Key findings: Paying Taxes 2012

Paying Taxes 2012 is a unique study from PwC, the World Bank and IFC, which measures the ease of paying taxes across 183 economies worldwide. It records the taxes and mandatory contributions that a medium-size company must pay in a given year as well as measuring the administrative burden of paying taxes and contributions.

This year the rankings in this report differ from those used by the World Bank Group in the Doing Business 2012 report where a change in the ranking methodology is being piloted to address various issues that have been raised through discussions with stakeholders. The Doing Business project has applied a threshold to the ranking for the Total Tax Rate to seek to mitigate the effects of low Total Tax Rates.

For more detailed information on the Paying Taxes methodology, please click here

With seven years of data now available, Paying Taxes 2012 gives some interesting perspectives on how the world’s tax regimes have changed during this time. Some of the key findings include:

  • Governments continue to reform their tax systems to help businesses to grow. Over the past 7 years more than 60% of economies made paying taxes easier with 244 reforms.
  • Easing the compliance burden can benefit both government and business. The most common feature of tax reform this year was introducing electronic systems - 66 economies now have online filing and payment systems.
  • The Total Tax Rate has fallen by 8.5% since 2006, more than 1% per year; the time to comply with taxes declined by more than 1 day per year (54 hours); and the number of tax payments required dropped by 5.
  • On average, a domestic medium-size company makes 28.5 tax payments per year, spends almost 7 weeks compling with its taxes, and has a tax cost of 44.8% of its commercial profit.
  • In high income economies the case study company makes 15.2 payments, takes 168.7 hours to comply with its main taxes and has an average Total Tax Rate of 37.4%. This compares to 38.3 payments, 271 hours and 67.8% for low income economies.
  • VAT is the predominant form of consumption tax used around the world. It takes 66% as much time again to comply with VAT as it does to comply with corporate income tax.
  • The time to comply with tax requirements for the model company varies between regions. It takes the least time to comply in the OECD (195 hours) and the longest time needed is in Latin America and the Caribbean (382 hours).
  • The number of payments also varies widely by region. The company makes the most payments in Central Europe and Eastern Europe, 37.9 a year on average and the fewest in OECD economies, 13.1 on average.