While tax season may not inspire the uncorking of champagne in most offices, it turns out Canadian businesses have a lot to celebrate. According to a new study, Canada ranks 8th among 185 nations in a measure of how easy it is for businesses to pay taxes.
Paying Taxes 2013, a joint study from PricewaterhouseCoopers, the World Bank and the International Finance Corporation, looked at tax regimes in 185 economies around the world. It measured the overall ease of paying taxes for small-to-medium-sized businesses by taking a look at three indicators: the number of tax payments per year; the time taken to compile returns and submit tax payments; and a calculation of the companies' total tax liability as a percentage of pre-tax profits.
One of the biggest reasons for Canada's current top 10 position is the country's competitive Total Tax Rate (TTR), which has dropped from 49% in 2004 to 27% in 2011.
"Efforts to make Canada more tax-competitive and create a business-friendly climate are evident with the recent reforms initiated by the provincial and federal governments," says Jason Sara, partner, tax services at PwC. "Canada's current tax laws have attractive tax regimes, which impact all companies – in particular small-and-medium-sized domestic companies." Companies benefit from a special reduced corporate income tax rate, says Sara, resulting in a lower TTR and leading to fewer administrative hours spent filing paperwork to fulfill tax obligations.
The report also notes Canada's plans to achieve an internationally competitive 25% combined federal and provincial corporate income tax rate by the end of 2013, and tax administrators' willingness to embrace technology to make it easier for companies to file and pay taxes.
Among the 185 countries surveyed, the average number of tax payments required by a company in a year is 27% (in Canada the number is 8) and the average tax rate on costs of commercial profits was 45% (27% in Canada). Those payments require an average of 267 hours of work (131 in Canada).
Among G8 nations, the United Kingdom scored the next-highest ranking at 16, while France came in at 53, the United States at 60 and Germany at 72. Canada is also well ahead of the BRIC economies, where China and India placed 122nd and 152nd respectively, for overall ease of paying taxes. Brazil has the highest TTR amongst the BRIC nations at 69%.
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