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Fourteenyearsofdataandanalysisoftaxsystemsin190economies:howistechnologyaffectingtaxadministrationandpolicy?November2018PayingTaxes2019@pwc.comAndrewPackmanLeader,TaxTransparencyandTotalTaxContributionPwCUK+447712666441andrew.packman@pwc.comTomDaneSeniorManager,TaxPwCUK+447715211316thomas.a.dane@pwc.comNevilleHowlettDirector,ExternalRelations,TaxPwCUK+447725069183neville.p.howlett@pwc.comWorldBankGroupRitaRamalhoSeniorManagerGlobalIndicatorsGroup+12024584139rramalho@ifc.orgSantiagoCrociProgramManagerDoingBusinessUnit+12024737172scroci@worldbank.orgJoannaNasrPrivateSectorDevelopmentSpecialistDoingBusinessUnit+12024584903jnasr@worldbank.org2|PayingTaxes2019PayingTaxes2019|3ContentsForeword04Keyfindings06Chapter1-Unlockingtechnology’spotential12Chapter2-Theunevenglobalimpactofthechangingtaxburdenforbusiness20Chapter3-Post-filingprocessesanddomesticdisputes30Chapter4-WorldBankcommentary:lessonslearned37Appendix46Theworldischangingwithunprecedentedspeed,drivenbymegatrends,includingdemographicchange,theshiftofeconomicpowertoemergingcountries,climatechangeandurbanisation.Butitisthedevelopmentsintechnologythatarechanginglivesbeyondrecognition,daybyday.Technologyistransformingthenatureofjobsthatareavailableandtheskillsneededtodothem.This,inturn,islikelytorequiregreaterinvestmentinhumancapital,especiallyinlearninganddevelopment.Someeconomiesarealreadybeginningtograpplewiththesechallenges,butfordevelopingeconomiesinparticular,thereisamountaintoclimb.TheWorldBank’sWorldDevelopmentReport2019,TheChangingNatureofWork,andPwC’sWorkforceoftheFuturereportshowjusthowfundamentaltechnologicaldevelopmentswillbetothewayinwhichsocietiesandeconomiesoperate.Theyarealsofundamentaltotheevolutionoftaxsystems–bothinhoweconomiesraiserevenuesandwhattheylevytaxeson.Formorethanadecade,PayingTaxes,aspartoftheWorldBank’sDoingBusinessproject,hascomparedtaxsystemsacross190economies,highlightinghowtechnologyischangingthewaytaxesareadministeredandcollected,usingamedium-sizedcasestudycompanyasthebasisforthecomparison.Yearbyyear,moreandmorebusinessesareabletofileandpaytheirtaxesonline,resultinginsubstantialsavingsintimeandcost.Inthisreport,welookathownewtaxsoftware,real-timereportingsystemsanddataanalyticsarechangingthewaycompaniesmeettheirtaxcomplianceobligationsandhowtaxauthoritiesmonitorandenforcethoseobligations.Weexaminethebalancebetweenlabourandincometaxesaseconomiesconsidertheeffectofthechangesonthenatureofworkandtheimpactthishasonrevenuestreams.Wealsolookatsomeofthedifferentapproachestakenbytaxauthoritiestotaxauditsandtotheprovisionoftrainingforbothtaxofficersandtaxpayers.Althoughinmanyrespects,theworldischangingfasterthanever,atagloballevel,ourcasestudycompanyhasthisyearseenverylittlechangeintheaverageeaseofpayingtaxes.Thisseemingstabilitymasksconsiderabledevelopmentstakingplaceinindividualeconomieswhichcanceloutatagloballevel.Someeconomies,whichwerealreadyusingadvancedtechnologyfortaxadministration,havecontinuedtoimprovetheirsystemstothebenefitofbothtaxpayersandtaxauthorities,recordingsignificantdecreasesinthetimeittakestoprepare,fileandpaytaxes.Others,though,arelaggingbehindandhaveintroducednewtaxeswithouttheadvantagesofmoderntechnology,therebyincreasingthecomplianceburdensontaxpayers.Theimpactoftechnologygoesfarbeyondtaxadministration;itwillalsoaffecttheincomestreamsthatareavailabletobetaxed.Wearealreadyseeingtechnologydrivingchangesintheemploymentskillswhichareneeded,inbusinessandemploymentmodelsandinthewaysinwhichbusinessesoperateacrossgeographicboundaries.Allofthesechangesmaymeangovernmentsneedtoreassesshowtheyraisetaxesfromtheavailablesourcesofincomeandwealth.Inrecentyears,PayingTaxeshasshownthat,globally,labourtaxesandprofittaxesaccountforsimilarproportionsofthetaxesbornebyourcasestudycompany,asmeasuredbytheTotalTaxandContributionRate(TTCR),butthismightchangeinthefutureifgovernmentsadjusttheirtaxstrategyinresponsetothechangingnatureofthetaxbase.Forexample,wehaveseenthisyearthatsomegovernmentshaveimplementedchangestocorporateincometax(CIT)thatareintendedtoencouragedomesticandforeigninvestment.1Othershavesoughttolowerthecostsofemploymentbyreducingtheratesofsocialsecuritycontributions(SSC).Foreword4|PayingTaxes20191TheUStaxreformsintroducedin2018werenotineffectwhenthedataforthisreportwascollected.PayingTaxes2019|5Somegovernments,ontheotherhand,areincreasingtaxrates.Ifgovernmentsaretoinvestinthehumancapitaloftheirpopulations,then,asdiscussedintheWorldBank’sWorldDevelopmentReport2019,manymaywishtoconsiderincreasingtheamountoftaxtheyraiseasaproportionofgrossdomesticproduct(GDP),particularlyinlower-incomecountrieswheretax-to-GDPratiosarebelowtheglobalaverage.2Changingtaxratesoradjustingthebalancebetweendirectandindirecttaxesaretwopossiblewaystoincreasetaxrevenues.Anotherwayistomaketaxsystemsassimpleaspossibletocomplywithandthenenforcetherulesinawaythatisfair,transparentandproportionate.Simple,coherent,well