JEDDAH — The UAE and Saudi Arabia are ranked first and third respectively in 2013; up from sixth and 7th in 2012, while Qatar remains second for the fourth year, a new report from the World Bank, IFC, and PwC titled “Paying Taxes 2013 – The Global Picture" released Sunday revealed. The other GCC countries of Bahrain, Oman and Kuwait were ranked 7th, 10th and 11th, respectively. The report found that on average a medium company in the Middle East pays a total tax rate (the cost of all taxes borne) of 23.6 percent, making 17.6 payments (frequency with which the company has to file and pay different types of taxes and contributions), and spending 158 hours (time to prepare, file and pay three major types of taxes including labor taxes, mandatory contributions and consumption taxes). Labor taxes and social contributions account for the largest part of these three indicators in the Middle East, which is quite different to the average global profile. In the eight years since the study began in 2004, the Middle East region required the fewest number of hours to comply with tax systems. The number of payments has also remained stable throughout most of the study period but witnessed some reduction over the last year driven by the implementation of online filing and payment systems by Saudi Arabia and the United Arab Emirates, which are improvements related to social security contributions. The total tax rate has fallen by only 2.5 percent for the region since Paying Taxes 2007 and has remained flat in the most recent years. Commenting on the report, Dean Kern, Tax Leader, PwC Middle East, said “Economies in the Middle East feature so prominently in the top jurisdiction of the Paying Taxes indicators. This can be largely attributed to the relatively few taxes levied and the reliance on other sources of government revenues. With increased spending requirements and populations demanding greater economic rights, governments in the Middle East will face a challenge to raise additional tax revenues in the future, either by introducing new taxes, expanding the tax base or increasing tax rates." “Electronic filing and payment reduces paperwork and complexity in tax systems and can help increase tax compliance and reduce the cost of tax administration," said Augusto Lopez Claros, Director, Global Indicators and Analysis, World Bank Group. “The report finds that over the last several years there has been a gradual reduction in the number of payments and in the number of hours spent by a medium-sized company to comply with its tax obligations. This reduction across all regions of the world in the burden of tax administration is a welcome development." The average number of payments for the Middle East region is 17.6, which is well below the world average, with the exception of North America and the EU & EFTA that have lower averages. The number of payments in this region is kept low by the small average number of taxes which is the lowest of all the regions, but to some extent this is compensated by the general low use of electronic filing and payment facilities particularly for labor taxes and social contributions, and VAT systems. It is also to note that it is the high-income economies that have the less demanding tax systems, as they place a greater reliance on other sources of revenue that the less well-off economies do not have. The average time to comply across the Middle East is 158 hours, a figure which is well below the world average and the lowest for any region. For many of the economies, labor taxes and social contributions are the primary drivers of the time to comply, but in Yemen the goods and services tax takes the longest time to comply with, whilst in the Syrian Arab Republic it is corporate income tax. The average total tax rate for Middle East region is 23.6 percent, well below the world average of 44.7 percent and the lowest of any region. The element for labor taxes and social contributions is a common feature for all of the economies in the Middle East apart from West Bank and Gaza where no labor taxes are levied on the employer. Oil-rich economies such as Kuwait, Qatar, Bahrain, Saudi Arabia, and the United Arab Emirates continue to have little or no corporate income tax which explains why the overall average total tax rate is so low. The absence of consumption and “other"' taxes also helps to explain this average rate. Venezuela has the world's most demanding tax framework for companies with total tax payments of 62.7 percent, 71 payments and 792 man hours to comply with the regulations. Venezuela was followed by Chad with total tax payments of 65.4 percent and Guinea at 73.2 percent. While the Democratic Republic of the Congo ranked 182 globally overall, it is the world's most expensive country to operate in with total tax payments of 339.7 percent. The African country is followed by Gambia with total tax payments of 283.5 percent and Comoros Islands at 217.9 percent. The lowest overall tax payment is Vanuatu, at 8.4 percent, followed by Macedonia at 9.4 percent. Reforms continue around the world. — SG
