This is the sixth year that the World Bank and IFC’s Doing Business project has included the “paying taxes” indicator. The indicator measures the ease of paying taxes in 183 economies around the world. Besides paying taxes, the Doing Business project provides quantitative measures of regulations in eight other areas: starting a business, dealing with construction permits, registering property, getting credit, protecting investors, trading across borders, enforcing contracts, and closing a business. In addition, data are presented for regulations on employing workers and, for a set of pilot indicators, on getting electricity.
The paying taxes indicator measures tax systems from the point of view of a domestic company complying with the different tax laws and regulations in each economy. The case study company is a small to medium-size manufacturer and retailer, deliberately chosen to ensure that its business can be identified with and compared worldwide.
The indicator covers the cost of taxes borne by the case study company and the administrative burden of tax compliance for the firm. Both are important for business. They are measured using three sub-indicators: the total tax rate (the cost of all taxes borne), the time needed to comply with the major taxes (profit taxes, labour taxes and mandatory contributions, and consumption taxes), and the number of tax payments.
The paying taxes indicator measures all taxes and contributions mandated by government at any level (federal, state, or local) as they apply to the standardised business. The total tax rate sub-indicator measures the impact of taxes and contributions that are borne by the company which impact the company’s financial statements. It includes the corporate income tax, social contributions and labour taxes paid by the employer, property taxes, property transfer taxes, dividend tax, capital gains tax, financial transactions tax, waste collection taxes, and vehicle and road taxes. The other two sub-indicators, on the time to comply and number of payments measure taxes borne and taxes collected, and so include taxes and contributions withheld or collected, such as sales tax or value added tax (VAT).
Between June 2009 and May 2010, 40 economies made it easier to pay taxes as measured by Doing Business.