Tax Reform Remains on the Agenda of Governments despite Economic Downturn

Romania ranks 149 out of 183 economies analyzed in the Paying Taxes 2010 report from the point of view of the ease of paying taxes and contributions, slightly lower that in last year's edition, when Romania ranked 146th.

"Romania performs better than the European average in what concern the number of hours necessary for the average company for the compliance with the fiscal requirements, 202 hours annually, compared to the European average of 232 hours. Unfortunately, this is counterbalanced by the high number of payments the average case study company has to perform annually, no less that 113, most of which are labour taxes, which rank Romania 182nd from that perspective out of 183 analyzed economies", stated Peter de Ruiter, Partner, Tax and Legal Services Leader, PricewaterhouseCoopers Romania.

By comparison, the global average number of payments necessary for the case study company is just 31 annually, which means that in Romania the average company makes almost four time as many payments during one year's time.

From the total tax rate perspective, meaning the companies' total tax liability as a percentage of pre-tax profits, Romania improved its position compared to last year, this percentage decreasing from 48% to 44,6%, which is the exact EU average.

"We have to say that this year's ranking of Romania is due not so much to the involutions on the local market, but to the fact that other economies took bolder steps to improve their fiscal regime", concluded Peter de Ruiter, Tax and Legal Services Leader, PricewaterhouseCoopers Romania.

This year's top reformer, Timor-Leste, introduced a new tax law, streamlined the business tax regime and simplified tax administration. For the third year in a row, Eastern Europe and Central Asia had the largest number of reforms, with 10 economies reforming.

"Government efforts to streamline tax procedures and reduce time spent on compliance can make an important difference for small and medium enterprises, especially in difficult economic times," said Penelope Brook, World Bank Group Director of the Global Indicators and Analysis department. "This year's top reformer reduced compliance time by over 50 percent by rationalizing tax regulations, simplifying computation rules, and reducing payments."

The report measures the ease of paying taxes across 183 economies by assessing the administrative burden for companies to comply with tax regulations, and also by calculating companies' total tax liability as a percentage of pre-tax profits. In the past five years, the report has recorded 171 reforms affecting taxes in 104 economies worldwide.

While 20 economies have reduced corporate income tax rates, 18 simplified the process of paying taxes. On average across all of the 183 economies covered in the report, the standard case study company measured has to make 31 tax payments and spend 286 hours on calculating and paying its taxes.

The results show that corporate income tax is just one of the taxes with which business must comply. On average, the company pays 9.5 different taxes and corporate income tax accounts for only 12 percent of payments, 26 percent of the time to comply, and 38 percent of the tax cost.

"The global recession has meant falling tax revenues and difficult tax policy choices," said Susan Symons, partner, PricewaterhouseCoopers. "The challenge is ensuring sufficient public revenues for the future while incentivizing investment and economic growth."

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The World Bank Group is one of the world's largest sources of funding and knowledge for developing countries. It comprises five closely associated institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a distinct role in the mission to fight poverty and improve living standards for people in the developing world. For more information, please visit www.worldbank.org, www.miga.org, and www.ifc.org.

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