Economies around the world are adopting a range of policies as they strive to strike a balance between raising tax revenues and encouraging growth, according to Paying Taxes 2014, a new report from the World Bank Group and PwC.
Paying Taxes is a unique study which investigates and compares tax regimes across 189 economies, ranking them according to the relative ease of paying taxes. The report is intended to be a catalyst for debate among tax authorities, governments and business around issues relating to tax systems and how they can be reformed.
The Paying Taxes indicator measures tax systems from the point of view of a domestic company complying with the different tax laws and regulations around the world. The case study company is a small to medium-size manufacturer and retailer, deliberately chosen to ensure that its business can be compared on a like for like basis worldwide.
Paying Taxes in Central Asia & Eastern Europe
On average in 2012 for the Central Asia & Eastern Europe region, it took the case study company 256 hours to comply with its taxes. It made 29.5 payments and paid an average Total Tax Rate of 39.5%.
Central Asia & Eastern Europe has been the biggest reformer over the nine years of the study. Economies in this region have shown the largest fall in both the time to comply (220 hours) and number of payments (25 payments) and apart from Africa has the largest fall in the Total Tax Rate (15.7 percentage points)
The average Total Tax Rate for the region at 39.5% is a little below the world average of 43.1%.
Since 2004, labor taxes have consistently accounted for the largest element, around 50% of the Total Tax Rate in the region.
Almost all of the economies in the region have a significant element of the Total Tax Rate accounted for by labor taxes and mandatory contributions. However, in two economies, Tajikistan and Uzbekistan, ‘other’ taxes are the most significant accounting for more than 60% of the Total Tax Rate.
The elements of the Total Tax Rate for profit tax, labor taxes and ‘other’ taxes have all shown a decline within the Total Tax Rate over the last nine years, but the rate of decline slowed from 2009 for all types of tax, and there has been a slight increase across all three in 2012.
The average time to comply across this region of 256 hours is 12 hours below the world average of 268. It is evenly split between the three major taxes.
The time needed to comply with tax obligations has dropped by 46% in nine years. The time to comply with consumption taxes has more than halved since 2004, the time to comply with corporate income and labor taxes has also dropped significantly, by 46% and 36% respectively.
The fall in the average time to comply is the largest for any of our regions. The average time to comply has fallen by 220 hours since 2004.
12 out of 19 economies in the region have adopted online filing and payment systems. The use of electronic filing systems covering corporate income tax, VAT, personal income tax and all social contributions has been the key driver for the fall in time to comply in all type of taxes.
At 29.5 the region’s number of payments is a little above the world average of 26.7.
The number of payments has fallen consistently over the nine year period by 25 from 54.4 to 29.3. This fall is twice as large as recorded by any other region.
Download the Regional Analysis for Central Asia and Eastern Europe (PDF)
For more information about Paying Taxes, visit: http://www.pwc.com/payingtaxes
For more information about the Doing Business series, visit: https://www.doingbusiness.org/
The following economies are included in our analysis of Central Asia & Eastern Europe: Albania; Armenia; Azerbaijan; Belarus; Bosnia and Herzegovina; Georgia; Israel; Kazakhstan; Kosovo; Kyrgyz Republic; FYR Macedonia; Moldova; Montenegro; Russia; Serbia; Tajikistan; Turkey; Ukraine; Uzbekistan.