Paying Taxes 2016 report published, Africa continues tax reforms

Taxation
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Wednesday, April 20, 2016 2.10PM / PwC / Proshare News

Paying Taxes 2016 is a unique joint report by PwC and the World Bank Group. Now in its tenth edition it continues to be a unique study which investigates and compares tax regimes across 189 economies, ranking them according to the relative ease of paying taxes. (144 pages) It is noteworthy that this is the 11th year that the Paying Taxes indicator has been included in the Doing Business project, run by the World Bank Group.

Paying Taxes records the taxes and mandatory contributions that a medium size company must pay in a given year as well as measuring the administrative burden of paying taxes and contributions.

Taxes and contributions measured include corporate income and other profit taxes, social contributions and labour taxes paid by the employer, property taxes, property transfer taxes, dividend tax, capital gains tax, financial transactions tax, waste collection taxes, vehicle and road taxes, and any other small taxes or fees.

One of the strengths of Paying Taxes is that it provides data on a like-for-like basis, year after year with the fundamentals of the study staying unchanged since the start. It looks at a medium sized case study company that is owned and operates entirely domestically. For each economy in the study, three sub-indicators are assessed; the costs of all taxes borne by the company (the Total Tax Rate), the time required to comply with tax obligations and the number of tax payments made. Using these components, the study continues to provide an objective basis for governments to benchmark their tax systems.

This year, PwC/World Bank have also conducted a pilot project into post filing compliance which covers the processes that take place once a tax return has been filed, including the paying of tax refunds, tax audits and tax appeals. Some initial qualitative findings are included in the 2016 report.

The objectives of the study are to:

·         compare tax systems on a like-for-like basis;

·         facilitate the benchmarking of tax systems within relevant economic and geographical groupings, which provides an opportunity to learn from peer group economies;

·         analyse data and identify good tax practises and reforms;

·         generate robust tax data on 189 economies around the world, including how they have changed over time, which can be used to inform tax policy decisions.

 

Reforms - Africa

Reforms continue to be made in Africa, while progress is less evident in South America. South America now has the highest average time to comply and Total Tax Rate.

Central Asia & Eastern Europe is still the fastest reforming region with a major focus on improving administrative systems. All three sub-indicators have fallen with the number of payments and time to comply both now below the world average.

 

Although the region shows the greatest overall drop in the Total Tax Rate since 2004, it is still a very difficult region in which to pay tax. The Total Tax Rate increased this year, with time to comply and number of payments decreasing.

 

Description: Regional findings: Africa: Paying Taxes 2016

 

Download the Report here

Addendum

1.      Executive Summary

One area of tax compliance that Paying Taxes has not considered to date is post filing-compliance which covers the processes that take place once a tax return has been filed, including the paying of tax refunds, tax audits and tax appeals. This year we conducted a pilot project into this area and some initial qualitative findings are included in this publication. Further detail will be available in early 2016.

One of the strengths of Paying Taxes is that it provides data on a like-for-like basis, year after year with the fundamentals of the study staying unchanged since the start. It looks at a medium sized case study company that is owned and operates entirely domestically. For each economy in the study, three sub-indicators are assessed; the costs of all taxes borne by the company (the Total Tax Rate), the time required to comply with tax obligations and the number of tax payments made. Using these components, the study continues to provide an objective basis for governments to benchmark their tax systems.

Over the period of the study there has been a steady decrease in our three sub-indicators, as across the world the tax cost has gradually reduced and electronic systems have made tax compliance less burdensome. The rates of decrease have however slowed in recent years and this year in particular we have seen a mixed picture for the Total Tax Rate. While across the globe the average Total Tax Rate has fallen very slightly, it actually rose in more economies than it fell. We have also seen diametrically opposing instances of tax reform with, for example, one economy introducing a tax which another economy has abolished or one economy increasing a tax rate which another has reduced.

This suggests that economies are taking different approaches to tax policy in the face of similar economic pressures.

The compliance sub-indicators also continued to fall this year, though there remain significant differences between the regions. Indeed, over the ten editions of Paying Taxes, some of the least reformed economies and regions are those where tax compliance is the most burdensome, while in the last year the high-income OECD group of economies had the most reforms as counted by Paying Taxes.

This suggests that there are many economies that still have considerable scope to reform the operation of their tax systems, and that challenges such as the availability of IT infrastructure may need to be addressed before the tax system can be significantly improved.

As well as our analysis of the Paying Taxes sub-indicators and reforms, we also look in this publication at the place of employment taxes in a balanced tax system, the role tax can play in reducing the informal economy and how to improve relationships between taxpayers and tax authorities. We also have some in-depth views from selected economies.

We hope that you enjoy reading this year’s publication and we would encourage you to get in touch if you have any questions, comments or suggestions for future areas of research

 



2.     Tax Policy and Administration

As well as our analysis of the Paying Taxes sub-indicators and reforms, this report also takes a look at three different aspects of global tax policy and administration.  The first considers the role of employment taxes in creating a balanced tax system, the second at how good tax systems can help reduce the informal economy and finally we consider how co-operation between tax authorities and taxpayers can be improved, especially in Africa.

Uncovering the impact of hidden taxes on employment

Dr. Andrew Sentance, PwC UK’s Senior Economic Adviser looks at the burden imposed on employers and employees by labour taxes and the role of employment taxes in a balanced tax system. What’s the economic impact of taxes on employment income? Is it a European problem? Is there potential for policy change and tax reform? Read the full article here.

Combatting the shadow economy; a taxpayer-centric approach

 

Amal Lahrlid and Nicholas O’Donovan of PwC’s Global Tax Governance team look at the links between tax systems and the informal economy. How can the Paying Taxes study be an invaluable source of information to decision-makers regarding the informal economy? What measures can be taken to combat the informal economy?
 

The relevance and sustainability of co-operative compliance models for tax in Africa

Eelco van der Enden and Kuralay Baisalbayeva from PwC Netherlands address the issues around improving trust and transparency between taxpayers and tax authorities, especially in Africa. What’s the co-operative compliance concept about? What are the main suggestions for African countries on co-operative compliance models?

3.     Previous Reports


Paying Taxes 2015

South America overtakes Africa for the first time as the region with the highest Total Tax Rate. The case study company is brought up to date by updating the Gross National Income per capita used to determine the study parameters. For the 11 biggest economies, data is now collected for an additional city in each economy.

 

Paying Taxes 2014

Data for Libya, Myanmar, San Marino and South Sudan were published in the study for the first time. The study now includes data for 189 economies. New analysis shows for the first time that labour taxes account for a higher share of the Total Tax Rate than profit taxes.

  

Paying Taxes 2013


Data for Barbados and Malta were published in the study for the first time. Time to comply for Central Asia & Eastern Europe dips below the world average for the first time. Econometric analysis of Paying Taxes data shows that economies with a higher tax compliance burden have less economic growth.

 

 Paying Taxes 2012

 

The first year that the introduction of electronic systems became the most popular reform. Global average number of payments sub-indicator drops below 30 for the first time. On average around the world the case study company pays 9.3 taxes and in 31 economies it pays more than 12 taxes.

 

Paying Taxes 2011  

"The economic and financial crisis has caused fiscal constraints for many economies, yet many are still choosing to lower tax rates on businesses." The highest ever Total Tax Rate of 339.7% is first recorded.

 

Paying Taxes 2010

 

Data for Cyprus and Kosovo were published in the study for the first time. World average Total Tax Rate drops below 50% for the first time. World average for time to comply drops below 300 hours for the first time. The effect of the global financial crisis on tax policy begins to be felt as governments seek to protect revenues.


Paying Taxes 2009

 

Data for The Bahamas, Bahrain and Qatar were published in the study for the first time. Central Asia & Eastern Europe had the most reforms. Since the start of the study, 50% of economies have implemented reforms making it easier to pay taxes.

 

Paying Taxes 2008

 

Data for Brunei Darussalam, Liberia, Luxembourg, Montenegro were published in the study for the first time. Corporate income taxes account for 37% of the Total Tax Rate, 26% of the number of hours spent on tax compliance and 12% of the number of tax payments made.

 

Paying Taxes 2007  

Businesses in the 175 economies covered by the study submit on average 35 pages of tax returns a year, equivalent to 100,000 trees a year, even after accounting for the few countries where business taxes can be filed electronically. The most popular reform is reducing corporate income taxes.

 

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