Three years strong - Canada remains in Top 10 global tax system ranking: PwC’s Paying Taxes 2014

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Canadian business priority centres on tax rate stability

TORONTO — Sitting steady in the Top 10 ranking for the last three studies, Canada remains in 8th place when it comes to its ease of paying taxes for businesses, according to Paying Taxes 2014 — a joint study from PwC and the World Bank Group that reviews tax regimes in 189 economies around the world.

Paying Taxes 2014 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.

Three factors affecting Canada’s high ranking include:

  1. Significant reduction in the corporate income tax rate on annual Canadian profits in excess of CA$500,000 since 2001
  2. Reduced corporate income tax rate on the first CA$500,000 of annual Canadian profits made by privately owned corporations
  3. Canada’s efforts to simplify electronic reporting, filing and payment, and the tax regulatory and compliance aspects of running a business (“tax red-tape”)
Indicators Global Average (189 economies) Canada
Number of tax payments 26.7 8
Number of hours to comply with tax affairs 268 hours 131 hours
Tax costs of commercial profits (Total Tax Rate – TTR ) 43.1% 24.3%

“Within North America, Canada maintains the lowest average total tax rate ranking largely due to its efforts to establish a tax-competitive and business-friendly environment,” says Brad Sakich, Canadian Tax Policy Leader, PwC. “Privately owned small businesses in Canada should take comfort — the ranking demonstrates that Canadian government agencies support and encourage the creation of more such businesses.”

The report indicates that continuing simplification of tax red-tape in Canada remains important, but with the current economic climate, the main priority for businesses today should be tax rate stability. Sakich says, “The federal government’s announcement in September regarding ‘cap’ employer employment insurance rates until 2016 is the type of tax stability that should be welcomed by Canadian businesses with a number of employees.”

Paying Taxes 2014 Rankings: Some of the G8 nations

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

Country Overall paying taxes ranking Total tax payments Time to comply (number of hours) Total tax rate (%)
Canada 8 8 131 24.3%
United Kingdom 14 8 110 34.0%
France 52 7 132 64.7%
United States 64 11 175 46.3%
Germany 89 9 218 49.4%

Around the world

Some of the other global key findings from the Paying Taxes 2014 report include:

  • Between June 2012 and June 2013, the World Bank’s Doing Business report recorded 32 reforms making it easier or less costly for companies to pay taxes.
  • Among the regions, Europe and Central Asia made the biggest improvements in the ease of paying taxes over the past five years.
  • The global average for the time to comply has fallen every year since 2005. Time to comply is lowest in the United Arab Emirates where it takes 12 hours to deal with taxes that apply.
  • At 52.9%, Africa has the highest average TTR of any region — ‘other’ taxes are the largest element of Africa’s TTR.
  • With a fall of 28 payments spread across all three types of tax (profit, labour, other) China has had the largest drop in the Asia Pacific region over the nine years of the study.

For more information about the Paying Taxes study, visit: http://www.pwc.com/ca/payingtaxes.

The Paying Taxes annual report builds on the World Bank Group’s Doing Business reports’ chapter on Paying Taxes. For more information on the Doing Business report series, visit: www.doingbusiness.org

Follow PwC on Twitter at @PwC_Canada_LLP and on Facebook at 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 more than 180,000 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.