ISLAMABAD, Nov 22: The ‘Paying Taxes 2013 Study’ published by the World Bank has placed Pakistan at the ranking of 162 out of 185 world economies, stating that the number of hours spent on dealing tax matters is too high against the world average.
Pakistan spends 560 hours against the world average of 267 hours which has significant impact on the average figure for Asia and the Pacific, says the study jointly released by the World Bank and International Finance Corporation on Wednesday.
“Our case study company in Pakistan spends 480 hours complying with VAT where it has to comply with three levels of government at federal, state and local levels,” according to the study.
The study calculates that the total tax rate in Pakistan is 35.3 per cent, while profit tax (income tax) is said to be 17.9 per cent; labour tax 15.1 per cent and other taxes 2.3 per cent.
The study show that total tax payments is 47 per cent, out of which profit tax is 5 per cent, labour tax payments are 25 per cent and other taxes payments 17 per cent.
The average total tax rate for the Asia Pacific region at 36.4 per cent is well below the world average of 44.7 per cent. Only nine of the 36 countries in the region have a total tax rate which is above the world average.
Profit taxes comprise the largest element of the total tax rate in the region with 24 out of the 36 economies having a corporate income tax which is the largest component of their rate.
The average time to comply for the region at 231 hours is much lower than the world average of 267 hours. The Asia Pacific region has an average of 24.8 payments per year but the range is wide and the economies are spread evenly through this range.A lack of electronic filing and payment in the majority of economies in the region for labour taxes and social contributions along with multiple ‘other’ taxes in many keeps the average number of payments close to the world average.
The study finds that governments continue to reform their tax systems despite global economic uncertainty, with 31 economies having taken steps from June last year through May 2012 to make it easier and cost less for small and medium businesses to pay taxes.
The study looks at tax regimes in 185 economies and finds that the most common tax reform is the introduction or improvement of online systems for tax compliance, which occurred in 16 economies.
It finds that on an average, a medium company pays a total tax rate of 44.7 percent of profits, making 27.2 payments, and spending 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, while the total tax rate has fallen nearly 1 percent for each year.
Reforms continue around the world. However, the study finds that the number of economies reforming has fallen from 35 last year to 31 in the most recent study. The focus continues to be on reducing the administrative burden of the tax system.