5 12 18 119

Dominica 38 5 12 21 126

Dominican

Republic

9 1 4 4 21

Ecuador 8 2 1 5 14

Egypt, Arab Rep. 29 1 12 16 93

El Salvador 53 13 24 16 157

Equatorial Guinea 46 1 24 21 144

Eritrea 18 2 0 16 59

Estonia 10 1 0 9 30

Ethiopia 19 2 0 17 63

Fiji 33 4 14 15 107

Finland 8 1 3 4 14

France 7 1 2 4 9

Gabon 26 3 4 19 88

Gambia 50 6 13 31 152

Georgia 18 4 0 14 59

Appendix 1.2Tax payments (number per year)







Economy Total tax

payments

Proft tax

payments

Labour tax

payments

Other

taxes

payments

Tax

payments

rank

Germany 16 2 4 10 52

Ghana 33 6 12 15 107

Greece 10 1 1 8 30

Grenada 30 1 12 17 95

Guatemala 24 1 12 11 84

Guinea 56 2 36 18 164

Guinea‑Bissau 46 5 12 29 144

Guyana 34 6 12 16 114

Haiti 42 2 25 15 136

Honduras 47 5 13 29 147

Hong Kong,

China

4 1 1 2 4

Hungary 14 2 4 8 43

Iceland 31 1 14 16 96

India 59 2 24 33 168

Indonesia 51 13 24 14 154

Iran 22 1 12 9 76

Iraq 13 1 12 0 41

Ireland 9 1 1 7 21

Israel 33 2 12 19 107

Italy 15 2 1 12 48

Jamaica 72 4 48 20 177

Japan 13 2 2 9 41

Jordan 26 2 12 12 88

Kazakhstan 9 1 1 7 21

Kenya 41 5 14 22 133

Kiribati 7 5 2 0 9

Korea, Rep. 14 1 3 10 43

Kosovo 33 5 12 16 107

Kuwait 15 3 12 0 48

Kyrgyz Republic 75 12 12 51 178

Lao PDR 34 4 12 18 114


Economy Total tax

payments

Proft tax

payments

Labour tax

payments

Other

taxes

payments

Tax

payments

rank

Latvia 7 1 1 5 9

Lebanon 19 1 12 6 63

Lesotho 21 5 0 16 72

Liberia 32 4 12 16 100

Lithuania 12 1 3 8 37

Luxembourg 22 2 12 8 76

Macedonia, FYR 40 12 12 16 129

Madagascar 23 1 8 14 82

Malawi 19 2 1 16 63

Malaysia 12 1 2 9 37

Maldives 1 0 0 1 1

Mali 58 3 36 19 167

Marshall Islands 21 0 16 5 72Mauritania 38 3 13 22 126

Mauritius 7 1 1 5 9

Mexico 6 1 2 3 7

Micronesia 21 4 4 13 72

Moldova 48 1 28 19 150

Mongolia 43 12 12 19 141

Montenegro 89 12 48 29 179

Morocco 28 1 12 15 92

Mozambique 37 7 12 18 122

Namibia 37 3 12 22 122

Nepal 34 4 12 18 114

Netherlands 9 1 1 7 21

New Zealand 8 1 2 5 14

Nicaragua 64 13 24 27 173

Niger 41 3 1 37 133

Nigeria 35 3 14 18 119

Norway 4 1 1 2 4

Oman 14 1 12 1 43



82


Economy Total tax

payments

Proft tax

payments

Labour tax

payments

Other

taxes

payments

Tax

payments

rank

Pakistan 47 5 25 17 147

Palau 19 0 12 7 63

Panama 59 2 24 33 168

Papua New

Guinea

33 1 13 19 107

Paraguay 35 5 12 18 119

Peru 9 1 2 6 21

Philippines 47 1 36 10 147

Poland 40 12 1 27 129

Portugal 8 1 1 6 14

Puerto Rico 16 5 6 5 52

Qatar 1 0 1 0 1

Romania 113 4 84 25 182

Russia 11 1 3 7 35

Rwanda 34 5 12 17 114

Samoa 37 5 24 8 122

São Tomé and

Principe

42 1 12 29 136

Saudi Arabia 14 1 12 1 43

Senegal 59 3 36 20 168

Serbia 66 12 12 42 174

Seychelles 16 1 12 3 52

Sierra Leone 29 1 12 16 93

Singapore 5 1 1 3 6

Slovak Republic 31 1 12 18 96

Slovenia 22 1 12 9 76

Solomon Islands 33 5 12 16 107

South Arica 9 2 3 4 21

Spain 8 1 1 6 14

Sri Lanka 62 5 24 33 172

St. Kitts and

Nevis

24 4 12 8 84

St. Lucia 32 1 12 19 100

St. Vincent and

the Grenadines

32 4 12 16 100


Economy Total tax

payments

Proft tax

payments

Labour tax

payments

Other

taxes

payments

Tax

payments

rank

Sudan 42 2 12 28 136

Suriname 17 4 0 13 55

Swaziland 33 2 13 18 107

Sweden 2 1 0 1 3

Switzerland 24 2 15 7 84

Syrian Arab

Republic

20 1 1 18 68

Taiwan, China 18 3 3 12 59

Tajikistan 54 12 12 30 160

Tanzania 48 5 24 19 150

Thailand 23 2 13 8 82

Timor‑Leste 6 5 0 1 7

Togo 53 5 25 23 157

Tonga 20 1 0 19 68

Trinidad and

Tobago

40 4 24 12 129

Tunisia 22 4 4 14 76

Turkey 15 1 1 13 48

Uganda 32 3 12 17 100

Ukraine 147 6 96 45 183

United Arab

Emirates

14 0 12 2 43

United Kingdom 8 1 1 6 14

United States 10 2 3 5 30

Uruguay 53 1 24 28 157

Uzbekistan 106 16 12 78 180

Vanuatu 31 0 12 19 96

Venezuela 71 13 28 30 176

Vietnam 32 6 12 14 100

West Bank and

Gaza

27 14 0 13 90

Yemen 44 1 24 19 142

Zambia 37 5 13 19 122

Zimbabwe 51 7 14 30 154





Hours Rank

Economy Total tax

time

Corporate

income

tax time

Labour

tax time

Consumption

tax time

Time

rank

Aghanistan 275 77 120 78 119

Albania 244 120 96 28 99

Algeria 451 152 110 189 161

Angola 272 80 96 96 116

Antigua and

Barbuda

207 23 136 48 81

Argentina 453 105 108 240 162

Armenia 958 152 352 454 179

Australia 107 35 18 54 24

Austria 170 49 54 67 64

Azerbaijan 376 80 134 162 151

Bahamas, The 58 0 48 0 5

Bahrain 36 0 36 0 3

Bangladesh 302 140 0 162 127

Belarus 900 714 139 47 177

Belgium 156 20 40 96 53

Belize 147 27 60 60 48

Benin 270 30 120 120 107

Bhutan 274 250 24 0 118

Bolivia 1080 120 480 480 181

Bosnia and

Herzegovina

422 68 96 258 159

Botswana 140 40 40 60 42

Brazil 2600 736 490 1374 183

Brunei

Darussalam

144 66 78 0 46

Bulgaria 616 40 288 288 172

Burkina Faso 270 30 120 120 107

Burundi 140 80 48 12 42

Cambodia 173 23 84 66 66

Cameroon 1400 500 700 200 182

Canada 119 47 36 36 30

Cape Verde 100 16 36 48 20

Hours Rank

Economy Total tax

time

Corporate

income

tax time

Labour

tax time

Consumption

tax time

Time

rank

Central Arican

Republic

504 24 240 240 165

Chad 122 50 36 36 34

Chile 316 42 137 137 130

China 504 96 192 216 165

Colombia 208 40 102 66 82

Comoros 100 4 48 48 20

Congo, Dem.

Rep.

308 116 96 96 128

Congo, Republic 606 275 150 181 170

Costa Rica 282 18 132 132 124

Côte d’Ivoire 270 30 120 120 107

Croatia 196 60 96 40 73

Cyprus 149 29 80 40 49Czech Republic 613 135 300 178 171

Denmark 135 25 70 40 41

Djibouti 114 30 36 48 26

Dominica 120 15 48 57 31

Dominican

Republic

324 82 80 162 133

Ecuador 600 60 300 240 169

Egypt, Arab Rep. 480 76 210 194 163

El Salvador 320 128 96 96 131

Equatorial Guinea 296 80 120 96 126

Eritrea 216 24 96 96 85

Estonia 81 20 34 27 16

Ethiopia 198 150 24 24 75

Fiji 150 24 66 60 50

Finland 243 21 200 22 98

France 132 26 80 26 40

Gabon 272 80 96 96 116

Gambia 376 40 96 240 151

Georgia 387 140 67 180 154

Appendix 1.3Time to comply (hours per year)




84

Hours Rank

Economy Total tax

time

Corporate

income

tax time

Labour

tax time

Consumption

tax time

Time

rank

Germany 196 30 123 43 73

Ghana 224 40 88 96 88

Greece 224 88 48 88 88

Grenada 140 8 96 36 42

Guatemala 344 44 144 156 142

Guinea 416 32 192 192 157

Guinea‑Bissau 208 160 24 24 82

Guyana 288 48 48 192 125

Haiti 160 40 72 48 56

Honduras 224 35 93 96 88

Hong Kong,

China

80 50 30 0 14

Hungary 330 35 203 92 137

Iceland 140 40 60 40 42

India 271 47 96 128 114

Indonesia 266 88 97 81 106

Iran 344 32 240 72 142

Iraq 312 24 288 0 129

Ireland 76 10 36 30 11

Israel 230 110 60 60 95

Italy 334 37 264 33 138

Jamaica 414 30 336 48 156

Japan 355 180 140 35 144

Jordan 101 5 60 36 22

Kazakhstan 271 105 74 92 114

Kenya 417 60 57 300 158

Kiribati 120 24 96 0 31

Korea, Rep. 250 120 80 50 101

Kosovo 163 41 32 90 60

Kuwait 118 48 70 0 29

Kyrgyz Republic 202 60 71 71 79

Lao PDR 362 138 42 182 148

Hours Rank

Economy Total tax

time

Corporate

income

tax time

Labour

tax time

Consumption

tax time

Time

rank

Latvia 279 31 165 83 121

Lebanon 180 40 100 40 67

Lesotho 324 22 140 162 133

Liberia 158 57 59 42 55

Lithuania 166 32 76 58 63

Luxembourg 59 21 14 24 6

Macedonia, FYR 75 25 28 22 10

Madagascar 201 9 72 120 78

Malawi 157 67 30 60 54

Malaysia 145 28 87 30 47

Maldives 0 0 0 0 1

Mali 270 30 120 120 107

Marshall Islands 128 0 96 32 36Mauritania 696 120 96 480 174

Mauritius 161 48 100 13 58

Mexico 517 185 118 214 167

Micronesia 128 32 96 0 36

Moldova 228 60 88 80 93

Mongolia 192 55 61 76 70

Montenegro 372 43 136 193 149

Morocco 358 70 48 240 147

Mozambique 230 50 60 120 95

Namibia 375 41 46 288 150

Nepal 338 120 96 122 141

Netherlands 164 40 64 60 61

New Zealand 70 30 25 15 9

Nicaragua 240 80 80 80 97

Niger 270 30 120 120 107

Nigeria 938 398 378 162 178

Norway 87 24 15 48 18

Oman 62 50 12 0 7





Hours Rank

Economy Total tax

time

Corporate

income

tax time

Labour

tax time

Consumption

tax time

Time

rank

Pakistan 560 40 40 480 168

Palau 128 0 96 32 36

Panama 482 50 180 252 164

Papua New

Guinea

194 153 8 33 71

Paraguay 328 40 144 144 135

Peru 380 32 192 156 153

Philippines 195 37 38 120 72

Poland 395 72 222 101 155

Portugal 328 40 192 96 135

Puerto Rico 218 80 60 78 86

Qatar 36 0 36 0 3

Romania 202 32 110 60 79

Russia 320 160 96 64 131

Rwanda 160 22 48 90 56

Samoa 224 48 96 80 88

São Tomé and

Principe

424 40 192 192 160

Saudi Arabia 79 20 59 0 13

Senegal 666 120 96 450 173

Serbia 279 48 126 105 121

Seychelles 76 40 36 0 11

Sierra Leone 357 15 168 174 146

Singapore 84 34 10 40 17

Slovak Republic 257 43 100 114 103

Slovenia 260 90 96 74 104

Solomon Islands 80 8 30 42 14

South Arica 200 100 50 50 77

Spain 213 33 90 90 84

Sri Lanka 256 16 96 144 102

St. Kitts and

Nevis

155 31 124 0 52

St. Lucia 92 11 51 30 19

St. Vincent and

the Grenadines

117 14 52 51 28

Hours Rank

Economy Total tax

time

Corporate

income

tax time

Labour

tax time

Consumption

tax time

Time

rank

Sudan 180 70 70 40 67

Suriname 199 48 24 127 76

Swaziland 104 8 48 48 23

Sweden 122 50 36 36 34

Switzerland 63 15 40 8 8

Syrian Arab

Republic

336 300 36 0 139

Taiwan, China 281 221 27 33 123

Tajikistan 224 80 48 96 88

Tanzania 172 60 52 60 65

Thailand 264 160 48 56 105

Timor‑Leste 276 132 144 0 120

Togo 270 30 120 120 107

Tonga 164 8 12 144 61

Trinidad and

Tobago

114 30 60 24 26

Tunisia 228 96 36 96 93

Turkey 223 46 80 97 87

Uganda 161 35 72 54 58

Ukraine 736 140 364 232 175

United Arab

Emirates

12 0 12 0 2

United Kingdom 110 35 45 30 25

United States 187 99 55 33 69

Uruguay 336 100 128 108 139

Uzbekistan 356 126 70 160 145

Vanuatu 120 0 24 96 31

Venezuela 864 120 360 384 176

Vietnam 1050 350 400 300 180

West Bank and

Gaza

154 10 96 48 51

Yemen 248 56 72 120 100

Zambia 132 48 24 60 39

Zimbabwe 270 90 96 84 107



86

Total Tax Rate Rank

Economy TTR Proft tax

TTR

Labour

tax TTR

Other taxes

TTR

TTR

Rank

Aghanistan 36.4% 0.0% 0.0% 36.4% 71

Albania 44.9% 8.0% 31.9% 5.0% 113

Algeria 72.0% 6.6% 29.7% 35.7% 168

Angola 53.2% 24.6% 0.0% 28.6% 143

Antigua and

Barbuda

41.5% 26.0% 9.5% 6.0% 94

Argentina 108.1% 2.9% 29.4% 75.8% 178

Armenia 36.2% 12.1% 23.0% 1.1% 69

Australia 48.0% 25.8% 21.0% 1.2% 127

Austria 55.5% 16.1% 34.6% 4.8% 146

Azerbaijan 40.9% 13.8% 24.8% 2.3% 89

Bahamas, The 47.0% 0.0% 6.1% 40.9% 121

Bahrain 15.0% 0.0% 14.6% 0.4% 8

Bangladesh 35.0% 25.7% 0.0% 9.3% 64

Belarus 99.7% 22.1% 39.6% 38.0% 177

Belgium 57.3% 5.3% 50.2% 1.8% 150

Belize 28.9% 20.4% 7.0% 1.5% 34

Benin 73.3% 16.7% 32.7% 23.9% 170

Bhutan 40.6% 35.0% 1.1% 4.5% 88

Bolivia 80.0% 0.0% 15.5% 64.5% 172

Bosnia and

Herzegovina

27.1% 4.9% 17.6% 4.6% 27

Botswana 17.1% 16.2% 0.0% 0.9% 14

Brazil 69.2% 21.3% 41.3% 6.6% 167

Brunei

Darussalam

30.3% 24.7% 5.6% 0.0% 40

Bulgaria 31.4% 4.6% 22.9% 3.9% 45

Burkina Faso 44.9% 16.1% 22.6% 6.2% 111

Burundi 278.6% 19.4% 7.8% 251.4% 181

Cambodia 22.7% 19.1% 0.1% 3.5% 19

Cameroon 50.5% 27.4% 18.3% 4.8% 137

Canada 43.6% 23.9% 12.5% 7.2% 103

Cape Verde 49.7% 18.6% 18.5% 12.6% 133

Total Tax Rate Rank


TTR

Labour

tax TTR

Other taxes

TTR

TTR

Rank

Central Arican

Republic

203.8% 176.8% 8.1% 18.9% 179

Chad 60.9% 31.3% 23.9% 5.7% 155

Chile 25.3% 17.9% 3.8% 3.6% 24

China 63.8% 6.3% 49.6% 7.9% 160

Colombia 78.7% 17.7% 33.9% 27.1% 171

Comoros 41.1% 31.4% 0.0% 9.7% 92

Congo, Dem.

Rep.

322.0% 58.9% 7.9% 255.2% 183

Congo, Republic 65.5% 0.0% 32.9% 32.6% 164

Costa Rica 54.8% 18.9% 29.3% 6.6% 145

Côte d’Ivoire 44.7% 9.0% 20.1% 15.6% 110

Croatia 32.5% 11.4% 19.4% 1.7% 50

Cyprus 28.8% 9.6% 7.1% 12.1% 33Czech Republic 47.2% 4.7% 39.5% 3.0% 122

Denmark 29.2% 22.0% 2.2% 5.0% 36

Djibouti 38.7% 17.7% 17.7% 3.3% 77

Dominica 37.0% 25.9% 7.9% 3.2% 73

Dominican

Republic39.0% 19.3% 17.8% 1.9% 80

Ecuador 34.9% 18.5% 13.7% 2.7% 61

Egypt, Arab Rep. 43.0% 13.8% 25.6% 3.6% 102

El Salvador 35.0% 17.0% 17.2% 0.8% 62

Equatorial Guinea 59.5% 13.5% 25.4% 20.6% 154

Eritrea 84.5% 8.8% 0.0% 75.7% 173

Estonia 49.1% 8.1% 37.5% 3.5% 131

Ethiopia 31.1% 26.8% 0.0% 4.3% 43

Fiji 41.2% 30.8% 10.2% 0.2% 93

Finland 47.7% 17.1% 29.6% 1.0% 125

France 65.8% 8.2% 51.7% 5.9% 165

Gabon 44.7% 19.7% 22.7% 2.3% 109

Gambia 292.4% 41.4% 12.8% 238.2% 182

Georgia 15.3% 13.3% 0.0% 2.0% 9

Appendix 1.4TotalTaxRate(%ofcommercialprots)






Total Tax Rate Rank


TTR

Labour

tax TTR

Other taxes

TTR

TTR

Rank

Germany 44.9% 17.4% 22.0% 5.5% 112

Ghana 32.7% 18.1% 14.0% 0.6% 52

Greece 47.4% 13.9% 31.7% 1.8% 124

Grenada 45.3% 27.6% 5.6% 12.1% 115

Guatemala 40.9% 25.9% 14.3% 0.7% 90

Guinea 49.9% 21.9% 17.3% 10.7% 135

Guinea‑Bissau 45.9% 14.9% 24.8% 6.2% 116

Guyana 38.9% 26.8% 8.8% 3.3% 79

Haiti 40.1% 23.3% 12.4% 4.4% 84

Honduras 48.3% 26.7% 10.7% 10.9% 128

Hong Kong,

China

24.2% 18.6% 5.3% 0.3% 22

Hungary 57.5% 9.1% 39.5% 8.9% 151

Iceland 25.0% 7.2% 12.8% 5.0% 23

India 64.7% 25.1% 18.2% 21.4% 162

Indonesia 37.6% 26.9% 10.6% 0.1% 76

Iran 44.2% 17.9% 25.9% 0.4% 106

Iraq 28.4% 14.9% 13.5% 0.0% 32

Ireland 26.5% 11.9% 12.1% 2.5% 26

Israel 32.6% 24.7% 5.3% 2.6% 51

Italy 68.4% 22.9% 43.4% 2.1% 166

Jamaica 51.3% 28.6% 13.0% 9.7% 139

Japan 55.7% 33.9% 16.5% 5.3% 147

Jordan 31.1% 15.1% 12.4% 3.6% 41

Kazakhstan 35.9% 23.5% 9.6% 2.8% 66

Kenya 49.7% 33.1% 6.9% 9.9% 134

Kiribati 31.8% 23.4% 8.4% 0.0% 47

Korea, Rep. 31.9% 17.1% 12.7% 2.1% 48

Kosovo 28.3% 21.2% 5.6% 1.5% 31

Kuwait 15.5% 4.7% 10.8% 0.0% 10

Kyrgyz Republic 59.4% 3.2% 21.4% 34.8% 153

Lao PDR 33.7% 25.2% 5.6% 2.9% 56

Total Tax Rate Rank


TTR

Labour

tax TTR

Other taxes

TTR

TTR

Rank

Latvia 33.0% 2.2% 27.2% 3.6% 54

Lebanon 30.2% 6.1% 24.1% 0.0% 38

Lesotho 18.5% 14.9% 0.0% 3.7% 15

Liberia 43.7% 0.0% 5.4% 38.3% 104

Lithuania 42.7% 4.1% 35.1% 3.5% 99

Luxembourg 20.9% 4.1% 15.3% 1.5% 17

Macedonia, FYR 16.4% 12.1% 0.8% 3.5% 12

Madagascar 39.2% 16.6% 20.3% 2.3% 81

Malawi 25.8% 24.0% 1.1% 0.7% 25

Malaysia 34.2% 16.5% 15.6% 2.1% 58

Maldives 9.1% 0.0% 0.0% 9.1% 3

Mali 52.1% 12.9% 32.6% 6.6% 140

Marshall Islands 64.9% 0.0% 11.8% 53.1% 163Mauritania 86.1% 61.9% 17.6% 6.6% 175

Mauritius 22.9% 10.6% 5.0% 7.3% 21

Mexico 51.0% 22.9% 26.7% 1.4% 138

Micronesia 58.7% 52.0% 6.7% 0.0% 152

Moldova 31.1% 0.0% 30.8% 0.3% 42

Mongolia 22.8% 9.3% 12.4% 1.1% 20

Montenegro 28.9% 8.3% 18.8% 1.8% 35

Morocco 41.7% 18.1% 22.2% 1.4% 96

Mozambique 34.3% 27.7% 4.5% 2.1% 59

Namibia 9.6% 4.0% 1.0% 4.6% 4

Nepal 38.8% 16.8% 11.3% 10.7% 78

Netherlands 39.3% 20.7% 17.3% 1.3% 82

New Zealand 32.8% 29.4% 2.6% 0.8% 53

Nicaragua 63.2% 24.9% 19.2% 19.1% 158

Niger 46.5% 20.1% 19.6% 6.8% 119

Nigeria 32.2% 21.8% 9.7% 0.7% 49

Norway 41.6% 24.4% 15.9% 1.3% 95

Oman 21.6% 9.7% 11.8% 0.1% 18



88

Total Tax Rate Rank


TTR

Labour

tax TTR

Other taxes

TTR

TTR

Rank

Pakistan 31.6% 14.3% 15.0% 2.3% 46

Palau 73.0% 0.0% 6.5% 66.5% 169

Panama 50.1% 17.1% 22.6% 10.4% 136

Papua New

Guinea

42.3% 22.0% 11.7% 8.6% 97

Paraguay 35.0% 9.6% 18.6% 6.8% 63

Peru 40.3% 12.1% 11.0% 17.2% 86

Philippines 49.4% 24.9% 10.3% 14.2% 132

Poland 42.5% 17.3% 21.9% 3.3% 98

Portugal 42.9% 14.3% 26.8% 1.8% 100

Puerto Rico 64.7% 25.3% 12.6% 26.8% 161

Qatar 11.3% 0.0% 11.3% 0.0% 5

Romania 44.6% 8.2% 34.2% 2.2% 108

Russia 48.3% 10.9% 31.8% 5.6% 129

Rwanda 31.3% 21.2% 5.7% 4.4% 44

Samoa 18.9% 11.9% 7.0% 0.0% 16

São Tomé and

Principe

47.2% 35.5% 6.8% 4.9% 123

Saudi Arabia 14.5% 2.1% 12.4% 0.0% 7

Senegal 46.0% 14.8% 24.1% 7.1% 117

Serbia 34.0% 11.6% 20.2% 2.2% 57

Seychelles 44.1% 20.8% 22.6% 0.7% 105

Sierra Leone 235.6% 0.0% 11.3% 224.3% 180

Singapore 27.8% 7.9% 14.9% 5.0% 29

Slovak Republic 48.6% 7.1% 39.6% 1.9% 130

Slovenia 37.5% 15.2% 19.9% 2.4% 75

Solomon Islands 36.3% 24.9% 8.4% 3.0% 70

South Arica 30.2% 24.5% 2.4% 3.3% 39

Spain 56.9% 21.2% 35.2% 0.5% 148

Sri Lanka 63.7% 26.5% 16.9% 20.3% 159

St. Kitts and

Nevis

52.7% 32.7% 11.3% 8.7% 142

St. Lucia 34.4% 25.9% 5.6% 2.9% 60

St. Vincent and

the Grenadines

41.0% 32.5% 5.1% 3.4% 91

Total Tax Rate Rank


TTR

Labour

tax TTR

Other taxes

TTR

TTR

Rank

Sudan 36.1% 13.8% 19.2% 3.1% 68

Suriname 27.9% 27.9% 0.0% 0.0% 30

Swaziland 36.6% 28.1% 4.0% 4.5% 72

Sweden 54.6% 16.4% 36.6% 1.6% 144

Switzerland 29.7% 9.7% 16.6% 3.4% 37

Syrian Arab

Republic

42.9% 23.2% 0.0% 19.7% 101

Taiwan, China 40.4% 19.5% 16.7% 4.2% 87

Tajikistan 85.9% 17.7% 28.5% 39.7% 174

Tanzania 45.2% 19.9% 18.0% 7.3% 114

Thailand 37.2% 29.0% 5.7% 2.5% 74

Timor‑Leste 0.2% 0.0% 0.0% 0.2% 1

Togo 52.7% 11.1% 28.3% 13.3% 141

Tonga 27.5% 26.3% 0.0% 1.2% 28

Trinidad and

Tobago

33.1% 21.6% 5.8% 5.7% 55

Tunisia 62.8% 15.0% 25.2% 22.6% 157

Turkey 44.5% 17.0% 23.1% 4.4% 107

Uganda 35.7% 23.3% 11.3% 1.1% 65

Ukraine 57.2% 12.3% 43.1% 1.8% 149

United Arab

Emirates

14.1% 0.0% 14.1% 0.0% 6

United Kingdom 35.9% 21.9% 11.0% 3.0% 67

United States 46.3% 27.9% 9.6% 8.8% 118

Uruguay 46.7% 28.3% 15.6% 2.8% 120

Uzbekistan 94.9% 1.7% 27.1% 66.1% 176

Vanuatu 8.4% 0.0% 4.5% 3.9% 2

Venezuela 61.1% 8.1% 18.1% 34.9% 156

Vietnam 40.1% 20.6% 19.2% 0.3% 85

West Bank and

Gaza

16.8% 16.2% 0.0% 0.6% 13

Yemen 47.8% 35.1% 11.3% 1.4% 126

Zambia 16.1% 1.7% 10.4% 4.0% 11

Zimbabwe 39.4% 24.2% 5.1% 10.1% 83



90

Methodology

Appendix

2



91Paying Taxes 2010

Appendix 2Methedology

Introduction

The Paying Taxes indicator is one o ten indicatorsassessed as part o the World Bank Group’s annualDoing Business report, which, this year, was published on9 September 2009. This is the th year in which tax datahas been collected as part o the Doing Business project.

The Paying Taxes study involves gathering inormationon the tax aairs o a standard case study company in183 economies, by reviewing the nancial statementsand a list o transactions o a standard small to mediumsized rm. This inormation is used to generate threesub‑indicators related to the number o tax payments,the time taken to comply with its tax aairs, and thetotal tax cost. These are equally weighted to produce anoverall ranking or each country or ‘the ease o payingtaxes’.Rankingsofeachoftheindividualcomponentsarealso available. All the rankings are included in Appendix 1,and urther details or each economy are available atwww.doingbusiness.org

The study also collects additional data, which, whilstnot used to determine a country’s ranking, assists withunderstanding the tax system in each country. Some othis additional data is reerred to in this report.

This appendix includes detailed inormation on themethodology behind the collection o data or the mainindicators, and the undamental distinction betweentaxes borne and taxes collected. It also explainsmore about the PricewaterhouseCoopers Total TaxContribution methodology (basic principles o which are

incorporated in the design o the Doing Business payingtaxes indicator), and some o the matters that must beconsidered when deciding what payments should beincluded when considering the tax burden o a company.

The case study company

In order to gather the necessary inormation to generatethe tax indicators mentioned or the standardisedbusiness in each economy, a case study company hasbeen developed. The case study company is a domesticfower‑pot manuacturer and retailer. It has been chosenas a business that can be readily understood worldwide,and has an activity that involves both manuactureand retail o a low‑technology product. The overridingobjective is to generate a standard act‑pattern, so thatthe tax indicators generated using the same criteria canbe compared across many economies without beingsignicantly distorted by industry‑specic incentives andrelies. It is also specied to be a domestic operation inthe economy, so the assessment is purely o the localtax system.

The company has a set o nancial statements, andcomparability is assisted by detailed assumptionsmade with regard to the company’s operations, sta,transactions, size etc., as well as the process by whichthe inormation is gathered and reviewed.

The acts and assumptions allow the World Bank Groupto generate tax indicators or each economy based on theapplication o their tax rules to the case study company.

Expertcontributorsfromeacheconomyprovidedatain a standard ormat, which is sense‑checked andvalidated by the World Bank Group team. The dataprovided is based on the standardised case study actsand assumptions and on the tax rules applying or the

year rom 1 January to 31 December 2008. While thebasic elements o the case study do not change year onyear, the period or which the rules are deemed to applyis updated.



92

The ramework o the DoingBusiness study

The Doing Business ‘paying taxes’ data records the taxesand mandatory contributions that a small to mediumsized company must pay in a given year, and alsomeasures the administrative burden o paying taxes andcontributions. Taxes and contributions measured includethe prot or corporate income tax, social contributionsand labour taxes paid by the employer, property taxes,dividend tax, capital gains tax, nancial transactions tax,waste collection taxes and vehicle and road taxes.

Doing Business measures all taxes and contributionsthat are government mandated (at any level – ederal,state or local), apply to the standardised business, andhave an impact on its income statements. In doing so,Doing Business goes beyond the traditional denitiono a tax, as dened or the purposes o governmentnational accounts, where taxes include only compulsoryunrequited payments to general government.Doing Business departs rom this denition, becauseit measures imposed charges that aect businessaccounts, not just government accounts. The maindierences relate to certain labour contributions.

The Doing Business ‘paying taxes’ data includesgovernment mandated contributions, paid by theemployer, to a requited private pension und or workersinsurance und. The indicator includes, or example,

Australia’s compulsory superannuation guarantee andworkers compensation insurance.

Assumptions about the business

The business:

• Isalimitedliability,taxablecompany.Ifthereismorethan one type o limited liability company in a country,the limited liability orm most popular among domesticrms is chosen. The most popular orm is reported byincorporation lawyers or the statistical oce.

• Startedoperationson1January2007.Atthattimeitpurchased all the assets shown in its balance sheet,and hired all its workers.

• Operatesintheeconomy’slargestbusinesscity.

• Is100%domestically‑ownedandhasveowners,all o whom are natural persons (resident or taxpurposes in the economy).

• Hasastart‑upcapitalof102timesincomepercapitaat the end o 2007.

• Performsgeneralindustrialandcommercialactivities.Specically, it produces ceramic fower‑pots and sellsthem at retail. It does not participate in oreign trade(no import or export), and does not handle productssubject to a special tax regime – or example, alcoholor tobacco.

• Atthebeginningof2007,thecompanyownstwo plots o land, one building, machinery, oceequipment, computers and one truck. Another truckis leased.

• Doesnotqualifyforinvestmentincentives,oranybenets apart rom those related to the age or size othe company.

• Has60employees,comprisingfourmanagers,eightassistants and 48 workers. All o these workers arenationals o the country and one o the managers isalso an owner.

• Noemployeeshaveleftorjoinedthecompanysincethe company was established.

• Hasaturnoverof1,050timesincomepercapita.

• Madealossintherstyearofoperation.

• Hasagrossmargin(pre‑tax)of20%(thatissalesare120% o the cost o goods sold).



93Paying Taxes 2010


• Sellsoneofitsplotsoflandataprotduringthesecond year.

• Hasannualfuelcostsforitstrucksequaltotwiceincome per capita.

• Distributes50%ofitsprotsasdividendstotheowners at the end o the second year.

• Issubjecttoaseriesofotherdetailedassumptionsonexpenses and transactions to urther standardise thecase. All nancial statement variables are proportionalto 2006 income per capita. For example, the owner,who is also a manager, spends 10% o income percapita on travelling or the company (20% o thisowner’s expenses are purely private, 20% are orentertaining customers, and 60% or business travel).

Assumptions about taxes and contributions

• Thetaxesandcontributionsarethosepaidinthesecond year o operation (scal year 2008). A tax orcontribution is considered distinct i it has a dierentname or is collected by a dierent agency. Taxes andcontributions with the same name and agency, butcharged at dierent rates depending on the business,are counted as the same tax or contribution.

• Thenumberoftimesthecompanypaystaxesandcontributions in a year is the number o dierenttaxes or contributions multiplied by the requency opayment (or withholding) or each one. The requencyo payment includes advance payments (or

withholding), as well as regular payments(or withholding).

The indicators:

Number of tax payments

• Thetaxpaymentsindicatorreectsthetotalnumber o taxes and contributions paid, the methodo payment, the requency o payment and thenumber o agencies involved or this standardisedcase study company, during the second year oits operation. It includes payments made by thecompany on consumption taxes, such as salestax or value added tax. Although these taxes donot aect the income statements o the company,

they add to the administrative burden o complyingwith the tax system and so are included in the taxpayments measure.

• Thenumberofpaymentstakesintoaccountelectronicling. Where ull electronic ling and payment isallowed (and it is used by the majority o small tomedium sized businesses), the tax is counted as paidonce a year, even i the payment is more requent.For taxes paid through third parties, such as tax on

The case study company has a turnover whichis the same multiple o the income per capita oreach economy. In absolute terms, thereore, thenumbers can be dierent. For example, in theUK, the turnover o the business is assumed tobe £21.5m, whereas, in Argentina, turnover is13,941,603 pesos, which at 31 December 2008(the end o the scal year o the study) equates to£0.4m. In both economies however, the calculationis the same and is based on income per capita.This allows the case study nancials to be fexedto refect the relative wealth o the economy inwhich it operates. While the turnover is fexed, thegross margin o the company is xed at the samepercentage regardless o the economy in which thecompany operates.



94

interest paid by a nancial institution or uel tax paidby the uel distributor, only one payment is included,even i payments are more requent. These aretaxes withheld at source, where no ling is made bythe company.

• Wheretwoormoretaxesorcontributionsarepaid jointly using the same orm, each o these jointpayments is counted once. For example, i mandatoryhealth insurance contributions and mandatory pensioncontributions are led and paid together, only one othese contributions would be included in the numbero payments.

Time to comply

• Timeisrecordedinhoursperyear.Theindicatormeasures the time to prepare, le and pay (orwithhold) three major types o taxes and contributions:

• corporateincometax,

• valueaddedorsalestax,and

• labourtaxes,includingpayrolltaxesandsocialsecurity contributions.

• Preparationtimeincludesthetimetocollectallinormation necessary to compute the tax payable.I separate accounting books must be kept or taxpurposes – or separate calculations made – the timeassociated with these processes is included. Thisextra time is included only i the regular accounting

work is not enough to ull the tax accountingrequirements, in which case the incremental timerequired is included. (The time estimated does notinclude the time spent developing the entries on taxor inclusion in the statutory accounts).

• Filingtimeincludesthetimetocompleteallnecessarytax orms and to make all necessary calculationsand submissions.

• Paymenttimeconsidersthehoursneededtomakethe payment online, or at the tax authorities. Wheretaxes and contributions are paid in person, the timeincludes delays while waiting. (Payment time canalso include analysis o orecast data and associatedcalculations i advance payments are required).

• Itisimportanttonotethatthehourstocomplymeasure does not include any time spent on taxaudits or inspections, or dealing with tax authorityqueries. The case study does not include any actsor assumptions which would enable such time tobe estimated.

Tax Cost – Total Tax Rate (TTR)

• TheTTRindicatormeasurestheamountofalltaxesand mandatory contributions borne by the businessin the second year o operation, expressed as apercentage o commercial prots. Doing Business

2010reportstheTTRforthescalyear2008(1 January to 31 December 2008).

• Thetotalamountoftaxesborneisthesumofallthe dierent taxes and contributions payable ateraccounting or deductions and exemptions. The taxeswithheld (such as personal income tax), or collectedby the company, but not remitted to the tax authorities(such as sales or value added tax), and not borne bythecompany,areexcludedfromtheTTR(whilenotingthatthesestillcontributetothecomplianceindicators;hours and payments).

• Thetaxesandcontributionsincludedcanbedividedinto ve categories:

• protorcorporateincometax;

• socialcontributionsandlabourtaxespaidbytheemployer (or which all mandatory contributions areincluded, even i paid to a private entity such as arequitedpensionfund);



95Paying Taxes 2010


• propertytaxes;

• turnovertaxesandcascadingsalestaxesaswellas other consumption taxes such as irrecoverableVAT;and

• othertaxes(suchasmunicipalfeesandvehicleand uel taxes).

• Thisisacomprehensivemeasureofallthetaxesand contributions borne by business. As such, itdiers rom the statutory rate, which merely providesthe actor to be applied to the tax base. It is moreinormative and more useul than other measures,which, or example, ocus only on corporateincome tax.

• ItisimportanttonotethattheprotgureusedintheTTRcalculation(thecommercialprot)isnottheconventional gure ound in the nancial statementso a company – the prot beore tax gure (PBT). Incomputing commercial prot, these taxes are notdeductible, and are added back to present a clearpicture o the actual prot o a business beore any othe taxes it bears in the course o the scal year.

• Commercialprotsaredenedas,‘salesminuscost o goods sold, minus gross salaries, minusadministrative expenses, minus other expenses,minus provisions, plus capital gains (rom the propertysale), minus interest expense, plus interest incomeand minus commercial depreciation’. To compute thecommercial depreciation, a straight‑line depreciation

method is applied with the ollowing rates: 0% orthe land, 5% or the building, 10% or the machinery,33% or the computers, 20% or the oce equipment,20% or the truck and 10% or business developmentexpenses. I any o the taxes and contributions areincluded in ‘other expenses’, then these are addedback to the commercial prots gure. Commercialprot amounts to 59.4 times the income per capita.

• TheTTRexcludesvalueaddedtaxes(wherenotirrecoverable), because they do not aect theaccounting prots o the business – and thereore theyare not refected in the income statement.

• Theprinciplesusedforthetaxcostindicatorarebroadly consistent with the PricewaterhouseCoopersTotal Tax Contribution ramework methodology.However,PricewaterhouseCoopers,initsempiricalwork,calculatesTTRincludingonlytaxesasdenedlater in this appendix. Other mandatory contributionssuch as the Australian superannuation guaranteeobligation are excluded. Such payments are usuallydisclosed by the company in other elements o theTotal Tax Contribution ramework, together withadditional payments made by the company such ascontributions to inrastructure costs. These are otenrequired o companies in the extractive industries, byeconomies in which they invest, but do not strictlycount as taxes.

Ease of Paying Taxes ranking

• ThedatacollectedbytheDoing Business teamis used to generate a system o ranking based onthree indicators:

Steps: the number o tax payments

Time: the number o hours to comply with thecompany’s tax obligations

Cost:thetotaltaxrate(TTR)

• Thisthreestepapproachislinkedtoabroadermethodology used by the World Bank Group in theDoing Business project which requires these threecomponents o steps, time and cost.



96

• TheWorldBankGroupreport,‘ Doing Business 2010’,aggregates these three indicators to generate anoverall ranking. The aggregation o the indicatorsgives each indicator an equal weighting.

• Hereisoneexampleofhowtherankingontheeaseo paying taxes is constructed. In Iceland, it takes 31payments, 140 hours and 25% o commercial protsto comply with business taxes during one year. Inthese three indicators, Iceland ranks in the 52nd, 22ndand 12th percentiles. Thereore, Iceland ranks in the29th percentile or the overall ease o paying taxes –the average o the three percentiles. By ordering theease o paying taxes percentile or each economy, theranking is obtained, which is 31 out o 183 economiesin the case o Iceland.

• ThedatatablesinAppendix1showthisoverallranking, and additionally the ranking or eachindividualindicatori.e.fortheTotalTaxRate,forthetime to comply and or tax payments. The appendixalso gives a breakdown o the results or eachindicator across the main types o taxes.

• Thedetailsonpayingtaxescanbefoundforeacheconomy at www.doingbusiness.org andwww.pwc.com/payingtaxes

The PricewaterhouseCoopers TotalTax Contribution (‘TTC’) ramework

The PricewaterhouseCoopers Total Tax Contribution

ramework was developed with a view to establishinga methodology which enables companies to collectand communicate total tax inormation in a consistentmanner, meeting the needs o their various stakeholdersand helping to improve transparency35.

The ramework encompasses all the taxes that arepaid by companies and includes, or example, propertytaxes, labour taxes and contributions, sales taxes andother taxes, as well as corporate income tax. It makes

a undamental distinction between two types o taxespaid by companies: these are known as ‘taxes borne’and ‘taxes collected’. In essence, taxes borne are thosewhich are a cost to the company, such as property taxes,employer social security and corporate income tax. Taxescollected are those where the company is collecting thetax on behal o the authority, including taxes deductedrom employees’ salaries, sales taxes and excise duties.

TheTotalTaxRateindicatorwhichisincludedinthe World Bank Group’s Paying Taxes study hasbeen calculated using the principles o the Total TaxContribution ramework. It is important to note that orthepurposeofcalculatingtheTTR,itisonlytaxesbornewhich are included (tax borne is discussed in moredetail below).

Details o taxes collected are also gathered by the studyand these have an impact, along with taxes borne, on theindicators dealing with hours to comply and the numbero tax payments. The Total Tax Contribution rameworkalso includes the cost o tax compliance.

It must be understood that the Total Tax Contributionramework is a data gathering and reporting mechanism,designed to increase transparency around a company’stax impacts. It is acknowledged that there are economicarguments over whether companies, consumers, oremployees ultimately bear the economic incidence otaxes. This is not addressed in this ramework.

What is a tax?

In the context o the PricewaterhouseCoopers Total TaxContribution ramework, and the surveys undertakenaround the world, the question o dening ‘what is atax?’ has been an important one to answer, in order toensure a solid base or comparison and analysis or thosesurveys. The Paying Taxes data generated by the DoingBusiness report, and included in this study, includesgovernment‑mandated contributions, even though theymay not t the traditional denition o tax.

35 Total Tax Contribution Framework – What is your company’s overall tax contribution? – APricewaterhouseCoopers discussion paper, published April 2005.

http://www.pwc.com/extweb/insights.nsf/docid/88E7FD4015197F0B802572F0003C96D0?utr=1



97Paying Taxes 2010


As a starting point, a tax can be dened assomething which:

• ispaidtogovernment;

• iscompulsory;

• isusedbytheauthorityaspartofthepublicnances;and

• hasnodirectreturnofvaluetothepayer.

Eachofthetermsneedsalittleexpansion.

Payment should be made to an independent authority– thereore government includes a central, state or localauthority. In many economies, TaxpayerCo in the PayingTaxes study will pay taxes at all three levels. It is still atax i it is collected on behal o the government by anagency, provided that the agency submits the taxescollected. In some economies (or example, in China),certain social security contributions made by employersare governed and collected by a separate taxingauthority. As this authority operates on behal o centralgovernment, albeit separate rom the main tax authority,these payments are thereore a tax and are includedwithin the Paying Taxes indicators.

It must be a compulsory levy – the only way to be exemptrom paying is not to to undertake the action that triggersthe tax payment. To give a simple example, i propertytranser tax is payable by the seller in a jurisdiction, theonly way to avoid paying this tax would be not to sell

the property.Most taxes go into a central pot and are used as theauthority wishes. A hypothecated tax remains a tax, buta levy that is a direct payment or a service may well notbe a tax.

The last point requires the return o value to beconsidered. This is most easily illustrated by consideringa company that leases space in a building owned by

the government. The rent paid is not a tax, as there is aull return o value to the company. Whilst this exampleis clear, others may not be quite so straightorward.For example, payments to a local authority will otenbe a tax as they do not result in the receipt o localgovernment services o comparable value. On this basis,charges or rubbish/garbage collection will be a tax i thecharge is clearly in excess o the cost o providing thatservice.However,roadtollswillusuallynotbeataxasthey are directly tied to the use o the road.

Payments in respect o labour

As evidenced in the results, payments in respecto labour, such as payroll taxes and social securitycontributions, can constitute a signicant part o theTTR(wheretheyarebornebytheemployer),andthecompliance burden (where they are collected rom theemployee). Such payments are included in the studywhere they meet the denition o a tax, notwithstandingthat they may be governed by separate legislation, orcalled a contribution rather than a tax.

Companies in many economies are required to payto government orms o social security or other taxesconnected with employing their workers. In mostcases, these payments are compulsory and are usedby the government as part o public nances – theyare not, or example, used or the direct benet othe employees o the company, and thereore do notprovide any direct return o value to the company or theemployee. These payments can be rightly included as a

tax.However,unlessallofthenecessaryrequirementslisted above are met, treatment as a tax may notbe appropriate.

A specic illustration o this point, over which there hasbeen some debate, is a payment made by employers in

Australia. This payment, known as the superannuationguarantee obligation, is mandatory and equivalent to9% o an employee’s salary. While it is compulsory,it is paid into a separate superannuation und which



98

is specically allocated or the benet o eachemployee. As such, under the PricewaterhouseCoopersmethodology, it is accepted that this payment is not atax as it is an employee benet, rather than a generalpayment into public nances. For the World Bank GroupDoing Business project, however, as it is a mandatorycontribution,ithasbeenincludedwithintheTTRcalculation to ensure that international comparisons inthe context o this survey are valid.

Taxes borne and taxes collected

As mentioned above, the PricewaterhouseCoopersTotal Tax Contribution ramework makes a undamentaldistinction between taxes borne and taxes collected,and this principle is ollowed by the Paying Taxes study.The split is important or the purpose o understandingthe impact o taxes on the company and or analysis othe results.

For the Paying Taxes study, taxes borne contribute totheTTR,buttaxescollecteddonot.Taxescollectedareimportant, however, as they do contribute to the numbero hours that the company takes to comply with thetax system and they also impact on the number o taxpayments. They thereore contribute signicantly to theadministrative cost o the tax system and to the eort andresource required. A common denition o the terms isas ollows:

Taxes borne – those which are paid by the company andare a cost to the company.

Taxes collected – those or which the company acts astax collector/administrator or the tax authority.

Taxes borne could also be termed ‘taxes suered’, inthat these are the levies that truly impact the companyconcerned. It does not matter whether the chargeto the prot and loss account is direct (or example,the corporate prots tax charge), or indirect (such asthe transer tax paid on the purchase o a building

which is capitalised as part o the building’s cost andthen amortised over a period). Both the corporateincome tax and the transer tax would count as taxesborne. For the transer tax, the amount borne wouldbe the ull amount paid in the period rather than theamount amortised.

Taxes borne are a cost to the company and, as withother costs, will ultimately be passed on – or example, inhigher prices to customers, lower wages to employees,or lower dividends to shareholders. This ultimateincidence does not aect the treatment under TTC or thePaying Taxes study as a tax borne.

Taxes collected are those where the company acts,in eect, as (unpaid) tax collector on behal o thetax authority. The classic examples are sales andexcise taxes, together with taxes and contributionsdeducted rom employees’ pay. The only impact taxescollected have on the company’s prots will be viaadministrative costs.



99Paying Taxes 2010




100

Additional questions asked

about the tax systemand administration

Appendix

3



101Paying Taxes 2010

Appendix 3 Additional questions asked about the tax system and administration

Clarity and accessibility o thetax rules

Where can you nd the tax rules and guidance or the taxsystem in your country?

• inprintfromthetaxadministration• inprintfromanotherofcialsource• ontheinternet• other,pleasespecify• notaccessible

In your opinion, how simple or complicated are the taxrules in your country?

• Scaleof1to5(1issimpleandeasytounderstand,and 5 is very complicated even or a tax expertto understand!).

In your opinion, how clear or ambiguous are the tax rulesin your country?

• Scaleof1to5(1isveryclear,5isveryambiguousand subject to dierent interpretations).

Please provide examples o any ambiguous rules.

Howfrequentlyaresignicantchangesmadetothetaxrules in your country?

• usuallyonceayear• usuallytwoorthreetimesayear

• probablyonamonthlybasis• probablyonaweeklybasis• onadailybasis

In your opinion how helpul are any guidance noteswhich the tax authority publishes to assist taxpayers inyour country?

• Scaleof1to5(1isveryhelpful,5isnotatallhelpful/ none are published).

Can you easily access a published statement bygovernment o the actual tax revenues in your country?

• YES/NO

I yes, please provide the source o such statement,including the website link i the statement is availableon the internet.

I no, please comment on why not.

How centralised/decentralised is thetax system

Please indicate the levels o government in your countrythat can levy taxes.

• Federallevel YES/NO

• State/provincial/territorylevel YES/NO

I yes, how many states/provinces/territories?

• Local/municipallevel YES/NO

I yes, how many local or municipal levels?

Please indicate where the ollowing specic taxes areadministered by separate tax authorities in your country.

Are indirect taxes (VAT, GST or Sales Tax) administered bya separate authority rom corporate income tax?

• YES/NO

IfYES,pleaseindicateatwhatlevelofgovernment.



102

Is social security/social contributionsadministered separately?

• YES/NO


Are payroll and wage taxes administered separately?

• YES/NO


Are property taxes administered separately?

• YES/NO


Are customs and/or excise duties administered separately?

• YES/NO


Are vehicle taxes and registration eesadministered separately?

• YES/NO


Are other taxes administered separately?

• YES/NO

IfYES,pleasespecifybelowandindicateatwhatlevelo government.

Approach o the tax authority

Over and above the books which are kept or accountingpurposes, are there additional books which must be keptby companies in your country only or tax purposes?

IfYES,pleaselistthembelow,indicatingwhichtaxestheyapply to.

In a typical situation how long is it likely to take in practiceor a company to receive a VAT or withholding tax reundin your country (time rom claiming a reund to receivingthe cash)?

• lessthanamonth• 1to3months• 3to6months• 6to12months• morethanayear

Dealing with tax audits and disputes

In your experience, how are companies selected or a taxaudit? Please select all relevant methods and number themrom the most common to the least common where 1 is themost common:

• riskassessment• bysize• bytypeofbusiness• whentheyaskforarefund• randombasis

• other,pleasespecifyI a company claims a VAT or withholding tax reund, willthe tax authority in your country audit the repayment claimprior to making payment?

• notusually• sometimes• usually

I usually, please comment on the process.




Appendix 3 Additional questions asked about the tax system and administration

Do tax audits typically cover a single tax (such ascorporate income tax) or multiple taxes (such ascorporate income tax, social contributions, sales tax atthe same time)?

• singletax• multipletaxes

In a typical situation or a large company, how longis a tax audit likely to take in your country (rom rstinormation request to substantive resolution)?

• lessthan3months• lessthanoneyear• 1to2years• 2to5years• over5years• continuousaudit

Is there an independent body (such as a tribunal or court)to which a taxpayer can appeal against a decision o thetax authority?

YES/NO

In your opinion how easy is it or a company to deal witha tax audit in your country?

• Scaleof1to5(1isveryeasy,5isverydifcult).

In your opinion how eective is the independent appealprocess in your county?

• Scaleof1to5(1isveryefcient,5isveryinefcient).

Best and worst aspects o the taxsystem

Please rate on a scale o 1 to 5 (1 or best and 5 orneeding most improvement) the ollowing aspects o thetax rules in your country Please also comment on thereasons or your rankings 1 – 5:

• aspectsofthetaxrules(e.g.ratesorincentives)• clarity,accessibilityandstabilityofthetaxrules• levelsofgovernmentandtaxauthority• approachofthetaxauthorities• dealingwithtaxauditsanddisputes• other,pleasespecify



104

Doing Business 2010 About Doing Business

Appendix

4




Appendix 4Doing Business 2010

About Doing Business

In1664WilliamPetty,anadvisertoEngland’sCharlesII,compiledtherstknownnationalaccounts.Hemade4 entries. On the expense side, “ood, housing, clothesand all other necessaries” were estimated at £40 million.National income was split among three sources: £8 millionrom land, £7 million rom other personal estates and £25million rom labour income.

In later centuries, estimates o country income,expenditure and material inputs and outputs becamemore abundant. But it was not until the 1940s that asystematic ramework was developed or measuringnational income and expenditure, under the directiono British economist John Maynard Keynes. As themethodology became an international standard,comparisons o countries’ nancial positions becamepossible. Today the macroeconomic indicators in nationalaccounts are standard in every country.

Governments committed to the economic health o theircountry and opportunities or its citizens now ocuson more than macroeconomic conditions. They alsopay attention to the laws, regulations and institutionalarrangements that shape daily economic activity.

The global nancial crisis has renewed interest in goodrules and regulation. In times o recession, eectivebusiness regulation and institutions can supporteconomicadjustment.Easyentryandexitofrms,andfexibility in redeploying resources, make it easier to stopdoing things or which demand has weakened and tostart doing new things. Clarication o property rightsand strengthening o market inrastructure (such as credit

inormation and collateral systems) can contribute tocondence as investors and entrepreneurs look to rebuild.

Until very recently, however, there were no globallyavailable indicator sets or monitoring suchmicroeconomic actors and analysing their relevance.The rst eorts, in the 1980s, drew on perceptionsdata rom expert or business surveys. Such surveysare useul gauges o economic and policy conditions.But their reliance on perceptions and their incomplete

coverage o poor countries constrain their useulnessor analysis.

The Doing Business project, launched eight years ago,goes one step urther. It looks at domestic small andmedium sized companies and measures the regulationsapplying to them through their lie cycle. Doing Business and the standard cost model initially developed andapplied in the Netherlands are, or the present, the onlystandard tools used across a broad range o jurisdictionsto measure the impact o government rule‑making onbusiness activity36.

The rst Doing Business report, published in 2003,covered ve indicator sets in 133 economies. Thisyear’s report covers 10 indicator sets in 183 economies.The project has benetted rom eedback romgovernments, academics, practitioners and reviewers37.The initial goal remains: to provide an objective basis orunderstanding and improving the regulatory environmentor business.

What Doing Business covers

Doing Business provides a quantitative measureo regulations or starting a business, dealing withconstruction permits, employing workers, registeringproperty, getting credit, protecting investors, payingtaxes, trading across borders, enorcing contracts andclosing a business – as they apply to domestic smalland medium sized enterprises.

A undamental premise o Doing Business is that

economic activity requires good rules. These includerules that establish and clariy property rights andreduce the costs o resolving disputes, rules that increasethe predictability o economic interactions, and rulesthat provide contractual partners with core protectionsagainst abuse. The objective: regulations designed to beecient, to be accessible to all who need to use them,and to be simple in their implementation. Accordingly,some Doing Business indicators give a higher score ormore regulation, such as stricter disclosure requirements

36 The standard cost model is a quantitative methodology or determining the administrativeburdens that regulation imposes on businesses. The method can be used to measurethe eect o a single law or o selected areas o legislation or to perorm a baselinemeasurement o all legislation in a country.

37 ThisincludedareviewbytheWorldBankIndependentEvaluationGroup(2008).



106

in related‑party transactions. Some give a higher scoreor a simplied way o implementing existing regulation,such as completing business start‑up ormalities in aone‑stop shop.

The Doing Business project encompasses two typeso data. The rst come rom readings o laws andregulations. The second are time and motion indicatorsthat measure the eciency in achieving a regulatorygoal (such as granting the legal identity o a business).Within the time and motion indicators, cost estimates arerecorded rom ocial ee schedules where applicable.Here,Doing BusinessbuildsonHernandodeSoto’spioneering work in applying the time and motionapproach rst used by Frederick Taylor to revolutionisethe production o the Model T Ford. De Soto used theapproach in the 1980s to show the obstacles to settingup a garment actory on the outskirts o Lima38.

What Doing Business does not cover

Just as important as knowing what Doing Business doesis to know what it does not do – to understand whatlimitations must be kept in mind in interpreting the data.

Limited in scope

Doing Business ocuses on 10 topics, with the specicaim o measuring the regulation and red tape relevantto the lie cycle o a domestic small to medium sizedrm. Accordingly:

• Doing Business does not measure all aspects o

the business environment that matter to rms orinvestors—or all actors that aect competitiveness.It does not, or example, measure security,macroeconomic stability, corruption, the labourskills o the population, the underlying strength oinstitutions or the quality o inrastructure39. Nor doesit ocus on regulations specic to oreign investment.

• Doing Business does not assess the strength o thenancial system or market regulations, both importantactors in understanding some o the underlyingcauses o the global nancial crisis.

• Doing Business does not cover all regulations, or allregulatory goals, in any economy. As economies andtechnology advance, more areas o economic activityarebeingregulated.Forexample,theEuropeanUnion’s body o laws ( acquis ) has now grown tono ewer than 14,500 rule sets. Doing Business measures just 10 phases o a company’s lie cycle,through 10 specic sets o indicators. The indicatorsets also do not cover all aspects o regulation in theparticular area. For example, the indicators on startinga business or protecting investors do not cover allaspects o commercial legislation. The employingworkers indicators do not cover all areas o labourregulation. Measures or regulations addressing saetyat work or right o collective bargaining, or example,are not included in the current indicator set.

Based on standardised case scenarios

Doing Business indicators are built on the basis ostandardised case scenarios with specic assumptions,such as the business being located in the largest businesscityoftheeconomy.Economicindicatorscommonlymake limiting assumptions o this kind. Infation statistics,or example, are oten based on prices o consumergoods in a ew urban areas.

Such assumptions allow global coverage and enhance

comparability. But they come at the expense o generality.Business regulation and its enorcement, particularlyin ederal states and large economies, dier across thecountry. And o course the challenges and opportunitieso the largest business city – whether Mumbai or SãoPaulo, Nuku’aloa or Nassau – vary greatly acrosscountries.Recognisinggovernments’interestinsuchvariation, Doing Business has complemented itsglobal indicators with sub‑national studies in suchcountriesasBrazil,China,Colombia,theArabRepublic

38 De Soto (2000).39 The indicators related to trading across borders and dealing with construction permits

and the pilot indicators on getting electricity take into account limited aspects o aneconomy’s inrastructure, including the inland transport o goods and utility connectionsor businesses.






ofEgypt,India,Kenya,Mexico,Morocco,Nigeriaandthe Philippines40.

In areas where regulation is complex and highlydierentiated, the standardised case used to constructthe Doing Business indicator needs to be careullydened. Where relevant, the standardised case assumesa limited liability company. This choice is in part empirical:private, limited liability companies are the most prevalentbusiness orm in most economies around the world.The choice also refects one ocus o Doing Business:expanding opportunities or entrepreneurship. Investorsare encouraged to venture into business when potentiallosses are limited to their capital participation.

Focused on the formal sector

In constructing the indicators, Doing Business assumesthat entrepreneurs are knowledgeable about allregulations in place and comply with them. In practice,entrepreneurs may spend considerable time nding outwhere to go and what documents to submit. Or they mayavoid legally required procedures altogether – by notregistering or social security, or example.

Where regulation is particularly onerous, levels oinormality are higher. Inormality comes at a cost: rmsin the inormal sector typically grow more slowly, havepoorer access to credit and employ ewer workers – andtheir workers remain outside the protections o labourlaw41. Doing Business measures one set o actors thathelp explain the occurrence o inormality and givepolicy‑makers insights into potential areas o reorm.

Gaining a uller understanding o the broader businessenvironment, and a broader perspective on policychallenges, requires combining insights rom DoingBusiness with data rom other sources, such as the WorldBankEnterpriseSurveys 42.

Why this ocus

Doing Business unctions as a kind o cholesterol testor the regulatory environment or domestic businesses.

A cholesterol test does not tell us everything aboutthe state o our health. But it does measure somethingimportant or our health. And it puts us on watch tochange behaviours in ways that will improve not onlyour cholesterol rating but also our overall health.

One way to test whether Doing Business serves as aproxy or the broader business environment and orcompetitiveness is to look at correlations between theDoing Business rankings and other major economicbenchmarks. The indicator set closest to Doing Business inwhatitmeasuresistheOrganisationforEconomicCo‑operation and Development’s indicators o productmarketregulation;thecorrelationhereis0.75.TheWorldEconomicForum’sGlobalCompetitivenessIndexandIMD’sWorldCompetitivenessYearbookarebroaderinscope, but these too are strongly correlated with DoingBusiness (0.79 and 0.72, respectively). These correlationssuggest that where peace and macroeconomic stabilityare present, domestic business regulation makes animportant dierence in economic competitiveness.

A bigger question is whether the issues on whichDoing Business ocuses matter or development andpoverty reduction. The World Bank study Voices o thePoor asked 60,000 poor people around the world howthey thought they might escape poverty43. The answerswere unequivocal: women and men alike pin their hopesabove all on income rom their own business or wagesearnedinemployment.Enablinggrowth–andensuringthat poor people can participate in its benets – requiresan environment where new entrants with drive and goodideas, regardless o their gender or ethnic origin, can get

started in business and where good rms can invest andgrow, generating more jobs.

Small and medium sized enterprises are key driverso competition, growth and job creation, particularlyin developing countries. But in these economies up to80% o economic activity takes place in the inormalsector. Firms may be prevented rom entering the ormalsector by excessive bureaucracy and regulation.

40 http://subnational.doingbusiness.org41 Schneider (2005).

42 http://www.enterprisesurveys.org43 Narayan and others (2000).



108

Where regulation is burdensome and competition limited,success tends to depend more on whom you know thanon what you can do. But where regulation is transparent,ecient and implemented in a simple way, it becomeseasier or any aspiring entrepreneurs, regardless o theirconnections, to operate within the rule o law and tobenet rom the opportunities and protections that thelaw provides.

In this sense Doing Business values good rules asa key to social inclusion. It also provides a basis orstudying eects o regulations and their application.For example, Doing Business 2004 ound that astercontract enorcement was associated with perceptions ogreater judicial airness—suggesting that justice delayedis justice denied44.

In the current global crisis, policy‑makers aceparticular challenges. Both developed and developingeconomies are seeing the impact o the nancialcrisis fowing through to the real economy, withrising unemployment and income loss. The oremostchallenge or many governments is to create new jobsand economic opportunities. But many have limitedscal space or publicly unded activities such asinrastructure investment or or the provision o publiclyfundedsafetynetsandsocialservices.Reformsaimedat creating a better investment climate, including reormso business regulation, can be benecial or severalreasons. Flexible regulation and eective institutions,including ecient processes or starting a businessand ecient insolvency or bankruptcy systems,can acilitate reallocation o labour and capital. And

regulatory institutions and processes that are streamlinedand accessible can help ensure that, as businessesrebuild, barriers between the inormal and ormal sectorsare lowered, creating more opportunities or the poor.

Doing Business as a benchmarking exercise

Doing Business, in capturing some key dimensionso regulatory regimes, has been ound useul orbenchmarking. Any benchmarking – or individuals, rms

or economies – is necessarily partial: it is valid and useuli it helps sharpen judgement, less so i it substitutesor judgement.

Doing Business provides two takes on the data it collects:it presents ‘absolute’ indicators or each economy oreach o the 10 regulatory topics it addresses, and itprovides rankings o economies, both by indicator andin aggregate. Judgement is required in interpreting thesemeasures or any economy and in determining a sensibleand politically easible path or reorm.

ReviewingtheDoing Business rankings in isolationmay show unexpected results. Some economies mayrank unexpectedly high on some indicators. And someeconomies that have had rapid growth or attracted agreat deal o investment may rank lower than others thatappear to be less dynamic.

But or reorm‑minded governments, how much theirindicators improve matters more than their absoluteranking. As economies develop, they strengthen andadd to regulations to protect investor and property rights.Meanwhile, they nd more ecient ways to implementexisting regulations and cut outdated ones. One ndingo Doing Business: dynamic and growing economiescontinually reorm and update their regulations and theirway o implementing them, while many poor economiesstill work with regulatory systems dating to the late 1800s.

Doing Business – a user’s guide

Quantitativedataandbenchmarkingcanbeuseful

in stimulating debate about policy, both by exposingpotential challenges and by identiying wherepolicy‑makers might look or lessons and good practices.This data also provides a basis or analysing how dierentpolicy approaches – and dierent policy reorms –contribute to desired outcomes such as competitiveness,growth and greater employment and incomes.

Seven years o Doing Business data have enabled agrowing body o research on how perormance on

44 World Bank (2003).






Doing Business indicators – and reorms relevant tothose indicators – relate to desired social and economicoutcomes. Some 405 articles have been published inpeer‑reviewed academic journals, and about 1,143working papers are available through Google Scholar45.

Among the ndings:

• Lowerbarrierstostart‑upareassociatedwithasmaller inormal sector46.

• Lowercostsofentryencourageentrepreneurship,enhance rm productivity and reduce corruption47.

• Simplerstart‑uptranslatesintogreateremployment opportunities48.

Howdogovernmentsuse Doing Business? A commonrst reaction is to doubt the quality and relevance o theDoing Businessdata.Yetthedebatetypicallyproceedstoa deeper discussion exploring the relevance o the data tothe economy and areas where reorm might make sense.

Most reormers start out by seeking examples, andDoing Business helps in this. For example, Saudi Arabiaused the company law o France as a model or revisingits own. Many countries in Arica look to Mauritius –the region’s strongest perormer on Doing Business indicators—as a source o good practices or reorm.In the words o Luis Guillermo Plata, the minister ocommerce, industry and tourism o Colombia,

It’s not like baking a cake where you follow the recipe. No.

We are all different. But we can take certain things, certain key lessons, and apply those lessons and see how they work in our environment.

Over the past seven years there has been much activityby governments in reorming the regulatory environmentor domestic businesses. Most reorms relating to DoingBusiness topics were nested in broader programmes oreorm aimed at enhancing economic competitiveness.In structuring their reorm programmes, governments

use multiple data sources and indicators. And reormersrespond to many stakeholders and interest groups, allo whom bring important issues and concerns into thereorm debate.

World Bank support to these reorm processes isdesigned to encourage critical use o the data, sharpening

judgment and avoiding a narrow ocus on improvingDoing Business rankings.

Methodology and data

Doing Business covers 183 economies – including smalleconomies and some o the poorest countries, or whichlittle or no data are available in other data sets. The DoingBusiness data is based on domestic laws and regulationsas well as administrative requirements.

Information sources for the data

Most o the indicators are based on laws and regulations.In addition, most o the cost indicators are backed byocial ee schedules. Doing Business respondents bothll out written surveys and provide reerences to therelevant laws, regulations and ee schedules, aiding datachecking and quality assurance.

For some indicators, part o the cost component (whereee schedules are lacking) and the time componentare based on actual practice rather than the law onthe books. This introduces a degree o subjectivity.The Doing Business approach has thereore been to workwith legal practitioners or proessionals who regularly

undertake the transactions involved. Following thestandard methodological approach or time and motionstudies, Doing Business breaks down each process ortransaction, such as starting and legally operating abusiness, into separate steps to ensure a better estimateo time. The time estimate or each step is given bypractitioners with signicant and routine experience inthe transaction.

45 http://scholar.google.com46 Forexample,MasatliogluandRigolini(2008),Kaplan,PiedraandSeira(2008),Ardagna

and Lusagi (2009) and Djankov and others (orthcoming).47 For example, Alesina and others (2005), Perotti and Volpin (2004), Klapper, Laeven

andRajan(2006),FismanandSarria‑Allende(2004),AntunesandCavalcanti(2007),

Barseghyan(2008),Djankovandothers(forthcoming)andKlapper,LewinandQuesadaDelgado (2009).

48 Forexample,FreundandBolaky(2008),Chang,KaltaniandLoayza(2009)andHelpman,MelitzandRubinstein(2008).



110

Over the past seven years more than 11,000 proessionalsin 183 economies have assisted in providing thedata that inorm the Doing Business indicators. Thisyear’s report draws on the inputs o more than 8,000proessionals. The Doing Business website indicates thenumber o respondents per economy and per indicator.Respondentsareprofessionalsorgovernmentofcialswho routinely administer or advise on the legal andregulatory requirements covered in each Doing Business topic. Because o the ocus on legal and regulatoryarrangements, most o the respondents are lawyers.The credit inormation survey is answered by ocialso the credit registry or bureau. Freight orwarders,accountants, architects and other proessionals answerthe surveys related to trading across borders, taxes andconstruction permits.

The Doing Business approach to data collection contrastswith that o enterprise or rm surveys, which capture otenone‑time perceptions and experiences o businesses.

A corporate lawyer registering 100 – 150 businessesa year will be more amiliar with the process than anentrepreneur, who will register a business only once ormaybe twice. A bankruptcy judge deciding dozens ocases a year will have more insight into bankruptcy than acompany that may undergo the process.

Development of the methodology

The methodology or calculating each indicatoris transparent, objective and easily replicable.Leading academics collaborate in the development othe indicators, ensuring academic rigour. Seven o the

background papers underlying the indicators have beenpublished in leading economic journals. One is at anadvanced stage o publication.

Doing Business uses a simple averaging approachor weighting sub‑indicators and calculating rankings.Other approaches were explored, including usingprincipal components and unobserved components.The principal components and unobserved componentsapproaches turn out to yield results nearly identical tothose o simple averaging. The tests show that each

set o indicators provides new inormation. The simpleaveraging approach is thereore robust to such tests.

Improvements to the methodology and data revisions

The methodology has undergone continual improvementover the years. Changes have been made mainly inresponse to country suggestions. For enorcing contracts,or example, the amount o the disputed claim in the casestudy was increased rom 50% to 200% o income percapita ater the rst year o data collection, as it becameclear that smaller claims were unlikely to go to court.

Another change relates to starting a business.The minimum capital requirement can be an obstacle orpotential entrepreneurs. Initially, Doing Business measuredthe required minimum capital regardless o whether it hadto be paid up ront or not. In many economies only parto the minimum capital has to be paid up ront. To refectthe actual potential barrier to entry, the paid‑in minimumcapital has been used since 2004.

This year’s report includes changes in the coremethodology or one set o indicators, those onemploying workers. The assumption or the standardisedcase study was changed to reer to a small to mediumsized company with 60 employees rather than 201.The scope o the question on night and weekly holidaywork has been limited to manuacturing activities inwhich continuous operation is economically necessary.Legally mandated wage premiums or night and weeklyholiday work up to a threshold are no longer considereda restriction. In addition, the calculation o the minimum

wage ratio was modied to ensure that an economywould not benet in the scoring rom lowering theminimum wage to below $1.25 a day, adjusted orpurchasing power parity. This level is consistent withrecent World Bank adjustments to the absolute povertyline. Finally, the calculation o the redundancy costwas adjusted so that having severance payments orunemployment protections below a certain thresholddoes not mean a better score or an economy.






All changes in methodology are explained on theDoing Business website. In addition, data time seriesor each indicator and economy are available on theDoing Business website, beginning with the rst yearthe indicator or economy was included in the report.To provide a comparable time series or research, thedata set is back‑calculated to adjust or changes inmethodology and any revisions in data due to corrections.The website also makes available all original data setsused or background papers.

Inormation on data corrections is provided onthe website. A transparent complaint procedureallows anyone to challenge the data. I errors areconrmed ater a data verication process, they areexpeditiously corrected.

New this year

This year’s Doing Business report presents initial ndingsin two new areas: the ease o obtaining an electricityconnection and the level o adoption in national legislationo aspects o the International Labour Organisation’s(ILO) core labour standards on child labour. Neithero these pilot indicator sets is included in the DoingBusiness rankings.

Pilot indicators on getting electricity.Where the quality and accessibility o inrastructureservices are poor, companies’ productivity and growthsuer. According to rm surveys in 89 economies,electricity was one o the biggest constraints to theirbusiness49. The Doing Business pilot data set on getting

electricity is the rst to compare distribution utilitiesaround the world on how eciently they respond tocustomer requests or connections.

The pilot indicators track the process a standardised localprivate business goes through in obtaining an electricityconnection. By applying its methodology to electricityprovision, Doing Business aims to illustrate some othe real implications o weak inrastructure services orentrepreneurs. The indicators complement existing data

that ocus on generation capacity, consumption pricesand the reliability o electricity supply50. And they allowurther investigation o the eects o the process ogetting an electricity connection on economic outcomes.

Worker protection.The ILO core labour standards consist o reedom oassociation and recognition o the right to collectivebargaining, the elimination o all orms o orced orcompulsory labour, the abolition o child labour andequitable treatment in employment practices. The DoingBusiness indicators on employing workers are consistentwith these core labour standards but do not measurecompliance with them. To complement these indicators,Doing Business has launched research on the adoption ocore labour standards in national legislation.

The initial research ocuses on the nationalimplementation o minimum age provisions includedin two ILO conventions on child labour: Convention138, on the minimum age or admission to employment(1973), and Convention 182, on the worst orms o childlabour (1999).

This year’s Doing Business report presents initial ndingson 102 countries (see ILO core labour standards). Foreach country Doing Business examined whether nationallaws ollow the minimum age threshold or generalaccess to employment (14 or 15 years, depending on thedevelopment o the country’s economy and educationalacilities), or hazardous work (18 years) and or light work(12 or 13 years, depending on the development o thecountry’s economy and educational acilities).

In the uture the research will expand to more economiesand to more areas covered by the core labour standards.On the basis o this, Doing Business plans to developa new worker protection indicator, a process that willbenet rom the advice o a consultative group withbroad representation o stakeholders. The ILO, which hasleadership on the core labour standards, will serve as anessential source o guidance in this process.

49 AccordingtoWorldBankEnterpriseSurveydataforthe89economies,15.6%ofmanagers consider electricity the most serious constraint, while a similar share (15.68%)consider access to nance the most serious constraint (http://www.enterprisesurveys.org).

50 See,forexample,dataoftheInternationalEnergyAgencyortheWorldBankEnterpriseSurveys (http://www.enterprisesurveys.org).



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Disclaimers and copyright

TheTotalTaxRateincludedinthesurveybytheWorld Bank Group has been calculated using thebroad principles o the PricewaterhouseCoopersmethodology. The application o these principlesby the World Bank Group has not been veried,validated or audited by PricewaterhouseCoopers, andthereore, PricewaterhouseCoopers cannot make anyrepresentations or warranties with regard to the accuracyo the inormation generated by the World Bank Group’smodels. In addition, the World Bank Group has notveried, validated or audited any inormation collectedby PricewaterhouseCoopers beyond the scope oDoing Business Paying Taxes data, and thereore, theWorld Bank Group cannot make any representations orwarranties with regard to the accuracy o the inormationgenerated by PricewaterhouseCoopers own research.

The World Bank Group’s Doing Business tax rankingindicator includes two components in addition to theTotalTaxRate.Theseestimatecompliancecostsbylooking at hours spent on tax work and the number o taxpayments made in a tax year. These calculations do notollow any PricewaterhouseCoopers methodology but doattempt to provide data which is consistent with the taxcompliance cost aspect o the PricewaterhouseCoopersTotal Tax Contribution ramework.

PricewaterhouseCoopers (www.pwc.com) providesindustry‑ocused assurance, tax and advisory servicesto build public trust and enhance value or its clientsand their stakeholders. More than 163,000 people in

151 countries across its network share their thinking,experience and solutions to develop resh perspectivesand practical advice.

This publication has been prepared as generalinormation on matters o interest only, and does notconstitute proessional advice. No one should actupon the inormation contained in this publicationwithout obtaining specic proessional advice. Norepresentation or warranty (express or implied) is given

as to the accuracy or completeness o the inormationcontained in this publication, and, to the extentpermitted by law, neither PricewaterhouseCoopers northe World Bank Group accept or assume any liability,responsibility or duty o care or any consequences oanyone else acting, or reraining to act, in reliance onthe inormation contained in this publication or or anydecision based on it. The World Bank Group does notguarantee the accuracy o the data included in thiswork. The boundaries, colours, denominations, andother inormation shown on any map in this work donot imply any judgement on the part o The World BankGroup concerning the legal status o any territory or theendorsement or acceptance o such boundaries. Thendings, interpretations, and conclusions expressedherein are those o the author(s) and do not necessarilyreecttheviewsoftheExecutiveDirectorsoftheWorldBank Group or the governments they represent.

This publication may be copied and disseminated in itsentirety, retaining all eatured logos, names, copyrightnoticeanddisclaimers.Extractsfromthispublicationmay be copied and disseminated, including publicationin other documentation, provided always that the extractis clearly identied as such and that a source notice isused as ollows: or extracts rom any section o thispublication except Chapter One, use the source notice:“© 2009 PricewaterhouseCoopers. All rights reserved.Extractfrom“PayingTaxes2010”publication,availableon www.pwc.com”. For extracts rom Chapter One only,use the source notice: “© 2009 The World Bank Group.

Allrightsreserved.Extractfrom“PayingTaxes2010”publication, available on www.pwc.com”.

All other queries on rights and licenses, includingsubsidiary rights, should be addressed to the OceofthePublisher,TheWorldBank,1818HStreetNW,Washington,DC20433,USA;fax:202‑522‑2422;e‑mail:[email protected].

© 2009 PricewaterhouseCoopers and the World BankGroup. All rights reserved. “PricewaterhouseCoopers”reers to the network o member rms o

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