Canadians have become a bit spoiled by recent reforms to paying business taxes. According to the global consultancy PwC, Canada has maintained its eighth-place global ranking for ease of paying taxes. If you’re trading into other countries it’s useful to know how their tax regimes stack up next to ours. So in its ninth annual survey called “Paying Taxes 2014,” PwC compares total tax rates as well as ease of paying taxes for 189 jurisdictions around the world, a useful compendium to consult when you’re thinking of expanding abroad.
Be prepared for some shocks. Although Canadian businesses think of themselves as heavily taxed, the burdens here are generally very low. Canada ranks the best among G8 countries for ease of paying taxes—the number of hours required for completing all tax compliance work—and has comparatively low total tax rates—those that include taxes on profit, a variety of labour taxes and other levies. Canada’s total tax rate is 24.3%, compared to 46.3% south of the border, 34% in the U.K. and 49.4% in Germany.
Some places are worth locating an overseas operation, if only for the tax burdens. The United Arab Emirates ranks first worldwide for ease of doing taxes and levies a total tax rate of just 14.9%. Completing tax compliance takes a mere 12 hours a year, compared to 131 hours in Canada.
But Brazil, one of the much-vaunted BRIC nations, is known for having one of the heaviest tax-compliance burdens—requiring a whopping 2,600 hours a year for a company to meet its tax obligations—about 325 eight-hour days. It’s disappointing that this hot emerging market ranks a dismal 159 out of 189 for ease of doing taxes. By the way, its total tax rate is 68.3%
PwC, which creates its annual survey in conjunction with the World Bank’s International Finance Corporation, says that generally the world’s governments are improving at improving indicators for labour taxation and for the amount of time it takes to pay taxes. Also tax-compliance systems, such as electronic filing, have been making the task speedier.
But while some favourite places for Canadians to do business in such as Hong Kong (total tax rate of 22.9% and ranked fourth for ease of paying taxes) continue to shine, others such as the Chinese Mainland remain cumbersome with a 63.7% total tax rate and ranked 120 for ease of paying taxes. And Mexico lumbers along with a 53.7% total tax rate and ranks 118 for ease of compliance.
Of course, no one chooses to export or expand into a region just on the basis of taxes. But taken with other measures, such as market potential, political stability and friendliness toward business, examining a country’s tax rate and the compliance burden is an important step in making an expansion assessment.