Paying Taxes 2018: Slovakia ranked 49th and was the best placed of the V4 countries

The use of technology in the administration and collection of taxes by the state and companies is key to simplifying and reducing the administrative burden at companies. Firms in Estonia need 50 hours to comply with their tax duties.
In Slovakia, this figure is 192 hours – the shortest time for any of the V4 countries. In Hungary it takes 277 hours. The Baltic countries, thanks to reforms, ranked in the top 20. The V4, including Slovakia, lags behind.

Washington, Bratislava, 28 November 2017 – According to the 12^th edition of Paying Taxes for 2018, compiled by the World Bank Group and PwC, the administrative burden for the administration and collection of taxes depends on the technology used by the state and companies. For most countries, the biggest challenges include the implementation of new technology, data integrity and security, and post-filing procedures applied by tax authorities, which may withhold the return of tax overpayments. IT has changed the way how tax authorities communicate with taxpayers, how they select companies for tax audits, and how they conduct those audits. Slovakia’s ranking is impacted by the 5^th highest tax burden in the EU and EFTA under tax legislation effective at the end of 2016. Reforms in electronic tax administration have been undertaken in Lithuania, Poland, and Estonia.

• 92 countries have fully implemented an electronic system for the administration and payment of taxes;
• 66 countries have adopted or improved electronic systems over the last 12 years;
• 95% of OECD countries have electronic systems for the administration and payment of taxes;
• 21 countries in Europe and Central Asia use such electronic systems; and
• 600 electronic services may be used by Estonian citizens.\

“Technology’s impact on reducing the administrative and cost burden of tax is almost universal this year in our findings. In particular, it is now embedded in driving simplification and time-saving for business. The increasing use of real, or near real time data is changing how tax authorities can use data, and analyse returns. This does, however, raise questions about data integrity and security and about how businesses can meet the increasing data obligations placed upon them,”

Andrew Packman, Tax Transparency and Total Tax Contribution leader at PwC.

In Estonia, VAT refunds only take 2.3 weeks

For the second time, the study applies the post-filing index, which uses four sub-indicators –time to comply with a VAT refund (in hours), time to obtain a VAT refund (weeks), time to correct a CIT return (including time to comply with a CIT audit) (hours), and time to complete a CIT audit, if applicable (weeks). In Eastern Europe, the Baltic countries achieve the best results in this parameter – over 97 points.

In 2016, 180 countries used a CIT system. In 81 of them, there is a 25% probability that voluntary corrections to a CIT return automatically lead to a tax audit or to inquiries from the tax authorities. In 62% of developing countries and in 32% of advanced economies, a correction of a CIT return leads to a tax audit in 25% of cases. If a tax audit is launched in advanced economies, it is completed within 20 weeks on average.

Up to 23 of 32 European countries undertook reforms with an impact on the total tax rate, with the biggest drop recorded in Italy (-14%) and the biggest increase observed in Greece (+0.9%).

“The continued reduction in the burden of paying taxes, in time and the number of payments, is welcome news indeed. The use of technology can provide significant benefits for both tax payers and tax collectors, and we look forward to its increased use in efforts to improve the ease of doing business for medium sized enterprises in countries around the world,”

Rita Ramalho, Acting Director, Global Indicators Group, Development Economics, World Bank Group.

Slovakia best ranked in V4,
but still far behind the Baltic countries

In this year’s study, Slovakia ranked 49^th (year-on-year improvement by 7 places) in the overall tax payment system ranking, although the measured parameters were almost unchanged. Poland ranked 51^st, Czech Republic 53^rd (unchanged from last year), and Hungary dropped to 93^rd from 77^th, mainly due to the very high number of hours (277) required to meet tax requirements. Just for comparison: in Estonia, the best country in this category, this figure is only 50 hours.

^{*Paying Taxes 2018 is based on legislation applicable at 31 December 2016.}

However, Slovakia’s total tax burden, i.e. the total tax rate of 51.6%, is still more than 12% higher than the EU and EFTA average of 39.6%, and also higher than the average for all 190 countries participating in the study (40.5%). Under tax legislation at the end of 2016, Slovakia had the 5^th highest tax burden in the EU and EFTA.

An overview of Paying Taxes 2018 results* – Slovakia/EU & EFTA/global average

^{*Paying Taxes 2018 is based on legislation applicable at 31 December 2016.}

In Eastern Europe, the Baltic countries had the best post-filing indexes of over 97 points. In Slovakia, the post-filing index increased from 80.57 to 87.17, while in the EU and EFTA, the average dropped from 88.90 to 81.59.