Ranked fifth in the world, Ireland is well ahead of the UK, which is ranked tenth, according to a survey into global tax trends by PwC and the World Bank Group.

In EU terms, Denmark is in second place after Ireland, followed by the UK with the lowest corporation tax rates. The top 10 includes Finland, San Marino, Latvia, Luxembourg, Switzerland, Netherlands and Estonia.

For many EU countries, the statutory headline rate is significantly higher than the effective rate, but Ireland's 12.5% tax rate is more or less on par with the effective rate of 12.4%. Taking labour and other taxes into account, Ireland's total tax rate on corporate profits at 26% is much lower when compared with the EU average of 40.3%.

Joe Tynan, head of tax at PwC Ireland said: ‘Over many years, the report has confirmed that Ireland’s 12.5% corporate tax rate is clear and simple. While no-one likes paying tax, the Irish tax system makes it relatively easy to comply with the rules and is much less bureaucratic system compared to other EU countries.’

International tax rates

Globally, Qatar and United Arab Emirates took joint first place in the rankings of the top 10 worldwide economies for ease of paying taxes, followed by Hong Kong, Bahrain and Ireland in fifth place. Then come, Kuwait, Denmark, Singapore, and Macedonia, with the UK in tenth place.

The report’s findings show that the total tax rate decreased by 0.1 percentage points to 40.6%; time to comply declined by eight hours to 251 hours; and the number of payments by 0.8 to 25 payments.

The eight-hour reduction in the global average for time to comply is higher than in recent years, which PwC says reflects ongoing improvements in electronic tax systems, and in particular as a result of reforms implemented in Brazil.

Similarly, the fall in the number of individual payments required is largely due to the introduction and use of electronic filing and payment systems, which was the most common feature of tax reform in the past year. Jamaica was the top reformer, reducing the number of payments by 26 to 11.

The small decrease in the total tax rate results from 44 economies increasing taxes while 38 recorded a reduction. It also represents a combination of a decrease in other taxes offset by small increases in both profit and labour taxes.

Post-filing process

For the first time this year, the research looked at post-filing processes in areas including VAT and corporate income tax returns, finding that in some cases, the length of the processes can create cash flow and administrative delays for companies of more than a year.

The report found that 162 economies have a VAT system, with a VAT refund available to the case study company in 93 economies. On average it takes just over 14 hours to make the VAT refund claim, but the case study company then has to wait over five months (almost 22 weeks) to receive the refund.

The analysis shows it typically takes less time to comply with a VAT refund in high income economies (almost eight hours) than in low income economies (almost 27 hours). A VAT refund triggers an audit in 70% of economies, of which over half (58%) will go through a comprehensive audit.

The study also shows that 180 economies in the study levied corporate income tax in 2015.

Examining the difference between low and high income countries, the study finds that in low income economies it can take more than twice as long to comply with procedures to correct corporate income tax errors, and it is twice as likely to be subject to an audit.

Andrew Packman, leader for tax transparency at PwC said: ‘While we recognise the pressures on governments to raise tax revenues to fund public spending, in many economies, governments and tax authorities can make it easier for companies to pay their taxes and this includes the ability to claim a VAT refund or deal with a corporate income tax audit.’

The Paying Taxes 2017 report models business taxation in each economy using a medium-sized domestic case study company. The findings of this year’s survey, the eleventh, rate Ireland's tax system as the most efficient in the EU in terms of bureaucracy and administrative burden when it comes to paying, filing, time spent and the amount of tax levied on businesses.

The PwC World Bank Paying Taxes Report is available here