Paying Taxes 2016
Jan 22, 2016
The tax burden of Slovak businesses is 10% higher than both the worldwide and EU & EFTA average. However, the introduction of electronic tax filing and payment has moved Slovakia up by 27 positions in the tax payment system rankings
For ten years running, businesses worldwide have reported a reduction of tax expenses and the administrative burden of tax payment. This year, in particular, due to the introduction of electronic tax systems
Washington, Bratislava, 19 November 2015 – According to the findings of the 10th edition of Paying Taxes compiled by the World Bank Group and PwC, electronic tax filing and payments were the most common tax reforms undertaken by countries worldwide during the past year. As a result, paying taxes became easier for medium-sized companies globally, but the focus has moved from reducing tax rates for companies to embracing technology and relieving their compliance burden.
Paying Taxes 2016 found that the average company has a Total Tax Rate (as defined under the Doing Business methodology) of 40.8% of commercial profits, down by just 0.1% from last year. It took 25.6 tax payments per year and 261 hours to comply with tax requirements, a drop of two hours compared to last year.
Paying Taxes 2016 found that the average company has a Total Tax Rate (as defined under the Doing Business methodology) of 40.8% of commercial profits, down by 0.1% from last year. The number of tax payments has been reduced slightly to 25.6 and the time to comply for an average company has been reduced to 261 hours per year. Over the 10-year period covered by the study, the global average time to comply has declined by 61 hours and the number of payments sub-indicator by 8.2 payments, due in large part to the introduction and improvement in electronic filing and payment systems.
Electronic filing continues to have a significant impact in easing the burden of tax administration. Globally, the most common feature of tax reform in the past year was the introduction or enhancement of electronic systems for filing and paying taxes.
In comparison, 84 economies used fully electronic tax filing and payment systems in 2014, while only 46 used them in 2005. Due to this, the number of economies in which the time to comply is less than 300 hours has increased from 60% to 74 %. From 2010 to 2014, the introduction of the electronic system was the most frequent reform affecting the ranking of economies, while from 2004 to 2009 it was mostly the reduction of corporate income taxes.
The most rapid tax burden decline in individual economies was recorded during the economic downturn in 2008 – 2010. During this period, the annual decrease was 1.8% on average. In 2011, the pace started to slow down.
In addition, the study for last year showed that the total tax burden rate increased in 46 economies and was reduced in 41 economies of the 189 global participants. It should also be noted that the tax burden for businesses from the 189 global economies was spread evenly between labour taxes and corporate income tax, and each of these categories represented 16.2% on average and in total they constituted 4/5 of taxes paid directly by businesses (VAT is not included in computation of tax burden).
Paying Taxes 2016 found that the average company has a Total Tax Rate (as defined under the Doing Business methodology) of 40.8% of commercial profits, down by 0.1% from last year. It took 25.6 tax payments and 261 hours to comply with its tax requirements, a drop of two hours compared to last year.
Over the 10-year period covered by the study, the global average time to comply has declined by 61 hours and the number of payments sub-indicator by 8.2 payments, due in a large part to the introduction and improvement in electronic filing and payment systems. Electronic filing continues to have a significant impact in easing the burden of tax administration. Globally, the most common feature of tax reform in the past year was the introduction or enhancement of electronic systems for filing and paying taxes.
Augusto Lopez-Claros, Director, Global Indicators Group, Development Economics, World Bank Group said:
“Taxes are essential to finance public services and development globally. The design of a tax system can influence firms’ decisions on whether to operate in the formal sector. It’s encouraging that economies worldwide continue to introduce substantial improvements in their tax environment. It means both an easing of the burden on business, and sustainable revenues for governments.”
Andrew Packman, leader for Tax Transparency and Total Tax Contribution at PwC said:
“There is still considerable scope for reform of tax systems in terms of simplification and supporting compliance. This year’s report demonstrates in particular the acute challenge in developing countries of the availability of IT infrastructure including broadband, needed to design and run a modern tax system to raise the revenues to sustain growth.”
Slovakia’s ranking in Paying Taxes 2016
In 2014, (Paying Taxes 2016 is based on legislation applicable as at 31.12.2014) Slovakia was one of the 18 countries where online tax filing and tax payment was introduced, together with Spain, Poland, Serbia, Costa Rica, Cyprus, Indonesia, Malaysia, Jamaica, Montenegro, Morocco, Mozambique, Peru, Rwanda, Tajikistan, Uruguay, Vietnam and Zambia. In total, 40 economies of the total 189 have implemented tax reforms easing tax compliance. Central Asia and Eastern Europe have seen the most reforms introduced since we launched our survey.
This year, Slovakia ranked 73rd in the overall Paying Taxes ranking an improvement by 27 positions compared to last year.
However, the overall tax burden in Slovakia, i.e. the total tax rate of 51.2%, is 10% higher compared to the 40.6% average in the EU & EFTA countries and the average of the total 189 countries participating in the study.
Overall Paying Taxes 2016* results – Slovakia / EU & EFTA / global average
|
Total tax rate |
Number of tax hours |
Number of tax payments |
Slovakia |
51.2% |
188 |
10 |
EU & EFTA |
40.6% |
173 |
11.5 |
Total of 189 countries |
40.8% |
261 |
25.6 |
*Paying Taxes 2016 is based on legislation applicable as at 31.12.2014
Christiana Serugová, Tax Partner and Tax Leader in PwC Slovakia comments on Slovakia’s ranking:
What is the reason for Slovakia’s improved ranking?
“As a result of the introduction of mandatory electronic filing of VAT returns from 1 January 2014 for VAT payers and representatives of tax entities (tax advisors, attorneys and other representatives), the position of Slovakia has improved significantly as the reported number of tax payments has dropped substantially. The additional administrative obligation, the introduction of a control VAT statement, did not have an adverse effect as it also must be filed electronically. However, this resulted in significant costs on software adjustments. However, our ranking was not influenced only by the development and changes in our own tax system, but also by changes in the tax systems of other benchmarked countries.”
What legislative measures and changes could help Slovakia improve its ranking further?
“If we look at the structure of the average total tax rate worldwide, we see that the tax burden is spread evenly between labour tax and corporate income tax, and both these categories represent 16.2% on average, and in total they constitute 4/5 of taxes payable by businesses. In Slovakia, the labour tax rate amounts to 39.7%, corporate income tax represents 10.5% and other taxes 1.0% of the total tax rate. This means that the tax burden is not distributed evenly between the taxation of labour and corporate profit and the total of these two components represents 98% of the total tax burden. Therefore, in addition to continuing improvements in electronic communication with the tax offices, Slovakia‘s overall “tax score” could be improved by reducing taxation on labour and simplifying the tax system, including the tax rate structure.”
Paying Taxes 2016* – V4 countries
|
Total tax rate |
Total hours |
Total payments |
Ranking |
Slovakia |
51.2% |
188 |
10 |
73 |
Czech Republic |
50% |
405 |
8 |
122 |
Poland |
40.3% |
271 |
7 |
58 |
Hungary |
48.4% |
277 |
11 |
95 |
*Paying Taxes 2016 is based on legislation applicable as at 31.12.2014
|
Ranking |
Total tax rate |
Corporate income tax |
Labour tax |
Other taxes |
Slovakia |
73 |
51.2% |
10.5% |
39.7% |
1.0% |
Czech Republic |
122 |
50.4% |
9.5% |
38.4% |
2.5% |
Poland |
58 |
40.3% |
14.5% |
24.8% |
1.0% |
Hungary |
95 |
48.4% |
11.8% |
34.3% |
2.3% |
Slovakia’s overall Paying Taxes ranking – history
Slovak Republic |
Overall ranking |
Paying Taxes 2016 |
73 |
Paying Taxes 2015 |
100 |
Paying Taxes 2014 |
102 |
Paying Taxes 2013 |
100 |
Paying Taxes 2012 |
129 |
Paying Taxes 2011 |
122 |
Paying Taxes 2010 |
119 |
Overview of Paying Taxes 2016* findings – Slovakia, detailed breakdown of reviewed indicators
Total tax rate
Slovak Republic |
Total tax rate |
Corporate income tax |
Labour tax |
Other taxes |
Paying Taxes 2016 |
51.2% |
10.5% |
39.7% |
1.0% |
Paying Taxes 2015 |
48.6% |
8.5% |
39.7% |
0.4% |
Paying Taxes 2014 |
47.2% |
7.0% |
39.6% |
0.6% |
*Paying Taxes 2016 is based on legislation applicable as at 31.12.2014
Tax payments
Slovak Republic |
Total number of payments |
Corporate income tax |
Labour tax |
Other taxes |
Paying Taxes 2016 |
10 |
1 |
1 |
8 |
Paying Taxes 2015 |
20 |
1 |
1 |
18 |
Paying Taxes 2014 |
20 |
1 |
1 |
18 |
Time to comply
|
Hours |
|||
Slovak Republic |
Total tax time |
Corporate income tax time |
Labour tax time |
Consumption tax time |
Paying Taxes 2016 |
188 |
42 |
62 |
84 |
Paying Taxes 2015 |
207 |
42 |
62 |
103 |
Paying Taxes 2014 |
207 |
42 |
62 |
103 |
ENDS
Notes
1. Paying Taxes 2016 measures all mandatory taxes and contributions that a medium-size company must pay in a given year. Taxes and contributions measured include the profit or 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, vehicle and road taxes, and other small taxes or fees. For more information about the Paying Taxes study, visit: www.pwc.com/payingtaxes.
2. The Paying Taxes annual report builds on the chapter in the World Bank Group’s Doing Business report on Paying Taxes. For more information on the Doing Business report series, visit: www.doingbusiness.org
3. In PwC’s 18th Annual Global CEO Survey, tax remains in the top five of the perceived issues for business, with seven out of ten CEOs (70%) being somewhat or extremely concerned about the increasing tax levied on their businesses. taxes and environmental levies can increase compliance time and have a significant impact on the bottom line.
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