Paying Taxes 2012: The Global Picture

Overview

A fair, sustainable tax system – how can governments create an environment that fosters business investment and economic growth?

Over the last three years, the world has experienced an extraordinary financial and economic upheaval. The financial turmoil continues to reshape the economic landscape and to present difficult choices for governments in terms of public spending and fiscal policy. Severe damage has been caused to the public finances in many economies and difficult measures are being taken to repair them. In an increasingly global economy, business investment, capital innovation and skilled people will quickly flow to countries where tax systems encourage and offer the prospect of economic growth.

Governments in economies of all sizes and at all stages of development are struggling with the tax policy choices available to them. While taxes are essential for economic and social development, it is important that the taxes levied do not hinder the ability of companies to generate a sufficient and consistent return so that they can reinvest and grow their business.

But while the perspective of business and government on what the optimum amount of taxes to levy may differ, there should be a common agenda regarding the administration of tax systems and the need to ensure that it is simple and efficient. Both benefit from tax systems which are simple to administer and where levels of compliance are high.

The quality of the rules that underpin the administration of the tax system is therefore very important. If care is taken to create a system which is easy to administer, then it is more likely that businesses will operate within the formal economy and as a consequence that government will be able to collect the revenues that it needs to fund expenditure on infrastructure, education and public health. This expenditure supports productivity, a key driver of economic growth, and so helps to promote a virtuous circle of development.

Our Paying Taxes study demonstrates again that reform of tax systems around the world is continuing. There is an increasing focus on improving the administrative aspects of tax systems, including the use of electronic filing and payment for tax returns, the reduction in the number of taxes per base and an increasing use of self-assessment procedures.

Governments, business and civil society all benefit from a fair, stable and sustainable tax system which can help to encourage growth. Articles included in this report continue to demonstrate the engagement of government with tax reform giving insights into how the Paying Taxes data has been used and providing details of the reforms that have been and are being implemented.