Dubai: The UAE has emerged fifth in terms of ease in paying taxes and 7th in terms of tax rates in a ranking of 183 economies, according to a report by the World Bank, International Finance Corporation (IFC) and PricewaterhouseCoopers (PwC).
‘Paying Taxes 2011' measures the ease of paying taxes across economies worldwide, covering both the cost of taxes and the administrative burden of tax compliance. "The study in its sixth year has shown that the Gulf region has been consistent in maintaining fewer and less complex tax laws while efforts are clearly on to improve the tax administration across the region," said Dean Rolfe, Tax Partner at PwC Dubai.
Within the global rankings, Qatar remains the second-easiest country in which to pay tax with its tax rates ranked at sixth position. All six GCC states fall within the top 14 in ease of paying taxes.
On average there are almost half as many taxes levied in the Middle East, 5.5, compared to the global average of 10. Moreover, the time to complete tax obligations is significantly lower than the rest of the world. However, tax experts say the region could achieve greater efficiency in tax administration and costs by electronic filing and electronic payment of taxes.
"About two-thirds of the tax burden comes from tax administration. Simplification of tax payments and reduction in number of taxes on the same tax base could reduce the tax burden while improving the tax revenue for the governments," said Dahlia Khalifa, Senior Strategy Advisor (Doing Business Project) at IFC.
Although the UAE ranks seventh globally in terms of tax rate, with 14.5 per cent being the total tax liability as a percentage of pre-tax profits, it is ranked forty-third on the number of taxes it levies. "This shows that although the country is ranked among the top 10 on ease of paying taxes, in terms of the number of taxes there is scope for improving efficiency," said Khalifa.
The study observed that in the post financial crisis era, governments across the world are looking to improve their tax revenues to fund the budget gaps and the current trend is towards widening the tax base while reducing the tax rates, especially the corporate and personal income tax.
"In the Gulf, tax regimes have remained stable over the past several years. But tax will increasingly be seen as a suitable and effective solution to fund governments' financial needs." said Rolfe.
Benchmarking
The report allows governments to benchmark their domestic tax system against taxation systems across the world. The study provides useful insights and identifies efficiencies which can benefit both government and business alike.
"Although tax efficiencies vary across jurisdictions, governments can learn from one another's experience to identify both best practice and reform opportunities to improve their international competitiveness," said Neville Howlett, Director of External Relations, Tax, at PwC.
GCC rankings within the global Paying Taxes report:
- Qatar – 2nd
- UAE – 5th
- KSA – 6th
- Oman – 8th
- Kuwait – 9th
- Bahrain – 14th
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