Indian corporates face a total tax burden as high as 70.6%, according to a World Bank-IFC-PricewaterhouseCoopers (PwC) study, Paying Taxes, 2008.
India, ranked 165 in the overall paying taxes ranking, however, has got an overall better ranking for ease of paying taxes than China, which is at 168. It scores ahead of its eastern neighbour on two key parameters, lower total tax rate, India (70.60%) to China (73.90%).
The total tax burden includes not just corporate taxes but also various state taxes such as VAT, municipal charges, pollution tax and social security contributions borne by a company.
The report includes a special coverage on a like-to-like comparison of the Bric economies (Brazil, Russia, India & China). At 165, India has an overall better ease of paying taxes ranking than China (168), and scores ahead of its eastern neighbour on two key parameters: a lower total tax rate, India (70.60%) to Chinas (73.90%), and time to comply index where it scores ahead of Russia and Brazil also, it highlighted.
However, on an overall basis, it appears the Bric economies have a gap to bridge vis--vis other countries. Russia, with the best overall ease of paying taxes ranking among the Bric economies, stands at a relatively-disappointing 130 among the 178 countries surveyed.
Paying Taxes, 2008, is the second report in the annual series on tax systems by the World Bank, International Finance Corp and PwC covering 178 countries worldwide.
This year, the top 10 economies for ease of paying taxes include Maldives, Singapore, Hong Kong (China) and United Arab Emirates, and the 10 economies where it is most difficult include Panama, Jamaica, Mauritania and Bolivia.
In particular, the overall ranking for each country is determined by assigning equal weights to the individual indicators for the number of tax payments, the time required to comply, and the total tax cost which is measured by the total tax rate, thereby generating an overall ranking for each country for ease of paying taxes.
The methodology applied to calculate the total tax rate for each country uses the broad principles from the PwC Total Tax Contribution Framework and looks across all taxes that businesses pay. The total tax rate indicator measures the amount of all taxes borne by the business, in the second year of operation, expressed as a percentage of commercial profits.
The report emphasises that the governments need to look at all the taxes that companies pay when considering reform agenda. It also calls on businesses to play a strategic part in reform.
PwC executive director Rahul Garg says, Businesses need to be more upfront in communicating to various stakeholders their total tax contribution, to help governments assess their real economic footprint. More and better information about the taxes paid and the cost of compliance is essential to understanding how tax systems affect businesses. It is clear that governments need to look across all taxes when considering reform.