India, November 20, 2007
— Tax reforms that make it easier for firms to pay taxes can increase government revenues by broadening the tax base.
Paying Taxes 2008 is
the second report in an annual series by the World Bank, IFC, and PricewaterhouseCoopers covering 178 countries worldwide. The report presents new empirical evidence that there is a win-win opportunity for governments and firms in simplifying tax systems, easing compliance costs on business, and reducing tax rates.
The study allows direct comparison of tax systems from around the world by use of a standardized case study. The Report uses the Total tax framework developed by PricewaterhouseCoopers which demonstrates again that corporate income tax is only part of the story. Governments need to look at all of the taxes that companies pay when considering their reform agenda. In particular the overall ranking for each country is determined by assigning equal weights to the individual indicators for the number of tax payments, the time required to comply and the total tax cost which is measured by the total tax rate, thereby generating an overall ranking for each country for the ease of paying taxes.
The Report also offers some insights on a like to like comparison of the BRIC economies (Brazil, Russia, India & China). India at 165 has an overall better ease of paying taxes ranking than China (168) and scores ahead of its eastern neighbour on two key parameters that is a lower total tax rate, India (70.60%) to China (73.90%) and time to comply indice where it scores ahead of Russia and Brazil also. However, on an overall basis it appears that the BRIC economies have some gap to bridge vis-à-vis other countries. Russia with the best overall ease of paying taxes ranking among the BRIC economies stands at a relatively moderate 130 among the 178 countries surveyed.
“Reducing the tax burden was the second most popular reform of the business regulatory environment this year. Despite previous reluctance to reduce tax burdens for fear of cutting government revenues, some governments that have implemented tax reform have reaped the benefit of higher investment and economic growth,” says Rita Ramalho, coauthor of the report and tax specialist with the World Bank–IFC
Doing Business
project. “Economies with a lower business tax burden also have more new firms entering the market.”
The report calls on businesses to play a strategic part in reform. Rahul Garg, executive director, PricewaterhouseCoopers, says, “Companies need to be more upfront in communicating to various stakeholders their total tax contribution, to help Governments assess their real economic footprint. More and better information about the taxes paid and the cost of compliance is essential to understanding how tax systems affect businesses. Governments need to look across all taxes when considering reform. We hope the new information on the ranking system for ease of paying taxes in this year’s report will help focus public debate on easing administrative burden and compliance costs as part of the reform efforts which ultimately spur overall investment in the economy.”
This year the top 10 economies for ease of paying taxes are, in order, Maldives, Singapore, Hong Kong (China), United Arab Emirates, Oman, Ireland, Saudi Arabia, Kuwait, New Zealand, and Kiribati. The 10 economies where it is most difficult are, from 169 to 178, Panama, Jamaica, Mauritania, Bolivia, the Gambia, Venezuela, the Central African Republic, the Republic of Congo, Ukraine, and Belarus.
Notes to editor
About
Paying Taxes 2008
The
Paying Taxes
study was carried out by PricewaterhouseCoopers and the World Bank Group as part of the World Bank Group’s
Doing Business 2008
report. The methodology applied to calculate the total tax rate for each country uses the broad principles from the PricewaterhouseCoopers Total Tax Contribution Framework and looks across all taxes that businesses pay. The total tax rate indicator measures the amount of all taxes borne by the business in the second year of operation, expressed as a percentage of commercial profits.
About PricewaterhouseCoopers
PricewaterhouseCoopers Pvt. Ltd. (
www.pwc.com/India
) provides industry - focused tax and advisory services to build public trust and enhance value for its clients and their stakeholders. PwC professionals work collaboratively using connected thinking to develop fresh perspectives and practical advice.
Complementing our depth of industry expertise and breadth of skills is our sound knowledge of the local business environment in India. PricewaterhouseCoopers is committed to working with our clients to deliver the solutions that help them take on the challenges of the ever-changing business environment.
PwC has offices in Bangalore, Bhubaneshwar, Chennai, Gurgaon, Hyderabad, Kolkata, Mumbai, New Delhi and Pune.
“PricewaterhouseCoopers”, a registered trademark, refers to PricewaterhouseCoopers Private Limited (a limited company in India) or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
The name PricewaterhouseCoopers is one word, with uppercase P, uppercase C, and all other letters in lower case.
About the
Doing Business
Project:
Doing Business 2008
rankings are based on 10 indicators of business regulation that track the time and cost to meet government requirements in business start-up, operation, trade, taxation, and closure. The rankings do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates. Since 2003,
Doing Business
has inspired or informed more than 113 reforms around the world. For more information, visit
www.doingbusiness.org
.
