Governments globally are making strenuous efforts to streamline tax systems for small and medium-sized enterprises (SMEs) and to bring them to some semblance of uniformity.
Now a report prepared by the World Bank, International Finance Corporation and PricewaterhouseCoopers (PwC), says that 123 of 183 economies measured have made significant regulatory changes since 2006 to ease tax burdens for SMEs, as governments seek to increase business registrations and relieve the impact of the global economic downturn.
Paying Taxes 2012 finds that 33 economies made it easier and less costly to pay taxes from June last year until this May. The most common tax reform was the increased use of online systems to assist tax compliance, introduced in 23 economies.
Electronic filing and payment reduces the amount of paperwork, allows a more targeted and risk-based approach to audit and compliance and can help eliminate corruption. In Hong Kong, the government has made an effort in launching electronic tax filing, which allows for the filing of corporate tax returns electronically. 'Governments have it in their control to develop tax systems that foster business investment and make the private sector an engine for a return to economic growth and prosperity,' says Andrew Packman, a tax partner at PwC UK. 'Reducing rates and making the compliance less burdensome helps companies focus on making their business grow.'
Paying Taxes 2012 measures all mandatory taxes and contributions that a medium-sized firm must pay in a given year. Taxes and contributions measured include profit or corporate income tax, social contributions and labour taxes paid by the employer, property taxes, property transfer taxes, dividend tax, capital gains tax, financial transactions tax, waste collection taxes, vehicle and road taxes, and other small taxes or fees.
The report found that the Total Tax Rate for SMEs has fallen by 8.5 percentage points since 2006, more than one point per year. 'The high number of reforms in tax administration shows that improving the tax system for businesses is high on the agenda for governments,' says Augusto Lopez Claros, director, global indicators and analysis, World Bank Group.
'If they create a system that is easy to comply with, it is more likely that businesses will ... provide a more sustainable source of revenue than debt or aid.'