Paying Taxes 2018: More countries make payments easier?
Taxes are critical to government spending, including funding social programmes in health, education, and infrastructure and in providing a safety net for their citizens.
The most common feature of reforms in the area of paying taxes over the past year was the implementation or enhancement of electronic filing and payment systems, according to Paying Taxes 2018 report by the World Bank Group and PwC.
Paying Taxes 2018 shows that around the world and across many different taxes, technology is having a significant effect on the tax obligations of businesses.
Nigeria ranked 171 in overall paying taxes ranking. There is however a mixed picture when it comes to the changes in the amounts and types of taxes businesses pay.
Of the 190 economies in the study, there are 162 with a Value Added Tax (VAT) system. In 51 of these no VAT refund is available to our case study company.
There are 180 economies with a Company Income Tax (CIT) system. In 81 of them, the likelihood that the case study company will be audited after amending a tax return is greater than 25percent.
Key findings from the Paying Taxes 2018 data are that on average, it takes a company 240 hours to comply with its taxes, it makes 24 payments and has an average Total Tax and Contribution Rate (TTCR) of 40.5percent.
Despite some recent improvement, African region still has the highest number of payments indicator. The TTCR also increased slightly while time to comply fell. The region’s below average post-filing score is driven down by a handful of very poorly performing economies.
Properly developed, effective taxation systems are crucial for a well-functioning society. A good tax system should ensure that taxes are proportionate and certain (not arbitrary) and that the method of paying taxes is convenient for taxpayers. Also, taxes should be easy to administer and collect.
El Salvador made the greatest advances in tax payment systems in 2016/17. Following regulatory changes, all companies are now required to submit their tax returns electronically.
No fewer than seventeen economies introduced or enhanced systems for filing and paying taxes online. Besides El Salvador, 16 other economies – Botswana, Brunei Darussalam, India, Indonesia, Kenya, Lithuania, Maldives, Morocco, New Zealand, the Philippines, Rwanda, Saudi Arabia, Uruguay, Uzbekistan, Vietnam and Zambia – introduced or enhanced systems for filing and paying taxes online.
El Salvador is not the only economy where a risk-based audit system has been introduced. Thailand is another good example: In 2016, the Inland Revenue Board of Thailand implemented a new automatic risk-based system for selecting companies for a tax audit.
Under this system, only companies classified as risky are audited. The system does not flag for an audit cases where there is an error in the tax return and an underpayment of tax liability due.
Other measures to boost efficiency in tax administration can be seen in Senegal.
The government amended certain provisions of the General Tax Code related to the time required to obtain a VAT refund. Following the new law, VAT refunds have to be paid within 90 days from the time the tax authority receives the documents from the taxpayer.
The request for a VAT credit refund has to be taken into account by the administration within 30 days from the time the request has been submitted. Lastly, the refund of the credit has to occur within 15 days of the request being approved.
These time limits are being applied in practice. As a result of these changes, the tax authority is processing VAT refunds in a faster and more efficient way reducing the overall time to receive VAT refund from 52 weeks in 2015 to 17 weeks in 2016.
India introduced a set of administrative measures to ease tax compliance for businesses. In 2016, the government introduced a number of reforms affecting the time to prepare and pay corporate income tax. First, the introduction of the Income
Computation and Disclosure Standards (ICDS) helped standardise the computation of taxable income and other tax accounting standards.
Secondly, data gathering has become increasingly automated due to the use of modern enterprise resource planning (ERP) software. This has resulted in reducing the time to comply with corporate income tax from 45 hours in 2015 to
25 hours per annum in 2016.
Other economies directed efforts to reducing the tax cost on businesses. With the objective of promoting more stable employment conditions,
Italy exempted employers from social security contributions for a maximum of 36 months for hires with open-ended contracts from 1 January
2015 to December 31, 2015. Japan reduced the corporate income tax rate at the national level from 25.5% to 23.9% for tax years beginning on or after 1 April 2015. The Bahamas reduced the rate of stamp duty on land sales from 10% in 2015 to 2.5% in 2016.
In Niger, young entrepreneurs are now exempted from the Tax Professionnelle (Business Licence) by 50% in the first two years of operation. In Spain and as of 2016, new companies set up from January 2015 are taxed at 15%, while for previous years this rate only applied to the first €300,000 of profit (the remaining taxable base was taxed at 20%).
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