Paying Taxes 2015, the 10th such report that builds on one of 11 key indicators of the World Bank Group’s annual Doing Business report, gauges medium-sized firms’ ease of paying taxes according to:
• total tax rate, which is the total of taxes borne as a percentage of commercial profit;
• time to comply -- prepare, file and pay -- corporate income, contributions to personal income tax and other similar requirements, and consumption tax; and
• number of payments, or frequency with which a company has to file and pay taxes and contributions.
The Philippines placed 127th in this year’s report out of 189 economies, after placing 131st in the report last year that was based on a different methodology.
While the study did not say if rankings in this year’s and last year’s reports were directly comparable, it said the impact of methodology change on “sub-indicators is expected to be limited.”
Changes in this year’s methodology consisted of updating of gross national income per capita values to 2012 from 2005 previously; adding of a second largest city for 11 economies with population of more than 100 million people; and basing rankings this year on “distance to frontier” -- or measure of performance of each economy against the highest and lowest values of each sub-indicator -- instead of simple percentile distribution used in past reports.
Qatar and the United Arab Emirates were tied in first place, followed by Saudi Arabia, Hong Kong, China and Singapore. On the other hand, Bolivia, Venezuela, Mauritania, Chad and the Central African Republic occupied the lowest five places.
The report -- which used data as of Dec. 31 last year -- stated that on global average, a mid-sized company takes 264 hours to comply with tax dues, makes 25.9 payments and pays 40.9% of commercial earnings for taxes and contributions (or total tax rate). Last year’s report showed it took companies 268 hours to comply with 26.7 tax payments and paid a 43.1% total tax rate.
The same report showed the Philippines faring a bit worse than global average. Specifically, it takes a medium-sized company here 193 hours to make 36 payments with 42.5% of commercial income going to taxes and contributions.
“Paying taxes has become easier over the past year for medium-sized companies around the world,” the latest report noted.
“The administrative burden of tax compliance has been steadily improving since 2004 with the growing use of electronic systems for filing and paying taxes,” it added.
“During the financial crisis there was an increase in the number of tax reforms. The pace of reform accelerated with the onset of the crisis, then slowed in subsequent periods.”
The latest results, the report said, showed several economies “are continuing to make progress in tax reform,” with measures that simplify tax systems, reduce burden on businesses and lower economic distortions. “Tax reform is therefore set to remain an important topic for governments around the world for many years to come.”
source: Businessworld
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