Date posted: 30/01/2019 10 mins min read

Technology is making tax compliance less taxing

It’s easier to pay tax in New Zealand and Bhutan than Australia. But Hong Kong is simplest of all, finds Paying Taxes 2019.

In Brief

  • Since it began in 2004, PwC’s Paying Taxes study has found that globally the time taken for companies to comply with tax payments has fallen by 84 hours.
  • The report attributes this to “real-time reporting systems, pre-populated tax returns and machine-learning tax accounting systems”.
  • New Zealand was placed 10th easiest economy in the world in which to pay tax. Australia was at 26th place, behind Latvia and Bhutan.

By Lachlan Colquhoun

On a global average scale, research shows it takes companies 26% less time to deal with tax compliance than it did 13 years ago – a trend set to continue with the rise of automated systems.

The latest edition of a longitudinal global study into how governments collect company taxes concludes that new technologies have led to fundamental improvements in the ease of doing business. 

Now in its 13th edition, Paying Taxes is an ongoing study produced by PwC Global and the World Bank Group, which investigates and compares tax regimes across 190 economies worldwide using a medium-sized domestic case study company.

Paying Taxes 2019 finds that since the study began in 2004, the global average for the time to comply has fallen by 84 hours, or 26%. It also shows that the global average for the number of tax payments companies make per year has reduced by 10.3, or 30%, since 2004.

“The steady reduction in both the number of hours it takes to file taxes and the number of payments companies have to make reflects the increasing use of technology across the world by both companies and tax authorities,” say co-authors Rita Ramahlo from the World Bank and PwC’s Andrew Packman.

They attribute this to the increasing use of “real-time reporting systems, pre-populated tax returns and machine-learning tax accounting systems”, particularly in “high-performing economies”.

“Since 2004, the global average for the time it takes companies to comply with their tax obligations has fallen by 84 hours, or 26%.”
Paying Taxes 2019 report

The Hong Kong Special Administrative Region was ranked the easiest economy in the world in which to pay tax, based on a combination of four metrics: the time corporate research shows it takes to comply, the total national tax contribution, the number of payments corporates are required to make, and a post-filing index based on the speed of refunds and corrections.

Australia lags NZ and Bhutan for simple tax payments

New Zealand ranked 10th easiest economy in the world in which to pay tax, while Australia was in 26th place. Countries that outranked Australia included Bhutan, coming in at 15th, and Latvia in 13th place.

In 2017, the global average time taken for a company to comply with its taxation obligations was 237 hours, down two hours from 2016. Meanwhile, the average number of payments fell by 0.2 to 23.8.

In New Zealand, the time to comply was 140 hours, with an average of seven payments, while in Australia it was 105 hours and 11 payments. By comparison, in top-ranked Hong Kong, time to comply was only 35 hours – with corporates making an average of three payments each year.

The report also calculates a global total tax and contribution rate, which includes income tax, corporate tax and all other taxes, which remained unchanged at a global average of 40.4%.

In New Zealand, this figure was 34.6%, and in Australia it was 47.4%.

The fourth metric is a post-filing index, expressed as a score out of 100, which measures how efficiently taxpayers received consumption tax refunds and corporate income tax returns are corrected.

The global average score in the post-filing index was 59.6, with both New Zealand and Australia rating significantly better than average at 96.9 and 95.3, respectively.

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