PwC: Effective tax systems recognition for UK

By Rob Starr, Content Manager, Big4.com

The latest PwC, World Bank and IFC Paying Taxes study puts the UK in 16^th position, up two places from last year but still five short of its number 11 spot in the 2006 report.

This year the report includes analysis by PwC’s senior economic advisor, Andrew Sentance, on the link between tax systems and economic growth. The findings support the view that regions with less complex tax regimes and lower tax costs experience stronger growth. Based on the global data collected over the last eight years, the analysis shows:

· Falling complexity across tax systems over the eight year course of the study is linked with an increase in GDP growth of around a quarter of a percentage point a year.

· A 10% cut in the Total Tax Rate for medium sized businesses can be linked to increased inward investment of 0.7% per year and a rise in the annual economic growth rate of just under 0.1%.

The report highlights the relative simplicity of the UK tax system compared with other economies. A medium sized UK business has to make eight tax payments a year (27.2 is the global average) and spend 110 hours on tax compliance (267 hours globally). Their Total Tax Rate is 35.5% compared with the global average of 44.7%.

· On average a medium sized company pays a Total Tax Rate of 44.7 percent of profits, makes 27.2 payments, and spends 267 hours to comply with its tax requirements.

· In the eight years since the study began, the time to comply has fallen by 54 hours, almost seven working days, and the number of payments has declined by more than six.

· The average Total Tax Rate is almost flat on last year’s study, just 0.3% less. This compares with a fall of 3.3% the previous year.