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Statement of World Bank Group on Discontinuing Doing Business ReportRead our statement
This topic records the taxes and mandatory contributions that a standardized manufacturing company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions. The most recent round of data collection for the project was completed on May 1, 2020 covering for the paying taxes indicators calendar year 2019 (January 1, 2019 – December 31, 2019). See the methodology for more information. Video presentation of the methodology is also available.
To learn more about the results of paying taxes in calendar year 2019, see the Paying Taxes 2021 report.
Properly developed, effective taxation systems are crucial for a well-functioning society. In most economies, taxes are the main source of revenue to fund public spending on education, health care, public transport, infrastructure and social programs, among others. Tax policy is one of the most contentious areas of public policy. A large body of theoretical and empirical work examines the effects of high tax rates and complex fiscal systems. Although determining the optimal tax system can be challenging because context matters when economies want to maximize their welfare, there is less uncertainty—from both theoretical and empirical perspectives—about the distortionary effects of high taxes and cumbersome tax systems. 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. Lastly, taxes should be easy to administer and collect.
Governments globally continue to do more to unlock the potential of technology to facilitate tax compliance. The data in Paying Taxes show how improvements in tax software, real time reporting systems and data analytics are easing the tax compliance on businesses. Even some advanced economies have continued to improve their tax administrations to the benefit of both taxpayers and tax authorities. New technology can drive considerable efficiencies for tax authorities and businesses alike. It is also important to consider that improvements to tax systems do not come from technology alone. Simple, coherent, well understood and properly administered tax systems are crucial to lower the barriers for businesses when complying with their tax obligations.
Togo made the greatest advances in paying taxes in calendar year 2019. Togo made online filing and payment of labor taxes mandatory and obligated taxpayers to pay corporate income tax and value-added tax by electronic means. Togo also abolished payroll tax, tax on training, and the land surcharge on insufficiently built properties. Lastly, Togo reduced the corporate income tax rate from 28% to 27% with effect from January 1, 2019.
This year, paying taxes recorded the highest number of economies implementing or enhancing their electronic filing and payment systems. Twenty four economies—Albania, Austria, Belarus, Bosnia and Herzegovina, China, Colombia, Guatemala, Guinea, Indonesia, Israel, Kenya, Mongolia, Morocco, Namibia, Oman, Pakistan, Paraguay, Puerto Rico, Saudi Arabia, Serbia, Togo, Tunisia, United Arab Emirates and Vietnam—introduced or enhanced systems for filing and paying taxes online in 2019.
For the tenth year in a row, this feature remains the most common one in the area of paying taxes. The most notable progress since Doing Business 2006 in digitization has been the economies of Europe and Central Asia (figure 1). At the same time, economies in the Sub-Saharan Africa region have been converging towards the use of digitization for filing tax returns and payment of taxes.
Source: Doing Business database. Note: the sample is comprised of 174 economies that were included in DB2006 report.
In Europe and Central Asia, 16 years ago the average compliance time was 473 hours per year. Thanks to the use of electronic systems for filing and paying taxes, economies in this region spent on average 225 hours on tax compliance in 2019. Sub-Saharan Africa remains the region with the smallest share of economies (25% of economies) using electronic filing or payments. However, in 2019 the use of online systems for filing and payment of taxes resulted in efficiency gains in several economies in the region, including Guinea, Kenya, Namibia and Togo. The OECD high-income group has the highest prevalence of electronic systems, with 97% of economies having adopted them. As the costs of technology have fallen, more companies are using tax software and more tax authorities are creating easier-to-use online portals to simplify compliance.
Other economies directed their reform efforts at simplifying the administrative compliance process beyond putting in place electronic systems for filing and payment of taxes. These reform efforts include merging taxes with the same tax base, introducing unique declaration forms and simplifying tax returns. Ten economies did so. The Democratic Republic of Congo introduced for medium-sized businesses a single form for reporting taxes, social contributions and employer contributions on remuneration, and it established a one-stop shop that allows taxpayers to submit in one place the single form.
Ten economies also implemented reforms that improved the process of requesting and obtaining value-added tax refund. Georgia introduced rules and terms for automatic value-added tax refunds and adopted a risk-based engine for selecting companies for a VAT audit. Under the new automatic VAT refund system, taxpayers only need to access a dedicated form approved by the Ministry of Finance and indicate a bank account for money transfer. The form would be pre-filled with information from the VAT return. Azerbaijan amended its Tax Code in 2019 eliminating the mandatory carry forward period of three months.
