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.
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.
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:
|Profit taxes (%)||Labour taxes (%)||Other taxes (%)||Total (%)|
|EU & EFTA||12.4||25.5||1.7||39.6|
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.”
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.
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.
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 158 countries with over 250,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
© 2018 PwC. All rights reserved