By Kevin Meyer
It's been a while since we had a Fun With Statistics post, but fellow blogger Jason Yip just pointed me to PWC's just-released Paying Taxes 2011 report – and that got the wheels turning. There is so much data here, and so many ways to cut it, that the statistics nuts among us could spend hours diving into it.
The study measures the total tax rate (federal, state, municipal, sales, etc) of 183 economies worldwide as a percentage of total commercial profits, but even more interesting are the measures of the cost of complexity, compliance, time required to comply, and the like. As the study says:
The study provides useful insights and identifies efficiencies which can benefit both government and business alike. And with six years of data now available, the study gives some interesting perspectives on how the world’s tax regimes have changed during this time – and, more recently, over a period of unprecedented economic turmoil.
Six years of data for 183 economies is quite a bit. If you want to jump to the individual country rankings you can go here. Click on the column header for easy sorting. A couple of things that jumped out to me:
- The United States is 124th out 183 in terms of total tax rate (ranked from lowest to highest rate), sandwiched right between Greece and Russia. Nice company to keep. Interesting that the total tax rate in the U.S. is greater than Canada (#37), Romania, Finland, Turkey, Poland, Taiwan, Netherlands, UK, New Zealand, Vietnam, Switzerland, Denmark, Bulgaria, Singapore – you get the picture. Both developed and third world countries that we compete with. And we wonder why jobs are going overseas.
- In terms of the ease of paying taxes and the time to comply the United States was 62nd and 66th. Better. But not as good as Switzerland, Hong Kong, Singapore, and the UK among others. In the U.S. it took on average of 187 hours per year while in Switzerland it took 63 hours.
That brings up some interesting issues regarding efficiency of tax collection and compliance, and whether the numerous "social engineering" loopholes, deductions, and the like create more burden than they are worth – perhaps even leading to lower compliance and revenue. From the key findings page:
- 50 economies now have one tax per base – ie combined federal, state, municipal taxes.
- On a similar note, on average, a company pays more than nine different taxes. Corporate income tax accounts for only 38% of the Total Tax Rate (TTR), 25% of the time to comply and 12% of tax payments. So imagine the efficiency savings those 50 economies with a single tax per base are experiencing – and I bet that turns into improved compliance.
- VAT style consumption taxes are not necessarily efficient. It takes the case study company longest to comply with consumption taxes, especially VAT. VAT is the predominant form of consumption tax used around the world (148 out of the 183 economies have a VAT type sales tax system). For these economies, it takes nearly 64% as much time again to comply with VAT as it does to comply with corporate income tax.
If you're a datahead like I am, enjoy picking through the numbers! And be thankful you don't run a company in Gambia where you'd have to pay a 290% total tax rate – hmmm… exactly how does that work?