DOING BUSINESS 2009 - JOHN J. HADDAD, Ph.D.

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tax rateSource: Doing Business database.40 Doing Business 2009ment systems. This reform, done in 12economies, reduced the frequency ofpayments and the time spent payingtaxes and filing returns. Eight economiesreduced the number of taxes paid bybusinesses by eliminating smaller taxessuch as stamp duties. The top 10 reformersfor paying taxes this year reduced thenumber of payments by almost half. Bosniaand Herzegovina, Bulgaria, Morocco,Mozambique and Zambia revised theirtax codes (table 8.2).Two economies introduced newtaxes: Botswana and Venezuela. That increasesnot only the costs but also theadministrative burden for businesses.The Dominican Republic was thetop reformer in 2007/08. It lowered thecorporate income tax from 30% to 25%,abolished several taxes (including thestamp duty) and reduced the propertytransfer tax. In addition, in 2007 it fullyimplemented online filing and payment,piloted in 2006.Malaysia was the runner-up reformer.It reduced the corporate incometax for 2009 to 25%—part of a gradualreduction that has seen the rate declineto 27% in 2007 and 26% in 2008. Thereform also introduced a single-tier taxsystem, in which profits are taxed onlyafter dividend payments are exempted.The capital gains tax was abolished in2007 to spur investment in the realFIGURE 8.3Profit taxes lowest, but overall tax burden still high in Eastern Europe & Central AsiaTotal tax rate (% of profit)6040200Middle East& NorthAfricaSource: Doing Business database.Other taxesLabor taxes and contributionsProfit taxesEast Asia& Pacificproperty and financial market sectors.And electronic payment systems wereimproved,FIGURE 8.4increasing online filing andpayments.Most time in Latin America & CaribbeanAmong regions, Eastern Europeand Central Asia had#Number ofthe tax payments most reformsin 2007/08. OECD Nine economies reformed,13mainly continuing the trend of reducingMiddle Eastthe profit tax rate, already among 23 thelowest East in the Asia world (figure 8.3). Albania,25Bosnia and Herzegovina and the formerYugoslav Republic of Macedonia all 32re-duced Sub-Saharan their profit tax to 10%. Georgia38reduced the corporate income tax fromEastern Europe20% & Central to 15% Asiaand abolished the social tax.The Latin Czech America Republic reduced its corporateincome tax rate to 21%.& CaribbeanSource: Azerbaijan Doing Business database. and Ukraine made ithigh income 183& North Africa 216& Pacific 252Belarus, Latin America Dominican Republic, Georgia,Madagascar, & CaribbeanMalaysia, Mexico, South Africa,(32 economies)UruguayBosniaMiddleandEastHerzegovina,&Bulgaria, Morocco,North Africa12Mozambique, (19 economies) ZambiaFrance, East Asia Mongolia, Ukraine& Pacific7(24 economies)OECDhighincomesimpler to file and pay taxes by introducingelectronic systems and onlinepayment capabilities. That significantlyreduced the time spent preparing, filingand paying taxes in the region. Belarusreduced the tax and administrative burdenon businesses by abolishing someTime (hours per year)taxes and reducing the frequency of payments.Bulgaria reduced labor taxes andcontributions.Following closely with 7 reformseach are the OECD high-income economiesand Latin America and the Caribbean.Five OECD high-income economies46reduced corporate income tax rates.388Canada 35 is gradually reducing the corporateincome tax to 15% by 2012 as part394of ambitious reforms in its tax system.The reforms also include abolishing the1.12% surtax and introducing accelerateddepreciation for buildings (10%)and computers (50%). Also reducing thecorporate tax rate were Denmark (from28% to 25%), Germany (from 25% 44 to15%), Italy (from 33% to 27.5%) andSouth Asia 293Africa 312FIGURE 8.5Table 8.2A third of reforms in Eastern Europe & Central AsiaReducing tax rates —the most common reform feature in 2007/08Number of reforms easing payment of taxesby Doing Business report yearReduced profit tax ratesAlbania, Antigua and Barbuda, DB2006 Bosnia and DB2007 DB2008 DB2009Herzegovina, Eastern Europe Burkina Faso, Canada, China, Côted’Ivoire, & Central Czech Asia Republic, Denmark, DominicanRepublic, (28 economies) Georgia, Germany, Italy, former YugoslavRepublic of Macedonia, Madagascar, Malaysia,Morocco, Sub-Saharan New Zealand, Samoa, St. Vincent and theAfricaGrenadines,(46 economies)ThailandSimplified process of paying taxesAzerbaijan,OECDBelarus, China, Colombia, DominicanRepublic, high income France, Greece, Honduras, Malaysia, 18Mozambique, (24 economies) Tunisia, UkraineEliminated taxesRevised tax codeReduced labor tax or contribution ratesSource: Doing Business database.SouthAsia17EasternEurope &CentralAsiaLatinAmerica& CaribbeanSub-SaharanAfricaNew Zealand (from 33% to 30%).22France and Greece made filingand paying taxes faster by implementingmandatory electronic filing for labortaxes and contributions.In Latin America and the Caribbean,besides the reforms in the DominicanRepublic, Antigua and Barbuda reducedthe corporate income tax rate from 30%to 25%. St. Vincent and the Grenadinesintroduced a new value added tax thatreplaced several existing taxes, includ-FIGURE 8.2Rankings on3 subindicaNumber of hper year to pfile returnsand pay taxeNote: See Data noFIGURE 8.6Top 5 reformReforms includiReduced profit22%Simplified proc19%Revised tax cod17%Eliminated taxe14%NumbReduced laborNote: A reform maySource: Doing BusinSouth Asia(8 economies)(c) The International Bank for Reconstruction and Development / The World BankNote: A reform is counted as 1 reform per reforming economy per year.6
AfricaSource: Doing Business database.incomeCentralAsia& CaribbeanNote: SePAYING TAXES 41ing the hotel tax, entertainment tax,consumption duty, stamp duty on receiptsand domestic and internationaltelecommunications surcharge. Uruguayabolished a tax on consumption. Mexicoabolished its asset tax. Colombia andHonduras made paying taxes easier byimplementing and improving online filingand payment systems. That cut thetime spent filing and paying taxes, especiallyin Honduras.In Africa 6 economies reformed.Three reduced their corporate incometax rate (table 8.3). Burkina Faso reducedits corporate income tax rate from35% to 30%, its dividend tax rate from15% to 12.5% and its property transfertax rate from 10% to 8%. Côte d’Ivoirereduced the corporate income tax ratefrom 27% to 25%. Madagascar reducedthat rate from 30% to 25% and abolished9 taxes, including the stamp duty anddividend tax. In Africa taxes other thanthe profit tax—such as stamp duties,property taxes and labor taxes—accountfor the largest share of the total tax rate.This is reflected in the large number ofFIGURE 8.4Most time in Latin America & CaribbeanSource: Doing Business database.#Number oftax paymentsOECDhigh income13183Middle East& North Africa 23216East Asia& Pacific 25252Time (hours per year)South Asia 32293Sub-SaharanAfrica 38312Eastern Europe& Central Asia46Latin America& CaribbeanFIGURE tax payments 8.5 African businesses must reformed. Aside from Malaysia, ChinaAmakethirdeachof reformsyear (figurein Eastern8.4).Europe & CentralmadeAsianotable reforms, reducing the corporatereport income year tax from 33.3% to 25%Number of reforms easing payment of taxesMozambique eased the filing and by Doing Businesspaying of taxes by introducing DB2006 electronic DB2007and unifying DB2008 accounting DB2009 methods andEastern systems. Europe It also revised its tax code to criteria for tax deductions and exemptions.Meanwhile, online filing became& Central Asia44(28 make economies) necessary updates, remove ambiguitiesand strengthen tax compliance more prevalent. Thailand introducedSub-SaharanAfrica and collection. Zambia did the same. corporate 22 income tax exemptions for(46 economies)These changes should increase the effectivenesssmall companies, reduced the corporateof tax administration.income tax rate to 25% for newly listedOECDhigh income18(24 economies) In East Asia and Pacific 5 economies companies and reduced several propertytaxes by sizable rates. It also made onlineTable 8.3Latin America& Caribbean17Major cuts in corporate income tax rates in 2007/08filing and payments easier. Samoa loweredits corporate income tax from 29%(32 economies)Region Middle Reduction East in & corporate income tax rate (%)to 27%. Mongolia reduced social securityNorth Africa12OECD high income (19 Canada economies) from 22.1 to 19.5contributions paid by employers fromCzech Republic from 24 to 21East Asia19% to 11% of gross salaries.&DenmarkPacificfrom 28 to 257In the Middle East and North Africa(24 Germany economies) from 25 to 15only 2 economies reformed. MoroccoItaly from 33 to 27.5South AsiaNew Zealand from 33 to 30 6lowered the standard corporate tax rate(8 economies)from 35% to 30%. Tunisia made filingEast Asia & Pacific China from 33.3 to 25Note: A reform is counted as 1 reform per reforming economy per year.Malaysia from 27 to 25and paying taxes easier by expandingSource: Doing Business database.Samoa from 29 to 27electronic options. Although companiesThailand from 30 to 25have been able to file and pay taxes onlineEastern Europe & Central Asia Albania from 20 to 10since 2005, many have been reluctant toBosnia and Herzegovina from 30 to 10pay their taxes this way. To address theirLatin America & CaribbeanGeorgia from 20 to 15Macedonia, former Yugoslav Republic of,from 12 to 10Antigua and Barbuda from 30 to 25Dominican Republic from 30 to 25St. Vincent and the Grenadines from 40 to 37.5concerns while easing the administrativeburden, Tunisian authorities introducedan option for filing tax returns onlinewhile paying the taxes in person at a taxoffice. This is a practical intermediatestep toward a full online system.South Asia recorded no significantreforms.Sub-Saharan Africa Burkina Faso from 35 to 30Côte d’Ivoire from 27 to 25Madagascar from 30 to 25Middle East & North Africa Morocco from 35 to 30Source: Doing Business database.35388394FIGURETop 5ReformsReduceSimplifiRevised1Elimina14%ReduceNote: A reSource: Do(c) The International Bank for Reconstruction and Development / The World Bank
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DOING BUSINESS 2009 - JOHN J. HADDAD, Ph.D.

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