The latest edition of ‘Paying Taxes 2017’ shows that economies around the world are making progress in simplifying and reducing the burden of tax compliance on businesses. Globally, the most common feature of tax reforms in the past year was the introduction or enhancement of electronic systems for filing and paying taxes. Twenty-six economies implemented such changes.
Jamaica was the top reformer, reducing the number of payments by 26 to 11. Andrew Packman, leader for Tax Transparency and Total Tax Contribution at PwC said: “While we recognise the pressures on governments to raise tax revenues to fund public spending, Paying Taxes has shown that in many economies, governments and tax authorities can make it easier for companies to pay
their taxes and this includes the ability to claim a VAT refund or deal with a corporate income tax audit. More efficient tax systems are good for businesses which in turn helps to promote economic growth and investment.” The Paying Taxes 2017, a report by The World Bank Group and PwC examined the ease of paying taxes in 190 economies.
The report modeled business taxation in each economy using a medium-sized domestic case study company. The report also measured all mandatory taxes and contributions that a medium-size company must pay in a given year as well as measured the administrative burden of filing and paying taxes and complying with post-filing processes. In an expanded analysis, the report found that for some economies, post-filing processes for value-added tax (VAT) and corporate income tax (CIT) returns could be amongst the most challenging and lengthy processes for businesses to comply with. In some cases, the length of the processes can create cash flow and administrative delays for companies of more than a year. The report found that the Total Tax Rate decreased by 0.1 percentage points to 40.6 percent; time to comply declined by 8 hours to 251 hours; and the number of payments by 0.8 to 25 payments. The reduction in the global average for time to comply of 8 hours is higher than in recent years reflecting ongoing improvements in electronic tax systems, and in particular as a result of reforms implemented in Brazil.
Similarly, the fall in the payments sub-indicator is largely due to the introduction and use of electronic filing and payment systems, which was the most common feature of tax reform in the past year. The small decrease in the Total Tax Rate results from 44 economies increasing taxes while 38 recorded a reduction. It also represents a combination of a decrease in other taxes offset by small increases in both profit and labour taxes.
The new additional research finds the interactions which a company has with tax authorities after a tax return has been filed can be some of the most challenging. The processes vary significantly from one jurisdiction to another. The report also found that 162 economies have a VAT system, with a VAT refund available to the case study company in 93 economies.
A fast and efficient process can be critical to ensure that a company does not face cash flow difficulties. For economies with a VAT refund system, on average it takes just over 14 hours to make the VAT refund claim, but it then has to wait over 5 months (almost 22 weeks) to receive the refund. The analysis showed it typically takes less time to comply with a VAT refund in high income economies (almost 8 hours) than in low income economies (almost 27 hours). A VAT refund triggers an audit in 70% of economies, of which over half (58%) will go through a comprehensive audit.
