DOING BUSINESS Augusto Lopez-Claros, Director Global Indicators Group

Transcription

1 DOING BUSINESS 2016 Augusto Lopez-Claros, Director Global Indicators Group November 19, 2015

2 What does Doing Business measure? Doing Business indicators: Focus on regulations relevant to the life cycle of a small to medium-size domestic business. Are built on standardized case scenarios. Are measured for the most populous city in each country, and the second largest business city in countries with more than 100 million inhabitants. Are focused on the formal sector. Doing Business DOES NOT measure all aspects of the business environment such as security, macro-economic stability, prevalence of bribery and corruption, level of training and skills of the labor force, proximity to markets, regulations specific to foreign investment or the state of the financial system. 2

3 The 11 areas of business regulation measured by Doing Business affect firms throughout their life cycle At start-up Starting a business Labor market regulation When things go wrong Enforcing contracts Resolving insolvency In daily operations Paying taxes Trading across borders In getting a location Dealing with construction permits Getting electricity Registering property In getting financing Getting credit Protecting minority investors 3

4 Tax rates among the top obstacles that firms face across the developing world Based on Enterprise Surveys in 135 countries around the world Direct responses from representative samples of the private sector Percent of firms identifying the problem as the main obstacle to their business activity, % Access to finance Practices of the informal sector Tax rates Political instability Electricity Inadequately educated workforce Corruption Crime, theft and disorder Tax administration Customs and trade regulations Access to land Business licensing and permits Sources: Doing Business database; World Enterprise Surveys.

5 The greater the difficulty of paying taxes, the more likely firms are to perceive corruption as a problem Score (1-7) Score (0-100) fewer irregular payments less corrupt more irregular payments Most difficult Economies scored by ease of paying taxes, quartiles Irregular payments and bribes Corruption perceptions index Note: The sample comprises 144 economies. The economies are grouped into quartiles by their distance to frontier score for paying taxes, which recorded on ow common it is to make undocumented extra payments or bribes in connection with (1) imports and exports; (2) public utilities; (3) annual tax payments; (4) awarding of public contracts and licenses; and (5) obtaining favorable judicial decisions. The answers range from 1 (very common) to 7 (never occurs). The score for the corruption perceptions index relates to the degree to which corruption is perceived to exist among public officials and politicians by business people and country analysts. Score ranges between 100 (highly clean) and 0 (highly corrupt). Sources: Doing Business database; World Economic Forum 2014, Transparency International 2014 Least difficult 10 0 more corrupt

6 Why do tax rates and tax administration matter? Taxes are the price we pay for a stable, more equitable society: Funding for social programs and public investments Key to building effective government But tax rates and burdensome tax administration remain top obstacle to business Challenges: To choose level of tax rates and tax base To design tax compliance system that encourages taxpayer participation 6

7 What does the Paying Taxes indicator measure? 3 indicators: time, payments and total tax rate for a local medium-size company to pay all taxes 7

8 Methodology Paying Taxes measures tax cost and administrative burden of paying taxes for standardized business in its 2nd year of operation (2014): Limited liability taxable company 100% domestically owned Has 60 employees: 4 managers, 8 assistants and 48 workers Performs general industrial or commercial activities Does not participate in foreign trade Has a turnover of 1,050 times income per capita 8

9 Higher tax rates do not always lead to higher tax revenue or better welfare 60% High 1.0 HDI 50% % % % % % Ireland Chile Uganda Poland Russian Federation Côte d'ivoire Low 0.0HDI Human development index (HDI) Total tax rate (% of profit) Tax revenue (% of GDP) Note: Data on Tax revenues (% of GDP) are for year 2012,. The Human Development Index in the HDR 2014 report is for Sources: Doing Business 2016, World Bank Development Indicators Database, Human Development Report (HDR)

10 Strong convergence in tax compliance time across economies since 2004 Time to prepare, file and pay taxes (hours per year) Worst Quartile Best 3 Quartiles Source: Doing Business database 10

11 Good practices in Paying Taxes Self-assessment systems make it possible to collect taxes earlier and reduce the likelihood of disputes over tax assessments. They also reduce opportunities for corruption. E-system for filing and paying taxes lightens the workload, reduces operational costs and time for tax administrations and increases tax compliance. For taxpayers, it saves time by avoiding errors and making it easier to prepare, file and pay taxes. The same tax treatment for taxes with the same tax base makes tax compliance convenient and easier. Good practices around the world in making it easy to pay taxes Practice Economies* Examples Allowing selfassessment Allowing electronic filing and payment Having one tax per tax base * Among 189 economies surveyed Argentina, Canada, China, Rwanda, Turkey Australia, Colombia, India, Mauritius, Tunisia Angola, Morocco, Namibia, Norway, Paraguay Poland has 2 out of 3 good practices: selfassessment and e-system for filing and paying taxes 11

12 Following Doing Business best practices would also significantly decrease the time to pay taxes In the 78 economies covered by both Doing Business Entrepreneurship Database, an estimated 31.7 million limited liability companies were in operation in Assuming that they followed the rules and regulations for paying taxes in their home economy as measured by Doing Business, these firms together spent million days to file their taxes. In countries that do not follow good practices, companies spend 17 times more time to prepare, file and pay taxes Not following best practices: million days Potential time savings = million days 47.6 million days Sources: Doing Business database; World Database. 12

13 Key findings of Paying Taxes in Doing Business 2016 Globally, the case study company needs on average 261 hours to comply with tax obligations. It has to make 26 payments per year and has an average total tax rate of 40.8%. In 2014, 40 economies made it easier or less costly to comply with tax obligations. Globally, the most common feature of tax reforms in the past year was the introduction or enhancement of electronic systems for filing and paying taxes. Eighteen economies implemented such changes: Costa Rica Cyprus Indonesia Jamaica Malaysia Montenegro Morocco Mozambique Peru Poland Rwanda Serbia Slovak Republic Spain Tajikistan Uruguay Vietnam Zambia 13

14 Reforms recorded in Paying Taxes in Doing Business

15 By 2014 eighty-four economies have a fully implemented electronic system for filing and paying taxes 30 OECD high income (30 of 32) 20 Europe & Central Asia (20 of 25) Latin America & Caribbean (14 of 32) 14 East Asia & Pacific (8 of 25) Middle East & North Africa (5 of 20) Sub-Saharan Africa (5 of 47) South Asia (2 of 8) Electronic system not available or not used by majority of businesses (105) Note: Electronic system is counted where both filing and payment of taxes are done online and used by the majority of medium-size businesses. Source: Doing Business database 15

16 Over the past 5 years, Europe and Central Asia implemented the most reforms in electronic tax systems East Asia & Pacific Europe & Central Asia Latin America & Caribbean Middle East & North Africa OECD high income South Asia Sub-Saharan Africa Reforms introducing or enhancing electronic system for filing and paying taxes Note: The reforms shown for each year until 2014 are those recorded from June 1 of that year to June 1 of the following year. For 2014 the reforms shown are those recorded from January 1 to December 31 of that year. Source: Doing Business database 16

17 Time (hours per year) In 2014, Serbia improved the most on making it easier for companies to comply with tax obligations payments payments Serbia improved its Paying Taxes DTF score from 48.9 in Doing Business 2015 to 61.9 in Doing Business Source: Doing Business database

18 Time (hours per year) In 2014, Poland also made complying with tax obligations easier for companies payments Poland improved its Paying Taxes DTF score from 72.2 in Doing Business 2015 to 79.6 in Doing Business payments Source: Doing Business database

19 OECD high income region has lowest number of payments and tax compliance time across all regions Payments (number per year) Time (hours) OECD high income East Asia & Pacific Middle East & North Africa Europe & Central Asia South Asia Sub-Saharan Africa Latin America & Caribbean 50 0 Source: Doing Business database 19

20 Poland is among the countries with lower tax payments Payments (number per year) Time (hours) Norway United Kingdom Germany Poland Portugal Hungary Czech Republic 50 0 Source: Doing Business database 20

21 OECD high income region has a total tax rate close to the world average Total tax rate (% of profit) Total tax rate is close to the world average of 40.8% Middle East & North Africa East Asia & Pacific Europe & Central Asia South Asia OECD high income Sub-Saharan Africa Latin America & Caribbean Source: Doing Business database 21

22 Poland is among the countries with a total tax rate below the regional average Total tax rate (% of profit) Total tax rate is below the OECD average of 41.2% United Kingdom Norway Poland Portugal Hungary Germany Czech Republic Source: Doing Business database 22

23 Paying taxes in Poland in Overview Tax Payments (number) Payments required by law (number) Time (hours) Statutory tax rate Tax base Total tax rate (% of profit) Value added tax (VAT) % value added not included Transport tax PLN 1,408 owned truck 0.06 Property tax PLN 0.88/m 2 of land and PLN 22.82/m 2 of building property area 0.93 Social security contributions % gross salaries National disabled fund % x 6% x average salary per employee 2.83 Labor fund % gross salaries 2.76 Guaranteed employees' fund % gross salaries 0.11 Corporate income tax % taxable profit Fuel Tax included in the price of fuel not included Employee paid - Social security contributions % (7.75% credited against PIT) gross salaries not included 23 TOTAL Source: Doing Business database

24 Time to prepare, file and pay 3 major taxes in Poland in 2014 Steps Corporate income tax Labor taxes and contributions Value added tax TOTAL Prepare File Pay TOTAL Source: Doing Business database 24

25 Over the past decade, Poland simplified tax compliance Payments (number per year) Total tax rate (% of profit) 50 Time (hours) Source: Doing Business database 25

26 Further opportunities to improve paying taxes In Poland multiple labor contributions are levied on the same tax base. The same tax treatment for taxes with the same tax base makes tax compliance convenient and easier. Companies in Poland pay three labor contributions on gross salaries social security contributions, contributions to labor fund, and contributions to Guaranteed employees' fund. Good Practice example: Employers in Sweden pay a single statutory social security contribution rate on behalf of their employees consisting of charges for pensions, health insurance and other social benefits. The employer-paid rate of social security contributions amount to 31.42% of gross salary. Focusing reform efforts to ease the administrative burden on taxpayers to file and pay taxes: clearer rules and guidelines on taxes, less frequent changes to tax rules and further upgrade to the software used by companies to calculate their tax liabilities. 26

27 THANK YOU! Questions

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29 IMF 2015 consultation report The economy has recovered from the slowdown Real GDP growth reached to 3.4 percent in 2014 up from 1.7 percent in supported by strong domestic demand (accelerated wages, falling unemployment and declining commodity prices). Investment benefited from robust credit growth and eased financial conditions. Poland has developed strong trade and financial linkages with the euro area exports to the EU represent 75 percent of Poland s exports. General government deficit declined to 3.2% of GDP in 2014 from 4.0%GDP in 2013 wage bill freeze, reduced debt servicing costs following changes to the pension system, and a cyclical rebound in tax revenues. Nonetheless, inflation has been negative since July Source: IMF Country Report No. 14/182, 2015 Consultation report 29

30 Continuing Fiscal Consolidation Fiscal consolidation has advanced further, allowing Poland to exit the EU s Excessive Deficit Procedure (EDP) one year early The fiscal deficit is expected to decline to around 2¾ percent of GDP in 2015 expected increasing revenues, strong growth, and lower expenditures on social benefits as unemployment declines. Medium term recommendations: Reforming large taxpayer administration and establishing a single Large Taxpayer Office. Closing a 3 rd of the VAT compliance gap could increase revenue by about 0.6% of GDP in the medium term: (i) developing industry-based compliance projects, (ii) implementing strategies to fight the shadow economy and (iii) improving the VAT administration, including a VAT gap analysis. Reducing the number of VAT rates to improve compliance and lower the burden on tax administration. Preventing the 2011 VAT increase from expiring in 2017 would help sustain revenues until tax administration reforms are finalized. 30