According to the latest Paying Taxes report released by The World Bank and PwC, the Middle East continues to be the region with the least demanding tax frameworks, consistently below the world average. The region averages a Total Tax Rate of 24.2%, 17 average number of payments and an average time to comply of 160 hours. While globally, the report shows a drop in the Total Tax Rate (as defined under the Doing Business methodology) by just 0.1 percentage points from last year, and a drop in the hours to comply with the tax requirements by two hours compared to last year's results. The Paying Taxes report measures the impact of tax systems on domestic companies complying with local tax laws and regulations in 189 economies around the world. The case study company in the report is a small to medium-size manufacturer and retailer with specific assumptions, deliberately chosen to ensure that its business can be compared worldwide on a like for like basis. According to the study, there was a small increase in the Total Tax Rate of 0.2 percentage points in the region from last year. The time to comply and the number of payments sub-indicators remained unchanged for the same period. In 2014, only two of the 13 Middle Eastern economies have a Total Tax Rate higher than the world average – Syria and Iran, with six of the economies having a Total Tax Rate higher than the regional average including Iraq, Jordan, Lebanon and Yemen. On a global level, electronic tax filing and payments were the most common reform taken, which resulted in easier taxes paid by medium sized companies globally, but the focus has moved from reducing tax rates for companies to embracing technology and relieving their compliance burden. The report also shows that low-income economies continue to face the biggest reform challenges. Commenting on the report Dean Kern, partner, PwC's Middle East tax and legal services leader, said: "The Paying Taxes report is an essential indicator for governments to frame their discussions on economic policy. With the recent proposal from the OECD to modernize the international tax system, the region will be seeing rapid development and transition, keeping tax reform an essential topic for governments in the region. While the Middle East ranks highest in regards to ease of paying taxes, the report finds that the region still has room for improvement, particularly in the use of electronic filing and payment mechanisms." The Paying Taxes 2016 report finds that labor taxes and mandatory contributions paid by employers account for 59% of the average Total Tax Rate for the region and is the most significant contributor to the Total Tax Rate in most economies. Profit taxes account for 39% while other taxes account for just 2% of the region's average Total Tax Rate. Despite a small increase in the Total Tax Rate in 2014, the region is the easiest in which to pay tax. It has the lowest Total Tax Rate and time to comply, and all of the sub-indicators have been stable since 2004. "We are seeing now, more than ever, an increasing interest and investment concerning tax reforms in the Middle East. With recent discussions on the implementation of a VAT in the GCC, governments in the Middle East are becoming increasingly engaged in the development of tax reforms, and more widely on ways to encourage economic growth," said Jeanine Daou, partner and Middle East leader for indirect taxes and fiscal policy. The Paying Taxes indicator measures all taxes and contributions mandated by government at any level (federal, state, or local) as they apply to the standardized sample business. The Total Tax Rate sub-indicator measures the cost of taxes and contributions that are borne by the company which affect the company's financial statements. The taxes included can be divided into five categories: profit or corporate income tax, social contributions and labor taxes paid by the employer, property taxes, turnover taxes and other taxes (such as municipal fees and vehicle taxes). The other two sub-indicators, on the time to comply and number of payments, measure taxes borne and taxes collected, and so include taxes and contributions withheld or collected, such as sales tax or value added tax (VAT).
