Sri Lanka has achieved an overall ranking of 164 out of 181 economies in terms of the relative ease of paying taxes according to a joint publication by PricewaterhouseCoopers (PwC) and the World Bank. The report on 'Paying Taxes 2009' assessed the ease of paying taxes as part of a broader analysis of regulations relevant to domestic, small to medium sized companies.
Ranked number one as the easiest country to pay taxes in is the Maldives followed by Qatar, Hong Kong, the United Arab Emirates, Singapore, Ireland, Saudi Arabia, Oman, Kuwait and Kiribati. The countries which ranked most difficult and came in the bottom ten are Panama, Jamaica, Mauritania, the Gambia, Bolivia, Venezuela, Central African Republic, the Republic of Congo, Ukraine and coming in last is Belarus.
Key findings of the study show that economies that rank highly on the ease of paying taxes tend to have lower and less complex taxes with simple administrative processes for paying taxes and filing tax returns. The most frequent reforms implemented are the reduction of corporate income tax rates and electronic filing. The study said tax reform is not just about the introduction of tax rates but that administrative aspects are almost equally important.
The analysis also confirmed that corporate income tax is only one of the many taxes that business has to bear. It accounts for only 13 % of payments, 26 % of compliance time and 37 % of the Total Tax Rate (TTR). As such, any reform agenda needs to look beyond corporate income tax. Transparency around the taxes collected by the government and the government's broader fiscal strategy can assist with securing the trust of business. It is interesting to note that 14 % of contributors reported that such information is not publicly avaiable.
The study also found that in addition to being a way or raising revenues for necessary public expenditures, tax systems continue to be used by governments to influence the behavior of individuals and businesses. Around 40 % of contributors to the Paying Taxes data indicated that their economies have Small and Medium sized Enterprise (SME) and Research and Development (R&D) incentives included within their tax systems. PwC sees environmental taxes as having the potential to be used to change behaviours but further research is required to assess the extent of these taxes and their effectiveness.
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