The UK has jumped five places to make it into the top 10 in the global ranking of effective business tax systems for the first time in over a decade, according to research by PwC and the World Bank Group
The Paying Taxes report, now in its 12th year, ranks 190 economies on the ease of paying taxes for a case study manufacturer. The UK is now at number 10, partly because of cuts in the corporation tax rate, but also because the compliance burden is lighter than in most other jurisdictions.
The list is headed by Qatar and the United Arab Emirates jointly, followed by Hong Kong, Bahrain and Ireland. Kuwait is ranked fifth, followed by Denmark, Singapore and Macedonia, with the UK taking ninth place overall and ranked tenth amongst the G20 group.
The UK performs well on post-filing interactions with tax authorities, specifically securing a VAT refund and correcting an error in a corporation tax return. In many other countries, particularly low income economies, this would be more time consuming and costly.
However, it still takes about 14 days (110 hours) for a medium sized company in the UK to prepare, file and pay its corporation, labour and value added taxes - with eight different taxes to pay in all.
Kevin Nicholson, head of tax at PwC, said: ‘Entering the top 10 comes at a good time, sending a clear signal the UK is open for business. Ease of paying taxes is a good indicator for a country’s business environment more generally.
‘But the UK can’t rest on its laurels, with tax reform on the cards in other countries including the US, no country’s position in the rankings is secure.’
Overall, the study finds that, year on year, key indicators of how easy it is for a business to pay taxes (time, number of payments, and the total tax rate) continue to fall.
However, there is little evidence of a race to the bottom with more countries increasing the total tax rate for business rather than cutting it, and profit taxes and labour related taxes increasing globally.
Economies around the world continue to reduce their compliance burden, bringing the global average compliance time down to 251 hours, a drop of eight hours compared to last year. The average number of payments globally was cut to 25 (down 0.8 payments).
Electronic filing continues to have a significant impact on easing the burden of tax administration, and globally, the most common feature of tax reform in the past year was the introduction or enhancement of electronic systems for filing and paying taxes.
The Middle East continues to be the easiest region in which to pay taxes, with the lowest total tax rate and time to comply, as governments rely on sources of revenue other than taxation. Compliance takes an average of 157 hours which is also below the global average.