UK's global tax ranking improves, says World Bank

The UK has gone up the global ranking of effective tax regimes for the first time in seven years, having previously slipped down the league.

The league tables appear in the latest Paying Taxes report produced by the World Bank, PwC and the International Finance Corporation.

This year the UK is placed in 16th position, up two places from the previous year's report but still far below the 11th spot it occupied in 2006.

The report - which compares tax systems across 185 economies by measuring total tax cost, number of payments and time to comply - revealed that the UK's improvement is a result of its reduced rate of corporation tax as well as increased NIC thresholds.

In the report, the relative simplicity of the UK tax system was compared with other economies. A medium-sized UK business has to make eight tax payments a year (27.2 is the global average) and spend 110 hours on tax compliance (267 hours globally). The total tax rate (TTR) is 35.5% compared with the global average of 44.7%.

The United Arab Emirates, Qatar, Saudi Arabia and Hong Kong were among the top 10 nations where paying taxes was easy for business while Cameroon, Mauritania, Senegal and Gambia had the most burdensome tax code.

On average across all economies, a medium-sized company pays a TTR of 44.7% of profits, makes 27.2 payments, and spends 267 hours to comply with its tax requirements.

In the eight years since the study began, the time to comply has fallen by 54 hours, almost seven working days, and the number of payments has declined by more than six.

The average TTR is almost flat on last year's study, just 0.3% less. This compares with a fall of 3.3% the previous year.

The current report also confirms that regions with less complex tax regimes and lower tax costs experience stronger growth.

In addition, falling complexity across tax systems over the eight-year period of the study is linked with an increase in GDP growth of around a quarter of a percentage point a year.

PwC's head of tax policy, Mary Monfries, said the UK government's 'open for business' agenda has fed through to the league table of tax systems.

'Ease of doing business is one of the UK's strong points so it's good we've made up some of the ground lost in recent years. Effective tax systems are good for growth. To keep on the map though, stability of policy and consistent messaging that encourages business investment will be crucial,' said Monfries.

Monfries added that many UK businesses would probably be surprised when they heard their tax compliance burden was relatively light.

'There's scope to reduce red tape further, particularly when it comes to employment taxes which make up a big chunk of compliance time. Our study suggests that for medium-sized firms the time spent having to deal with the tax system can have a bigger potential impact on economic growth than the rate of tax,' she said.

Penny Sukhraj |Content editor, Accountancy - (up to 2016)

Penny Sukhraj, former content editor and writer for Accountancy and Accountancy Live, responsible for commissioning and editing news...

View profile and articles

Be the first to vote

Rate this article

Related Articles