In today’s world, technology, globalisation, environmental challenges and demographic shifts are affecting the ways in which governments choose to raise tax to meet the rising expectations of citizens for better public services.
What to tax?, where to tax it?…and how to tax it are in no doubt three big questions facing tax authorities and governments treasury managers.
“Tax systems evolve slowly over time, and the Paying Taxes study provides some evidence of this, both in terms of the mix of taxes and the way in which governments collect their taxes. We live in a rapidly changing world which is being shaped by a number of major forces, ” said Andrew Sentance, Senior Economic Adviser, PwC UK.
Paying Taxes 2018 shows that tax reforms in recent past have been many and varied and given the rate at which the world is changing, many more can be expected in the near future. Paying Taxes 2018 shows that around the world and across many different taxes, technology is having a significant effect on the tax obligations of businesses.
Key findings from the 2018 paying taxes data show that on average, it takes a case study company 240 hours to comply with its taxes, it makes 24 payments and has an average Total Tax and Contribution Rate (TTCR) of 40.5percent. Paying Taxes 2018 is a report by World Bank Group and PwC.
Information technology has also changed the way businesses collect, record and transmit data and the way that they pay their taxes. It has changed the way tax administrations can communicate with taxpayers, the way they select companies for audit and the way they conduct those audits. Not all economies have been able however to embrace new technologies at the same rate and these differences are evident in the latest set of results in Paying Taxes 2018.
The report notes that properly developed, effective taxation systems are crucial for a well-functioning society. A good tax system should ensure that taxes are proportionate and certain (not arbitrary) and that the method of paying taxes is convenient for taxpayers. Also, taxes should be easy to administer and collect.
The Paying Taxes 2018 report examines the ease of paying taxes in 190 economies. The report models business taxation in each economy using a medium-sized domestic case study company.
Both the time and number of payments needed to comply have continued to fall significantly, reflecting the increasing use of technology. Time needed to comply with labour and profit taxes fell by 2 hours (to 61 hours for profit taxes and 87 hours for labour taxes), compared to last year, with labour taxes showing the greatest reduction over the life of the study (since Doing Business 2006). Electronic filing and payment, improved tax and accounting software and pre-populated returns are amongst the key drivers.
The number of tax payments made has fallen by around one payment for the second year in a row, driven largely by increased on-line filing and payments capabilities, new web portals and the greater use by taxpayers of online systems.
“The use of technology in tax collection is not new. Paying Taxes shows that technology is already being widely applied to tax collection (in particular electronic filing and payment) and is generating benefits, notably in the reduction in the time to comply and payment sub-indicators,” according to Amal Larhlid, Global Fiscal Policy Advisory Leader at PwC UK. “With governments under pressure to ‘raise more with less’, technological innovation, may be required to substantially reduce the marginal costs of tax collection”, Larhlid-led team said in their recent comment titled “Improving tax collection in lower and middle income countries: A role for technology?”.
Iheanyi Nwachukwu
