Paying Taxes 2019 Global and Regional Findings: AFRICA

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World Bank Group: Indira Chand Phone: +1 202 458 0434 E-mail: ichand@worldbank.org PwC: Sharon O Connor Tel:+1 646 471 2326 E-mail: sharon.m.oconnor@pwc.com Fact sheet Paying Taxes 2019 Global and Regional Findings: AFRICA The Paying Taxes report is a joint annual publication by PwC and the World Bank Group. This year marks the 13th year of the publication. The report is based on the World Bank Group s Paying Taxes indicator within their Doing Business project and includes analysis and commentary by the World Bank and PwC. The Paying Taxes indicator measures tax systems from the point of view of a domestic company complying with the different tax laws and regulations in 190 economies around the world. The case study company is a small to medium-size manufacturer and retailer with specific assumptions, deliberately chosen to ensure that its business can be compared worldwide on a like for like basis. The Doing Business project, a World Bank Group annual publication which measures business regulations in 190 economies, has been collecting data on paying taxes for 14 years. Besides paying taxes, the Doing Business project provides measures of regulations in nine other areas: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, trading across borders, enforcing contracts, and resolving insolvency. It also looks at labour market regulation. Paying Taxes compares tax systems using four measures: the Total Tax and Contribution Rate ( TTCR : the cost of all taxes borne, as a % of commercial profit), the time needed to comply with the major taxes (profit taxes, labour taxes and mandatory contributions, and consumption taxes), the number of tax payments and the post-filing index. The four measures are each converted to a score of 0 100 and the simple average of these scores determines the overall Paying Taxes ranking. The Paying Taxes indicator measures all taxes and contributions mandated by government at any level (federal, state, or local) as they apply to the standardised business. The TTCR sub-indicator measures the cost of taxes and contributions that are borne by the company. The taxes included can be divided into 5 categories: profit or corporate income tax, social contributions and labour taxes paid by the employer (for which all mandatory contributions are included, even if paid to a private entity such as a requited pension fund), property taxes, turnover taxes and other taxes (such as municipal fees and vehicle taxes). The two original compliance sub-indicators, on the time to comply and number of payments, measure taxes borne and taxes collected, and so include taxes and contributions withheld or collected, such as sales tax or value added tax (VAT). The postfiling index measures two processes based on four components time to comply with a VAT refund (hours), time to obtain a VAT refund (weeks), time to comply with a correction of a CIT return (hours) and the time to complete a CIT correction (weeks). Some important points to note are that: 1. The sub-indicators are calculated by reference to a particular calendar year. The effect of any change that takes place part way through the year is pro-rated. The most recent data in this study, Paying Taxes 2019, relates to the calendar year ended 31 December 2017. 2. The ranking order is based on the World Bank s ease of doing business score (formerly called the distance to frontier score) which is used by the World Bank Group to evaluate each economy s performance relative to the lowest and highest value of each sub-indicator rather than relative to the other economies. This means that economies can see how far they have progressed towards the best regulatory performance, rather than simply looking at how they compare to other economies. A score is calculated for each of the four sub-indicators. The simple average of these four scores then gives the

overall score on Paying Taxes. The distribution used to determine the score of the TTCR is non-linear. This means that movements in a TTCR that is already close to the lowest TTCR will have less of an impact on the score of the TTCR. As in previous years, the lowest TTCR for the purposes of the ranking calculation is set at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2016, which is 26.1%. Economies with a TTCR below this value will therefore not be closer to the best regulatory performance than an economy with a TTCR equal to this value. 3. If in the course of collecting and analysing the data for 2017 it became apparent that data for previous years was incorrect, the necessary adjustments have been made and the sub- indicators recalculated for prior years. Rankings are only revised for the immediate prior year. Any data that refers to 2016 and earlier years is therefore stated after such revisions have been made and so may differ from the data published in previous editions of this study including the global and regional averages. The key themes and findings are: On average, it takes our case study company 237 hours to comply with its taxes, it makes 23.8 payments and has an average Total Tax and Contribution Rate (TTCR) of 40.4%. In 2017, the global average results are almost unchanged compared to last year, and yet 113 economies recorded tax reforms. Since 2004, the global average time to comply has fallen by 84 hours and the global average number of payments has fallen by 10.3 - both driven by technology. High performing economies are introducing even more advanced technology (e.g. machine learning),but some economies are finding it difficult to implement online filing and payment due to the lack of IT infrastructure, cultural barriers and complex legislation. On average, labour and profit taxes have each accounted for 40% of the TTCR since 2008. In 2017, the profit tax component of the TTCR fell in 58 economies and increased in 37, conversely the labour tax component of the TTCR rose in 39 economies and decreased in 17. The average TTCR is around 13% points higher in low-income economies than in high- and middleincome economies. The global post-filing score is 59.6 out of 100. The higher score the more efficient it is to receive VAT refunds and correct corporate income tax returns. On average around the world, our case study needs 19.6 hours to comply with a VAT refund and it takes 29 weeks to obtain the refund. The time to correct a corporate income tax takes 15.1 hours on average. If the correction results in further interaction with the tax authority, it takes 26.1 weeks from the submission of the correction until the completion of any interactions with the tax authority, including audits. Improving tax officers skills is vital for a well-functioning tax system: 97% of economies provide training to tax officers, but only 35% of economies offer regular, periodic training. Regional details Africa 1 1 The following 53 economies are included in our analysis of Africa: Algeria; Angola; Benin; Botswana; Burkina Faso; Burundi; Cabo Verde; Cameroon; Central African Republic; Chad; Comoros; Congo, Dem. Rep.; Congo, 2 of 5

In 2017, the case study company has an average Total Tax & Contribution Rate of 47.0% in the Africa region; it takes 285 hours to comply with its tax affairs and makes 35.5 payments. These three original Paying Taxes sub-indicators for Africa are higher than the global average. The TTCR and the time to comply are the second highest (behind South America) when comparing the regions. Africa has the highest number of payments across all the regions. The average post-filing index score in the African region is 56.0 (on a scale of 1 100) compared to 59.6 globally. While obtaining a VAT refund seems challenging in Africa compared to other regions, time to correct a CIT return and the time to complete a CIT correction are below the world average. The African TTCR remained unchanged between 2016 and 2017. The TTCR in 29 out of the 53 economies in the region is above the world average (40.4%). In 2017, 11 of the 53 economies in Africa increased their TTCR. The largest increase in TTCR was in Comoros (by 3.1 percentage points to 219.6%) due to the increase in municipality patent tax. In 2017, 7 of the 53 economies in Africa decreased their TTCR. The largest decrease was in Tunisia (by 3.9 percentage points to 60.2%). Tunisia made paying taxes easier by not extending the exceptional corporate income tax contribution introduced in 2016. The average time to comply remained unchanged in the African region, 285 hours, compared to 2016. The average for the region remains well above the world average of 240 hours and is exceeded only by South America with 547 hours. In 27 of the 53 economies in the region, the time to comply is below the world average (237 hours), and is above 600 hours in 5 economies. The greatest reduction in time to comply was 65 hours in Côte d'ivoire as a result of the effective introduction of an e-filing system for large and medium companies. Togo made paying taxes easier by introducing an online platform for filing corporate income tax and VAT, which reduced the time to comply by 57 hours. The biggest increase in time to comply was 144 hours in Gabon following the introduction of two new taxes. Overall, the number of payments in the Africa region increased by 0.4 to 35.5. The largest increase in the number of payments indicator among the African economies was 24 in Gabon following the introduction of two new taxes. Liberia has the most efficient post-filing processes in the region with a score of 98.6. The Central African Republic has the least efficient post-filing score of 5.1 as no VAT refund is available to the case study company and it takes a relatively long time to comply with and complete a corporate income tax correction (66 hours). Of the 53 economies in the African region, 7 do not have VAT system and 4 of the economies are not scored as there is no VAT on the case study company s purchase. The case study company will not be able to obtain a VAT refund in 18 economies. In the African region, the average time to comply with a VAT refund is 28.0 hours ranging from zero time in Seychelles to 89 hours in Egypt. On average, where a VAT refund is available to the case study company in the African region, it takes 38.6 weeks to obtain it ranging from 4.3 weeks in Mauritius to 109.9 weeks in Tanzania. Rep.; Côte d Ivoire; Djibouti; Egypt, Arab Rep.; Equatorial Guinea; Eritrea; Eswatini; Ethiopia; Gabon; Gambia, The; Ghana; Guinea; Guinea-Bissau; Kenya; Lesotho; Liberia; Libya; Madagascar; Malawi; Mali; Mauritania; Mauritius; Morocco; Mozambique; Namibia; Niger; Nigeria; Rwanda; São Tomé and Príncipe; Senegal; Seychelles; Sierra Leone; South Africa; South Sudan; Sudan; Tanzania; Togo; Tunisia; Uganda; Zambia; Zimbabwe.

In 49% of economies in the region, more than 25% of companies would be selected for additional review following a voluntary correction of an error in a corporate income tax return. In the African region, it takes the case study company 14.6 hours on average to correct the error in the corporate income tax return and comply with any resulting interactions with the tax authority. At 1.5 hours, the most efficient processes are in Seychelles. For the economies in the region where the CIT correction would lead to the company being selected for additional review in more than 25% of cases, the review process takes 21.5 weeks on average to complete. For more information about Paying Taxes, visit www.pwc.com/payingtaxes. For more information about the Doing Business report series, visit www.doingbusiness.org. 4 of 5

About the Doing Business report series The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational reports, which exhaustively cover business regulation and reform in different cities and regions within a nation. These reports provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business report, published in 2003, covered 5 indicator sets and 133 economies. This year s report covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business, also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. About the World Bank Group The World Bank Group is one of the world's largest sources of funding and knowledge for developing countries. It comprises five closely associated institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), which together form the World Bank; the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a distinct role in the mission to fight poverty and improve living standards for people in the developing world. For more information, please visit www.worldbank.org, www.miga.org, and www.ifc.org. About PwC At PwC, our purpose is to build trust in society and solve important problems. We re a network of firms in 158 countries with over 250,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. 2018 PwC. All rights reserved