UK ranked second in G20 for tax compliance

The UK has the second most effective tax system in the G20 for the ease of paying business taxes, with companies taking an average of 105 hours to prepare and file taxes, but remains outside the global top 20, according to research by PwC and the World Bank

For the second year running, their study ranks the UK tax system 23rd overall for the ease of paying taxes based on a medium sized domestic business. Canada, ranked 19th overall, has the most effective tax system in the G20.

Hong Kong SAR has leapfrogged Qatar and the United Arab Emirates to the top of the table. The US was ranked 37, although the data cut-off for this report was prior to the introduction of the US tax reforms.

Ireland is placed fourth, ahead of Bahrain, Mauritius, Kuwait and Singapore. Brazil is the lowest ranked member of the G20 at 184, while Venezuela is bottom of the table.

The report looks at the overall tax rate and time spent preparing, filing and paying the three main taxes (corporation tax, labour taxes and VAT), ranking 190 global economies.

On average, the case study UK company takes 105 hours to prepare, file and pay these taxes, compared to the global average of 237 hours.

Kevin Nicholson, UK head of tax at PwC, said: ‘Less time spent on administrative tasks means more time spent on activity that brings the greatest value and increases productivity. Business can take comfort that the UK has retained its position as having one of the most effective tax systems in the G20 when it comes to the ease of paying taxes.

‘While our tax system may continue to fair favourably from an administrative perspective it is, however, far from perfect. Changing ways of working and doing business, technological advances and a perceived disparity between the tax treatment of bricks and mortar businesses and those operating online have all highlighted the need to review a system that has not seen major reform since the 1980s.’

The research findings suggested that tax authorities throughout the world could do more to realise the full potential of new technology to reduce the tax compliance burdens on taxpayers. Some advanced economies have continued to improve their systems to the benefit of both taxpayers and tax authorities, significantly reducing the time it takes to prepare, file and pay taxes.

Yet the report notes that overall the size of the gains in 2017 is relatively small in global terms. In Poland, the implementation of new technology for VAT compliance has increased the administrative burden, at least in the short term, while in Spain a more established VAT system has reduced the time slightly.

The impact of HMRC’s own Making Tax Digital programme, which comes into force in April 2019, will be assessed in future editions of the report.

Paying Taxes 2019 is here

Report by Pat Sweet

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