OREANDA-NEWS. December 01, 2009. Despite the economic downturn, government focus around the world has remained on tax reform, concludes a new report ‘Paying Taxes 2010. Global picture’ released by the World Bank Group, IFC (International Finance Corporation) and PricewaterhouseCoopers. The report finds that between June 2008 and May 2009 45 economies made it easier to pay taxes, almost 25 percent more than in the previous year, reported the press-centre of PwC.

The report measures the ease of paying taxes across 183 economies by assessing the administrative burden for companies to comply with tax regulations, and also by calculating companies’ total tax liability as a percentage of pre-tax profits. In the past five years, the report has recorded 171 reforms affecting taxes in 104 economies worldwide.


For the third year in a row, Eastern Europe and Central Asia had the largest number of reforms, with 10 economies reforming. The top reformer was Timor-Leste, which introduced a new tax law, streamlined the business tax regime, and simplified tax administration.

Penelope Brook, World Bank Group Director of the Global Indicators and Analysis department said:

“Government efforts to streamline tax procedures and reduce time spent on compliance can make an important difference for small and medium enterprises, especially in difficult economic times.

“This year’s top reformer reduced compliance time by over 50 percent by rationalizing tax regulations, simplifying computation rules, and reducing payments.”

While 20 economies have reduced corporate income tax rates, 18 simplified the process of paying taxes. In the EU the average total tax rate for the standard case study company measured fell from 46% to 44.5%. This reflects, in part, cuts in the corporate income tax rate implemented in 2007/08 in Germany and Italy. A few economies, such as Russia (from 24 percent to 20 percent) and Korea (from 25 percent to 22 percent), reduced corporate income tax rates or accelerated previously planned reform programmes as part of economic stimulus packages.

On average across all of the 183 economies covered in the report, the standard case study company measured has to make 31 tax payments and spend 286 hours on calculating and paying its taxes. The time to comply with tax requirements ranges from 212 hours a year on average in OECD high-income economies to 638 in Latin America. The number of payments also varies widely. The company makes the most payments in Eastern Europe and Central Asia, 53 a year on average. It makes the fewest in OECD high-income economies, just 14 on average. The average time required to comply with taxes in the EU is 232 hours, down from the previous year’s 257, with labor taxes requiring the most time (117 hours). The fall reflects continued efforts in implementing and enhancing electronic filing and payment systems and in streamlining regulations and improving tax returns to simplify compliance.

On average, the company pays 9.5 different taxes and corporate income tax accounts for only 12 percent of payments, 26 percent of the time to comply, and 38 percent of the tax cost.

Susan Symons, partner, PricewaterhouseCoopers, said:
“The global recession has meant falling tax revenues and difficult tax policy choices.”

“The challenge is ensuring sufficient public revenues for the future while incentivizing investment and economic growth.”

The study allows direct comparison of tax systems from around the world and uses a standard case study company. The report shows how businesses are affected not only by tax rates, but also by the procedural burden of compliance. They are measured using three subindicators: 1) the total tax rate (the cost of all taxes borne), 2) the time needed to comply with the major taxes (profit taxes, labor taxes and mandatory contributions, and consumption taxes), and 3) the number of tax payments.

This year the top 10 economies for ease of paying taxes are, in order, Maldives, Qatar, Hong Kong (China), United Arab Emirates, Singapore, Ireland, Saudi Arabia, Oman, New Zealand, and Kiribati. The 10 economies where it is most difficult are, from 174 to 183, Jamaica, Mauritania, the Gambia, Bolivia, Uzbekistan, the Central African Republic, the Republic of Congo, Ukraine, Venezuela, and Belarus.

In terms of the aggregate index, Russia improved its position, rising 31 places (to 103rd) this year. This is connected with a certain reduction in the administrative burden. Thus, VAT began to be paid on a quarterly rather than monthly basis starting from 2008. In addition, the fact that companies began actively taking advantage of electronic filing of tax returns also had a positive impact on Russia’s ranking.

If we compare Russia with BRIC countries (Brazil, Russia, India and China), Russia remains ahead of these countries in terms of overall rating. Besides, Russia (129th) leads other BRIC countries in terms of average total tax rate. Therefore, Russia has somewhat improved its positions in the global rating and leads in a number of rankings compared to other BRIC countries.