Paying Taxes 2018

In-depth analysis on tax systems in 190 economies

Explore the new edition of Paying Taxes, a unique report by PwC and the World Bank Group

Paying Taxes 2018 report

Now in its 12th edition, Paying Taxes is a unique report from PwC and the World Bank Group which uses a medium-sized domestic case study company to measure and assess the ease of paying taxes across 190 economies. This year we explore how the digital revolution is transforming almost every aspect of paying taxes. We consider the methods companies use to pay their taxes, how tax administrations communicate with taxpayers, how they collect and use data and the ways in which they monitor tax compliance.

Diving into the data – PwC's Commentary

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Paying Taxes 2018: Key findings

How long, on average, does it takes to our case study company to comply with its taxes? What's the average Total Tax & Contribution Rate? Which sub-indicators continue to fall?

The view from the Middle East

Milestones towards the ambitious GCC VAT introduction  

A number of countries in the Gulf Cooperation Council (GCC)12 have developed a reputation for taking on ambitious projects with accelerated timelines. While developments such as skyscrapers and indoor ski slopes have caught the public’s attention, there are many other substantial, though less eye-catching projects, including work on transport, logistics, energy and infrastructure. Many of these projects demonstrate the success of the approach taken.

Implementing VAT across the six member states of the GCC in two years is another ambitious undertaking in the region; especially as two of the countries, Bahrain and the United Arab Emirates (UAE) have limited tax history, jurisprudence or administrative infrastructure. An excise tax system is also being introduced. This is major transformation by any measure. Saudi Arabia and the UAE are the first movers on VAT with a start date of 1 January 2018, but what are some of the main milestones to date?

At the time of writing (mid October 2017), the VAT law was recently officially released in Saudi Arabia and the UAE, with the UAE establishing a new tax authority (the Federal Tax Authority) and issuing a tax procedure law. VAT implementing regulations have been issued by Saudi Arabia and the executive regulations for the UAE are anticipated to be released in November 2017. Over the past few months, in advance of, or in combination with, the publication of the law, website FAQs and information sessions have been held by the government authorities in both countries. Going back further, government announcements have been made about the likely implementation of VAT and have indicated that the broad principles of the VAT model would be in line with concept of a fully-fledged VAT system. More recently we have seen new avenues, for example industry forums, of discussion with taxing authorities.

Trends in Paying Taxes indicators for the Middle East region, Saudia Arabia and the United Arab Emirates
Trends in Paying Taxes indicators chart

Source: Paying Taxes 2018 data
Note: The trend only considers the economies that have been part of the Paying Taxes study since 2004
 

Six countries over two years:

Implementing VAT across the GCC is another ambitious undertaking in the region

Post-filing in Saudi Arabia, the United Arab Emirates and other selected economies
Post-filing in Saudi Arabia, the United Arab Emirates and other selected economies

* Audit likelihood <25% indicates that an audit is unlikely and so the economy receives the best score on this component.

** Where an economy's data sits within the highest 5% of the post-filing component's range, these economies are allocated the worst distance to frontier score of 0 for that
component of the post-filing index.

Source: Paying Taxes 2018 data

Society at large and companies have therefore been given notice, and some information, to implement the systems that they need in place to be able to comply with VAT. In doing so many advisors and systems suppliers have boosted their VAT capability – fulfilling an important role alongside the government in the implementation process. The media has also been an important channel of communication.

Certain details on the VAT regulations are yet to be made available. For example, at the time of writing, the VAT treatment of certain transactions, the full set of VAT filing and related data requirements and details of the systems interface with the tax authorities are not yet available. This may mean further systems changes will be needed in the future once these details become available.

Saudi Arabia and the UAE have performed well to date on the Paying Taxes sub-indicators, as shown in Figure 5, due in part to the low number of taxes in these countries. The introduction of VAT will increase the number of taxes in the countries with a corresponding impact on the time and payments indicators. The new post filing indicator in the Paying Taxes methodology will be valuable to measure the level of success of governments over time in implementing an efficient VAT system. We have seen already the potential impact in the region, where the Paying Taxes distance to frontier score of some economies changed significantly because of the corporate income tax audit aspects of the post filing indicator. As shown in Figure 6, the impact of the VAT refund process varies considerably between economies and it will be interesting to see how Saudi Arabia and the UAE fit within this range. The introduction of new taxes in any society involves a period of adjustment for taxpayers and the public at large; there will inevitably be a period of transition. Post 1 January 2018, the use of knowledgeable teams and efficient processes and technology will be critical in ensuring a workable transition.

Governments, companies and other stakeholders all have a shared interest in this ambitious VAT transformation not being at the cost of doing business in the region.  

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Access an interactive table that shows the ease of paying taxes ranking and the four sub-indicators results for 190 economies.

Overall ranking and data tables

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Dean Kern
Tax and Legal Services Leader
Tel: +971 4 304 3575
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