Doing business and paying taxes in the world – the World Bank (PwC) latest 2018 surveys

The latest annual rankings of 190 countries in the world in terms of, first, the ease of doing business and, second, the business tax environment have been published by the World Bank, the latter publication is joint with PwC.

The Doing Business publication is the 15th edition while the Paying Taxes is the 13th edition.

The Doing Business publication is prepared based on evaluations by academics, country experts, government and world bank officials into the ease of doing business in individual countries for a hypothetical medium-sized business which is domestically owned, performs general industrial or commercial activities, does not trade cross border and has a turnover of at least 100 times the income per capital of the country and operates in the largest business city in the country.

The Paying Taxes publication, produced in conjunction with PwC, looks at the same business and assesses the tax contribution the company has to make and the efficiency and effectiveness of the tax system.

The subsequent listing of countries, in order of merit, has been very influential in many parts of the world in incentivising governments to improve their business environment as well as making improvements to their tax systems.

Doing business 2018 – Reforming to create jobs

Doing business 2018 – Reforming to create jobs measures aspects of regulation affecting 11 areas of the life of a business. Ten of these areas are included in the ranking: the ease of doing business, starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and dealing with insolvency. Doing Business also measures features of labour market regulation but this is not included in the ranking.

The Overview notes that:

“Doing Business focuses on key areas of interaction between the government and entrepreneurs, where policy makers and regulators can directly influence procedures to facilitate these interactions.”

“Doing Business measures aspects of business regulation and their implications for firm establishment and operations. It does not include all the issues that are relevant for businesses’ decisions, but it does cover important areas that are under the control of policy makers. Governments worldwide recognize the economic and political benefits of improved business regulation. In fact, 119 of the 190 economies measured by Doing Business 2018 enacted at least one business regulation reform in 2016/17. Of these, 79.8% implemented at least one reform for a second consecutive year and 64.7% for a third.”

The UK is ranked 7th amongst the countries in the world as it was in the 2017 edition.

Paying Taxes 2018

Paying Taxes 2018 uses a similar case study business in relation to each country and sees what tax the business has to pay, how much time its employees have to spend to deal with the tax system and the number of tax payments the company has to make each year.

For the second time the 2018 survey looks at post filing issues, namely, obtaining a VAT refund and a voluntary correction to a corporate income tax return, including dealing with a potential tax administration audit.

In the 2018 survey the UK has gone down from 10th to 23rd as a result of the post filing evaluation and the fact that businesses are more likely to be subject to an audit in the UK, compared with other countries, and this audit is estimated to take 34 weeks.

The overall tax rate for all the countries in the survey has remained pretty stable over recent years and went up very slightly by 0.1% to 40.5%: it was 52% when the surveys began 14 years ago. The number of hours to comply with the tax system is down to 240 hours compared with 251 hours in the very first survey while the number of payment is down 10, over that same period, to 24.

The current UK equivalent figures are 30.7%, 110 hours and 8 tax payments.