Canada makes paying taxes look easy – Our tax system breaks into Top 10 global ranking according to PwC’s Paying Taxes 2013

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Canada well ahead of fellow G8 nations and BRIC countries when it comes to paying taxes

TORONTO, December 3, 2012—This year Canada places 8th overall when it comes to its ease of paying taxes for businesses, according to Paying Taxes 2013 – a joint study from PwC, the World Bank and the International Finance Corporation (IFC) that looks at tax regimes in 185 economies around the world. Paying Taxes 2013 measures the overall ease of paying taxes for a hypothetical small to medium-sized domestic business by assessing three indicators: number of tax payments per year; time taken to compile returns and submit tax payments; and by calculating companies’ total tax liability as a percentage of pre-tax profits.

One of the biggest reasons for Canada’s current top 10 position is the country’s competitive Total Tax Rate (TTR), which has dropped from 49.1% in 2004 to 26.9% in 2011. “Efforts to make Canada more tax-competitive and create a business-friendly climate are evident with the recent reforms initiated by the provincial and federal governments,” says Jason Safar, Partner, Tax Services, PwC. “Canada’s current tax laws have attractive tax regimes, which impact all companies – in particular small-medium sized domestic companies. With companies benefitting from a special reduced corporate income tax rate, this not only results in a lower Total Tax Rate, but leads to a decline in the number of hours spent by companies to fulfil tax obligations.”

The report highlights Canada planning to achieve an internationally competitive 25% combined federal and provincial corporate income tax rate by the end of the year, and with tax administrators embracing technology to help make it easier and more efficient to file and pay taxes.

Paying Taxes 2013: Global average (185 economies)

Indicators

Global Average

Canada

Number of tax payments 27.2 8
Number of hours to comply with tax affairs 267 hours 131 hours
Tax costs of commercial profits 44.7% 26.9%

Canada’s 8th place ranking also makes it the easiest country to pay taxes amongst the G8 nations based on the number of tax payments, the time it takes to comply and its TTR.

Paying Taxes 2013 Rankings: Some of the G8 nations

Economy

Overall (rank)

Tax Payments

Total Tax Rate

Canada 8 8 26.9%
United Kingdom 16 8 35.5%
France 53 7 65.7%
United States 69 11 46.7%
Germany 72 9 46.8%

Canada is also well ahead of the BRIC economies, where China and India placed 122nd and 152nd respectively for overall ease of paying taxes. Brazil has the highest TTR amongst the BRIC nations at 69.3%.

Some of the other global key findings from the report include:

  • The highest number of payments is now made in Africa (37) and the lowest in North America (8.3)
  • Economies in the Central Asia and Eastern European region have shown the largest fall in both the time to comply (200 hours) and number of payments (22.2).
  • The Asia-Pacific economies tend to have TTRs below the world average and they have continued to fall as they look to compete in the world economy.
  • Firms in the United Arab Emirates face the lightest administrative burn in paying taxes. They must only make four payments a year and spend 12 hours doing so.

Electronic filing gets more main stream in other regions

According to the Paying Taxes 2013 report, more economies have focused on introducing electronic systems in the last two years. Central Asia and Eastern Europe has been the biggest reformer over the eight years of the study and the introduction of electronic filing and reducing tax rates have been key to the reform process in these regions. “Electronic filing and payment reduces paperwork and complexity in tax systems and can help increase tax compliance and reduce the cost of tax administration,” says Safar. “In the last several years, there has been a gradual reduction in the number of payments and in the number of hours spent by companies to comply with its tax commitments.”

For more information, and to access the complete Paying Taxes 2013 report, please visit http://www.pwc.com/ca/en/tax/paying-taxes.jhtml and www.doingbusiness.org/data/exploretopics/paying-taxes.

Follow PwC on Twitter at @PwC_Canada_LLP and on Facebook at http://www.facebook.com/pwccanada.

About PwC Canada

PwC Canada helps organizations and individuals create the value they’re looking for. More than 5,700 partners and staff in offices across the country are committed to delivering quality in assurance, tax, consulting and deals services. PwC Canada is a member of the PwC network of firms with close to 169,000 people in 158 countries. Find out more by visiting us at www.pwc.com/ca.

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About the World Bank

Group The World Bank Group is one of the world’s largest sources of funding and knowledge for developing countries. It comprises five closely associated institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a distinct role in the mission to fight poverty and improve living standards for people in the developing world. For more information, please visit www.worldbank.org, www.miga.org, and www.ifc.org.