PwC/World Bank Group Paying Taxes 2018 report

11 December, 2017

The PwC/World Bank Group Paying Taxes 2018 report, published in Ireland today, highlights that Ireland is competitive on tax and continues to top the EU league of business friendly tax regimes.

  • Ireland continues to be most effective country in the EU in which to pay business taxes and 4th most effective worldwide (up from 5th place globally last year)
  • Ireland performs strongly on tax contribution rate and compliance metrics,  having a very competitive tax system in terms of cost and time
  • The report confirms that Ireland is an attractive location in which to establish business

The report reconfirms that Ireland's tax system again ranks as the most effective in the EU for paying business taxes and the fourth most effective in the world - the PwC/World Bank Group report confirms.

The survey further demonstrates that Ireland's statutory headline rate on profits is broadly similar to the effective rate.  For many EU countries, the statutory headline rate is significantly higher than the effective rate. 

More efficient tax systems are good for business which in turn help to promote economic growth and investment. The report covers 190 countries worldwide (including Ireland) and looks at all taxes paid by businesses, using broad principles from PwC’s Total Tax Contribution Framework. 

Joe Tynan, Head of Tax, PwC, said: “When you look at the mix of the tax indicators – cost and compliance - the report highlights that Ireland does very well in terms of tax competitiveness.  When you take labour and other taxes into account, Ireland's total tax rate on corporate profits is much lower when compared with many other EU countries such as the UK, Germany, Sweden and France and also the US and China.  And ranking as the most effective country in the EU for paying business taxes, Ireland remains a very attractive location in which to do business.”

Top 10 rankings for the EU countries on ease of paying taxes are, in order, are: Ireland, Denmark,  Finland, Latvia, Estonia, Lithuania, Switzerland, Netherlands, Luxembourg and the UK.

The top 10 worldwide economies for ease of paying taxes are, in order:  Joint first: Qatar and United Arab Emirates, Hong Kong, Ireland, Bahrain, Kuwait, Singapore, Denmark, New Zealand and Mauritius.

How does Ireland compare?

See pages 75, 76, 77 and 78 of the report.

The research is based on a case study which is a medium sized domestic company.  It is set up so that it can be compared on a like for like basis across countries showing how businesses are affected not only by tax rates, but also by the procedural burden of compliance.  The report focuses on four indicators which are used to determine the overall ease of paying taxes.  It shows that, on average, a medium sized company in Ireland similar to the case study:

  1. Pays a total of 26% of its profits in taxes compared to 39.6% for the EU and 40.5% globally.  This is made up of 12.4% in profit taxes, which is very close to our corporate tax rate of 12.5%, 12.2% in labour taxes (which in Ireland this is mostly PRSI) and 1.4% in other taxes (e.g. VRT, etc).  It is interesting to note that Ireland compares very well on labour taxes (12.2%) compared to the average for the EU (25.5%).  Ireland is substantially more competitive on the cost of employing people.
  2. Takes just 82 hours to comply compared to 161 hours for the EU and 240 hours globally.
  3. Makes 9 tax payments compared to the average of 12 for the EU and 24 globally.
  4. The report also shows that Ireland scores well where filing is concerned.  For example, the time taken to file a VAT refund is 1 hour compared to 7.1 hours for the EU; the time taken to comply with a Corporate Income Tax audit is 2 hours compared to 7.3% for the EU.
  Profit taxes (%) Labour taxes (%) Other taxes (%) Total (%)
Global 16.3 16.1 8.1 40.5
EU & EFTA 12.4 25.5 1.7 39.6
US 27.9 9.8 6.1 43.8
UK 18.1 10.9 1.7 30.7
Ireland 12.4 12.2 1.4 26.0
Denmark 17.7 3.8 2.7 24.2
Germany 23.2 21.4 4.3 48.9
France 0.7 51.1 10.4 62.2
Luxembourg 4.2 15.5 0.8 20.5
Sweden 13.1 35.4 0.6 49.1
Switzerland 9.3 17.7 1.8 28.8
Australia 26.0 21.1 0.4 47.5

According to the study, a typical Irish company spends around a quarter of its total commercial profit in taxes, spends just over two weeks dealing with its tax affairs and makes a tax payment nearly every six weeks.  Globally this compares to the typical company paying over a third of its commercial profit in taxes, spending  nearly seven weeks dealing with its tax affairs and making a tax payment every 2 weeks.

Joe Tynan concluded:  “While many countries such as the US and the UK are taking steps to reduce their corporate tax rate, Ireland will still compare very well.  International companies will continue to look for sustainable tax models and Ireland has just that.  We need to continue to work with the OECD to ensure that we continue to be recognised as having a corporate tax system that is fit for purpose and at the forefront of global standards.”

ENDS

Notes to editor:

Economic analysis undertaken by PwC  shows that economies where action was taken to reduce complexity in tax administration – both in terms of the number of payments and the time taken with tax matters – there has tended to be higher economic growth.  A good tax system should ensure that taxes are proportionate and certain (not arbitrary) and that the method of paying taxes is convenient for taxpayers.

Additional global research undertaken finds that the interactions which companies around the world have with tax authorities after a tax return has been filed can, in some instances, be some of the most challenging.  The survey shows that Ireland scores well where filing is concerned.

Ireland’s ability to cope with multiple tax payments and at the same time to have a system that eases the administrative burden is a credit to our regulatory and tax authorities.  Taxes are a significant issue for business and the fact that we continue to hold our rank in this area is critical for continued investment in Ireland.

About the report:

The ranking by PwC/The World Bank Group Paying Taxes report is unique as it looks beyond corporate income tax to all of the other business taxes paid and is a measure of effectiveness of tax systems around the world. The Paying Taxes 2018 report measures the ease of paying taxes by assessing the administrative burden for companies to comply with tax regulations, and by calculating companies’ total tax liability as a percentage of pre-tax profits.  Paying Taxes 2018 measures all mandatory taxes and contributions that a medium-size company must pay in a given year. Taxes and contributions measured include the 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, such as fuel taxes,  or fees.

*European Union and European Free Trade Association (EU & EFTA).  The following economies are included in the EU and EFTA : Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, San Marino, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, United Kingdom. 

Other notes:

  1. Paying Taxes 2018 measures all mandatory taxes and contributions that a medium-size company must pay in a given year as well as measuring the administrative burden of filing and paying taxes and complying with post-filing processes. 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. For more information about the Paying Taxes study, visit: www.pwc.com/payingtaxes.
  2. Paying Taxes builds on the World Bank Group’s Doing Business reports’ chapter on Paying Taxes. For more information on the Doing Business report series, visit: www.doingbusiness.org

About the World Bank Group
The World Bank Group plays a key role in the global effort to end extreme poverty and boost shared prosperity. It consists of five institutions: the World Bank, including the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA); the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Working together in more than 100 countries, these institutions provide financing, advice, and other solutions that enable countries to address the most urgent challenges of development. For more information, please visit www.worldbank.org, www.miga.org, and ifc.org.

About PwC
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Joe Tynan
Partner, PwC Ireland (Republic of)
Tel: +353 1 792 6399
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Corporate Communications, PwC Ireland (Republic of)
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