Ireland is the easiest country in Europe and the sixth easiest country in the world in which to pay business taxes. This is according to a new report issued by PricewaterhouseCoopers, the World Bank and IFC entitled “Paying Taxes 2008 – The global picture”. The report covers 178 countries worldwide and looks at all taxes paid by businesses, using broad principles from PwC’s Total Tax Contribution Framework.
The ranking by PwC/The World Bank is unique as it looks beyond corporate income tax to all of the taxes paid and is a measure of effectiveness of tax systems around the world. It shows how businesses are affected not only by tax rates, but also by the procedural burden of compliance. The report focuses on three indicators which are used to determine the overall ease of paying taxes which are:
(1) the number of tax payments made (Ireland ranked 8th in the world with 9 payments);
(2) the time it takes to comply (Ireland ranked 9th in the world with 76 hours) and (3) the cost of taxes, which is measured by the total tax rate (Ireland ranked 23rd in the world with 28.9%). The total tax rate covers five types of taxes that organisations pay: profit, social security, property, turnover, and other taxes, such as fuel taxes etc.
Speaking about the Irish result, Colm Kelly, PwC Ireland Tax Leader said:
“This is very good news for Ireland. As the easiest place in Europe and sixth easiest place in the world to pay tax, Ireland is clearly in a leadership position in this area when attracting Foreign Direct Investment. This survey demonstrates that having simpler tax systems, together with competitive business tax rates, gives Ireland an advantage in the market for attracting direct investment. It’s a win-win for Government and industry”.
The overall rankings for the EU on ease of paying taxes are, in order, Ireland, the United Kingdom, Denmark, Luxembourg, Latvia, Estonia, the Netherlands, Sweden, Slovenia, Belgium, Portugal, Germany, Lithuania, Austria, France, Finland, Greece, Bulgaria, Spain, the Czech Republic, Italy, the Slovak Republic, Poland, Hungary, and Romania.
The top 10 worldwide economies for ease of paying taxes are, in order, Maldives, Singapore, Hong Kong (China), United Arab Emirates, Oman, Ireland, Saudi Arabia, Kuwait, New Zealand, and Kiribati. The 10 economies where it is most difficult are Panama, Jamaica, Mauritania, Bolivia, the Gambia, Venezuela, the Central African Republic, the Republic of Congo, Ukraine, and Belarus.
Notes to the Editor
For more information and copies of the report contact Johanna Dehaene on +353 1 792 6547 or email: johanna.dehaene@ie.pwc.com
Globally, the report notes that tax reforms that make it easier for firms to pay taxes can increase government revenues by broadening the tax base. There is a win-win opportunity for governments and organisations if governments simplify tax systems, ease the compliance cost on business, and reduce tax rates.
This year, on a worldwide basis 31 economies improved their business tax systems, and 65 have done so over the past three years. Bulgaria was the top reformer, and Turkey was runner-up. While reducing corporate income tax was the most popular worldwide reform, implemented in 27 economies worldwide, many countries have reduced the compliance burden by simplifying or eliminating other business taxes. Countries in Eastern Europe and Central Asia had the most reforms in 2006 and 2007, but tax rates remain highest there and in Africa. The compliance burden is highest in Latin America and in Eastern Europe and Central Asia.
Reducing the tax burden was the second most popular worldwide reform of the business regulatory environment this year. Despite previous reluctance to reduce tax burdens for fear of cutting government revenues, some governments that have implemented tax reform have reaped the benefit of higher investment and economic growth. Economies with a lower business tax burden also have more new firms entering the market.
Complying with administrative tax requirements remains a real burden for business on a global basis. Globally, on average, a company spends almost two months a year complying with tax regulations—15 days for corporate income taxes, 21 for labor taxes and contributions, and 21 for consumption taxes. However, there are wide variations between countries. For example, it takes 105 days to comply with consumption taxes in Azerbaijan but only one day in Switzerland.
The global findings demonstrate that when considering reform, governments need to look at all taxes paid by companies. Corporate income tax is only a part of the story, accounting for only 37 percent of the total tax rate, 26 percent of the number of hours spent on tax compliance, and 12 percent of the number of tax payments. Labour taxes and contributions add significantly to the tax cost in some countries and also to the compliance obligations.
About Paying Taxes 2008
The Paying Taxes study was carried out by PricewaterhouseCoopers and the World Bank Group as part of the World Bank Group’s Doing Business 2008 report. The methodology applied to calculate the total tax rate for each country uses the broad principles from the PricewaterhouseCoopers Total Tax Contribution Framework and looks across all taxes that businesses pay. The total tax rate indicator measures the amount of all taxes borne by the business in the second year of operation, expressed as a percentage of commercial profits.
About PricewaterhouseCoopers
PricewaterhouseCoopers (www.ifc.org) provides industry-focused assurance, tax, and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience, and solutions to develop fresh perspectives and practical advice. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
About the Doing Business Project:
Doing Business 2008 rankings are based on 10 indicators of business regulation that track the time and cost to meet government requirements in business start-up, operation, trade, taxation, and closure. The rankings do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates. Since 2003, Doing Business has inspired or informed more than 113 reforms around the world. For more information, visit www.doingbusiness.org.
For more information on the IFC or the World Bank, visit www.ifc.org or www.worldbank.org.
PricewaterhouseCoopers provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.
