Uploaded on

 

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
552
On Slideshare
0
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
13
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide
  • Official definition (Sandford): “Costs incurred by taxpayers in meeting the requirements laid on them by the tax law and the revenue authorities … over and above the actual payment of tax; costs which would disappear if the tax was abolished.”That is, in addition to the fiscal burden of tax on business (their actual tax payments), the compliance burden is a real cost to businesses in terms of staff costs (time spent on tax compliance * relevant wage rate or salary) and other expenses (e.g., buying tax software, hiring a tax specialist on an as-needed basis, driving to the tax office, etc.).It is important to note that most economists view tax compliance costs as the marginal cost of tax accounting AFTER normal bookkeeping/accounting has been done. The expectation is that proper accounting is a normal cost of business and beneficial to the company in terms of improved financial management. Only the extra costs beyond that done for purpose of tax compliance should be counted as tax compliance costs (altho many small business owners assert that they “only reason” they do proper accounting is because it is required for tax purposes).
  • Notes:Please note that the disparity in figures (N and %) during analysis of subsets of data is due to the weighting factors applied. This is a GREAT slide!!!!! But … the N’s and %’s don’t match up, e.g., 7% * 517 = 36, not 50; and even if it should be 50, 16% * 50 = 8, not 19.There might be an explanation (weighting?) and you don’t necessarily have to put it on the slide, but you could put it here in the “notes” section beneath the slide.SP:DONE
  • We have several more, but they all show much the same pattern. This is probably a bigger problem in developing/transition countries than in New Zealand, as many of the micro-enterprises are NOT part-time entrepreneurs or even necessarily start-ups, but are more likely to account for the main livelihood of most of them. Two other major issues are (a) imputed value of the time of small business owners and (b) the possibility respondents may be under-reporting turnover.
  • Here we see some evidence that the VAT threshold (less than $24,000) might be too low and imposing a daunting burden.
  • This is still a hypothesis to be tested
  • Numbers at bottom are numbers of “focus clients” of survey respondents (professional tax accountants).“RUS” = fixed payment for eligible micro-enterprises (there are actually many more “RUS” users but they don’t have to have certified accountants).“RER” = simplified tax based on turnover for elibibleMSMEs (Less popular than anticipated by the Government – why?)“RG” = “Regular Regime” (CIT, VAT, payroll taxes, etc.)
  • “RER” is the simplified regime based on turnover, introduced in Peru for small businesses several years ago. The Tax Authority was surprised that it was not very popular, and want to find out why. There is also a “patent” type regime that is even more popular for sole proprietors who are eligible for it (but they don’t need certified accountants so were not well represented by this particular survey).
  • In the case of Yemen, the business tax regime for all except officially designated “large taxpayers” has yet to move to “self-assessment.” Any business that declared it did not keep full accounts was taxed presumptively, and the great majority of businesses opted for that system. In preparation for major reforms, the Government of Yemen made a decision in principle to exempt “micro-enterprises” from national-level taxation (other than the possibility of a nominal “patent”), to required all other firms to use “self-assessment, and creation of a new, simplified “turnover tax” regime for small businesses. But it was necessary to define appropriate categories of firms, for which the survey data was put to use. The survey data helped both to correlate turnover with number of employees, and to determine current capacity for bookkeeping by size of firm. On the basis of the survey, it was determined that more than 75% of small firms (and even 59% of micro firms) indicated that they are keeping books and physical receipts. As expected, the share of respondents who do not keep any receipts drops with business size while the share of respondents practicing all types of bookkeeping practices rises with size.  
  • Another hypothesis to be tested
  • … though it may also be a venue for bribes to pay lower taxes.
  • Higher proportion of smallest businesses said “it costs too much” (almost 25%).
  • Cheaper for smaller businesses to outsource than to do everything in house, except for the largest businesses.We even used the low-end of estimates for the cost of wage rates:Gross monthly salaries of inside accountants were estimated based on firmturnover band. The assumption is that accountants in the larger firms have highersalaries. The following estimates were used:(a) Up to 300 K rand the salary is estimated at 6 000 rand(b) 300K – 1 million – 10 000 rand(c) 1 – 6 million – 12 000 rand(d) More than 6 million – 15 000 rand
  • Of course, the higher cost is due primarily to duplicative work – the professional TP needs to review (and often correct) the books of the company who asked for its help with TC. Also - Who does partial outsourcing? Probably businesses that had been trying to do everything in-house and then ran into trouble. Source: Coolidge, Ilic and Kisunko, Policy Research Working Paper “Who outsources tax compliance work and why?”
  • Note high incidence of inspections in Ukraine. These are all separate inspections (uncoordinated) so the likelihood of even a small company getting inspected at least once per year is pretty high.
  • In discussions with KRA we concluded these figures probably include some “informational visits” by KRA officials that are not an inspection, but they also agreed it could possibly include some “unofficial inspections” or visits from people fraudulently claiming to be a KRA inspector (in search of a bribe).
  • Overall, inspections in S. Africa are much rarer, altho there is still relative variation across provinces.
  • Sample sizes: 208 – inspected firms only (from sheet “38”)Definitions:"control of cash register" It means that cash register should be in compliance with set standards "visual inspection" It's a visual inspection of premises without checking accounting documents, stock, etc."controlling purchases" Tax inspectors buy goods from a store. They check if salesperson registers the transaction in cash register and gives them receipt. If not, business is penalized. This is the most frequent form of tax inspection since making usage of cash registers mandatory. "chronomegrate/invigilation" Tax inspectors monitor sales (of a restaurant or a hotel) for a certain period of time, usually for at least one week. If sales during this period exceeds sales from previous period, then the business gets penalized. Such penalties existed during the survey but are now abolished.
  • Sample size: 208 – inspected firms only (from sheet “39”)
  • Those who report “none” are probably still losing out on business opportunities!
  • A larger proportion of informal businesses in the Agriculture, construction and manufacturing sectors say they are likely to register for tax in the next two years than those in trade and services.Source: Coolidge and Ilic 2009, “Tax Compliance Perceptions and formalization of small businesses in S. Africa” WB PRWP 4992.
  • A larger percentage of informal businesses who keep complete financials say they are likely to register for tax in the next two years than those who do not keep complete financials.
  • Those renting are more likely to say they will register for tax – probably because they are aware that SARS has access to the financial information of their landlords.
  • Those closer to a SARS office are more likely to say they will register
  • Those who find bookkeeping relatively easy are more likely to register.
  • 5 means full agreement, 1 means complete disagreement. Here, general tax morale seems less of a problem than mistrust of government (in terms of corruption, lack of fairness, etc.)
  • None of the categories have an average estimate of more than one quarter; and larger businesses appear to see a bit more in benefits than smaller ones.
  • Survey respondents were asked: “Having in mind businesses similar to yours (in the same line of this business, same size, and same area),…what percentage of their taxable profit would you estimate they usually report for tax purposes?” Note medium size businesses seem to report the most.

Transcript

  • 1. Tax compliance cost surveys: Findings from developing and transition countries Jacqueline Coolidge Washington DC February 1, 2012 1
  • 2. INTRODUCTION 2
  • 3. What are tax compliance costs? Enterprises’ tax compliance and associated reporting costs – these are NOT amounts of taxes paid and NOT • Enterprises’ tax compliance and statistical reporting costs – these are costs of general bookkeeping or accounting, but costs: NOT amounts of taxes paid, but costs: • • of working time spent by accountants and other staff on calculation of working time spent by accountants and other staff on calculation taxes, preparing all reports (including statistical), providingauthorities, taxes, preparing all reports, providing explanations to tax trips to tax offices, etc. statistic authorities, trips to these bodies explanations to tax and • for purchasing all necessary forms of declaring/filing, updates on purchasing, installation and maintenance of corresponding equipment (cash registers)or regs, etc. (on workflow automation) changes in tax legislation and programs • • for outsourcingall necessary forms of reporting,fee-for-service basis for purchasing to tax preparers on retainer or etc. • for outside consultants • for purchasing, installation and maintenance of required equipment (e.g., cash registers) and/or software (amortized as appropriate) 3
  • 4. Why should we care about taxcompliance costs? • Tax compliance costs add significantly to the cost of doing business • Tax compliance costs can be extremely regressive: a relatively minor burden for large firms but extremely onerous for small firms • The costs and risks of tax compliance (e.g., the risk of incurring severe penalties) can deter business formation and formalization of informal firms. 4
  • 5. Examples of TCCS • South Africa, Kenya, Burundi (Uganda upcoming) • Yemen • Ukraine, Uzbekistan, Armenia, Georgia • Peru • India (Bihar), Lao, Nepal (Bangladesh upcoming) • What data did we get and how did we use it??? 5
  • 6. BASIC TAX COMPLIANCECOSTS 6
  • 7. South Africa Tax Compliance Burden -coverage • Time and cost estimates for main business taxes: – Income Tax (IT), including provisional tax – Value Added Tax (VAT) – Employees’ Tax (ET) • Significant processes: – Preparation, completion of returns – Tax filing and payment – Objections, Appeals & Alternative Dispute Resolution – Audits, inspections & written queries from SARS 7
  • 8. Armenia: Tax Compliance Costs incurred by an average Enterprise in 2009DRA • In person-hours:FT Total time spent on tax compliance of all staffFO • In money:RD Time cost X labor costs (salary and wages)*ISC 400 person-hours (50 business days),U which isSS AMD 428 892 (~$1,181*)IO * Beware: imputed salaries for business owners/managers can be veryN * average exchange rate in 2009 was 363.28 AMD. Source: Armenian social-economic situation in 2009. problematic and can lead to very wide variation in valuations. 8 8
  • 9. Ukraine: Most costly taxes for enterprises Time spent on tax accounting (analysis of tax legislation, tax accounting, preparation of reports, paying taxes) of different taxes in 2007 per average enterprise Tax Average time, hours per yearVAT (including preparation of VAT 650invoices)Enterprise Profit Tax 280Personal Income Tax 142Social contributions 146Unified Tax 65Fixed Agriculture Tax 90 9
  • 10. Other expenses related tocompliance with tax in Ukraine Average costs per Average costs per Expenses enterprise*, UAH sole proprietor*, UAH 1500 498Accounting software 1000 279Consulting and legal database,tax literature, consultations andseminars etc.Tax templates, books and other 350 83tax reporting formsRegisters for settlement 700 842transactionsTotal average: 3600 394 Average costs calculated among enterprises and sole proprietors who incurred these costs 10
  • 11. Nepal: 84 percent of eligible taxpayersdon’t file for VAT Refund 1. Eligible for VAT 2. Applied for VAT 3. Status of application Refund (N=517) Refund (N=50) (N=19) Dont know Disapprove Still in 1% d process Not 24% 12% Applied 84% Applied Not Eligible 16% Eligible 7% 92% Approve d 64% 4. Received VAT refund Reasons for Not Demanding VAT Refund (N=13) in Cash Complicated formalities for rebate 50.3 ReceivedNot worth because the rebate amount was too fully 31.2 small 33% We would not get the rebate anyway 50.7 Received partially Might induce a tax audit in our enterprise 9.0 67% Other (please, specify) 4.2 11
  • 12. TCCS TEND TO BE VERYREGRESSIVE, AND AMAJOR BURDEN FORSMALL BUSINESSES 12
  • 13. Developed country TCC/turnover 24 Tax Compliance Cost as a percentage of turnover (scale for 19 14 New Zealand) 9 4 0.1 0.06 0.09 0.09 0.02 0.006 -1 4 6 98 3 5 0 9 15 44 8 3 87 45 10 21 43 54 31 90 ,8 9, 6, 1, 1, 81 18 31 Turnover in 000 USD Canada United Kingdom Netherlands New Zealand 13
  • 14. Regressive Compliance Costs –South Africa (Pre reform) Compliance Burden for preparation of tax returns as a percent of turnover (firms registered/not registered for VAT; mandatory at R300,000) 6.0%% of turnover 5.0% 4.0% Firms registered for VAT 3.0% 2.0% 1.0% Firms not registered for VAT 0.0% 0.15 0.3 0.65 3.5 10 Turnover (in R million) 14 Source: FIAS Tax Compliance Cost Survey South Africa, 2007 14
  • 15. Country-specific examples of TCC/turnover 20 Tax Compliance Cost as a percentage of turnover 18 16 14 12 10 8 6 4 2 0 Turnover in 000 USD South Africa Armenia India (Bihar) Georgia 15
  • 16. Nepal – threshold may be too low Tax Compliance Cost vs Revenue of Business 4.00% 3.50% 3.43% 3.00% VAT Thresh- 2.50% hold 2.00% 1.50% 1.00% 0.87% 0.48% 0.55% 0.50% 0.43% 0.32% 0.19% 0.09% 0.05% 0.10% 0.00% 30,001 - 100,001 - 500,001 - 1,000,001 - 2,000,001 - 5,000,001 - 10,000,001 - 50,000,001 - 100,000,001 Above 100,000 500,000 1,000,000 2,000,000 5,000,000 10,000,000 50,000,000 100,000,000 - 250,000,000 250,000,000 16
  • 17. WHAT CAN REDUCE TAXCOMPLIANCE COSTS FORSMALL BUSINESSES?SIMPLIFIED TAX REGIMES? 17
  • 18. Peru – Tax Regimes / Turnover100% 5.1% 8.0% 90% 8.6% 80% 23.2% 43.6% 70% 58.4% 60% More than S/. 360,000 50% 16.8% S/.150,001 - S/.360,000 86.3% Less than S/. 150,000 40% 68.8% 16.0% 30% 20% 39.6% 25.5% 10% 0% All Regimes RUS RER RG Regime of client 1949 175 388 1386 18
  • 19. Advantages and disadvantages of simplified regimes – Peru: reasons offered … ….Not to file under RER … to File under RG other reasons other reasons do not know about this allows to emit regime all invoices lowest taxrequirements are too difficult compliance to comply cost the only regimeclients expectations to grow that allows above S/.500,000 client to grow only regime for fixed assets >S/.126,000 which client is eligible easiest regime net income >S/.500,000 to understand does not allow for clients did not advise economic activiy 0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50% N=1302 n=1289 19
  • 20. The simplified regime in Ukraine appearedto broaden the Tax Net… Table 5: Ukraine’s Presumptive Tax System Year Unified/Single tax Number of Number of special trade fixed tax payers patents (‘000) Legal entities (‘000) Natural purchased persons (‘000) (units) 1999 28.6 66.1 16,873 318 2000 66.6 182 7,411 327.4 2001 91.7 345.1 6,986 339.3 Source: Barbone and Sanchez (2003) 20
  • 21. … but it was still no panacea Table 6: Registered Enterprises in the Presumptive Tax SystemEnterprise size Number of Estimated Estimated Estimated employees number of employ- percentage enterprises ment of regis- tration 0 (Sole entrep- 2,651,433 2,651,435 24.6 reneur)Small 1 to 5 148,976 516,947 37.6 6 to 10 104,608 850,460 94.1 11 to 50 123,757 3,189,226 99.5Medium 51 to 250 33,169 4,206,444 99.5Large more than 10,851 9,822,542 99.4 250 Total 3,073,244 21,237,054 -Source: Thiessen (2001) 21
  • 22. Why offer a simplified regime? Compliancecapacity is often low: e.g., in Yemen 22
  • 23. WHAT ELSE CAN REDUCETAX COMPLIANCE COSTS?TAX SOFTWARE, E-FILINGAND OTHER TAX I.T. 23
  • 24. Use of computers and Internet forbusiness purposes in ArmeniaDRAF 46.7% Enterprises 82.6%T Sole proprietorsFO 23.0%R 16.8% 13.5%DI 7.9% 8.5% 1.6%S Using Using Using No, do notC business personally business as using Using Using Using No, do notU owned owned well as computer business personally business as usingS computer only computer only personally owned owned well as computer owned computer only computer only personallyS computers ownedI computersON 73.2% of enterprises who used 70.8% of sole proprietors who used computers had internet computers had internet connection connection 24 24
  • 25. Accounting Software is not used at the majority of micro and small enterprises in Armenia …DRA 79%FT 62% 55%F 52%O 34% 41%R 24% 34% 32% 34% 26% 24% 25%D 19% 18% 20% 13%I 8%SC UP to 5 million 5-29.99 million 30-58.35 million More than 58.35 More than 58.35 Average for allU million million (Large enterprisesS taxpayers)S Annual turnover of enterprises, AMDION Manually PC using non specialized software PC using specialized software 25 25
  • 26. …and is even less common among sole proprietors in ArmeniaDRAF 99.2% 95.6%T 91.4% 85.8% 76.6%FORD 10.6%I 15.1% 2.7%S 8.3% 5.2% 3.4% 1.7% 3.6% .0% .8%CU up to 1,000, 000 1,000,001 – 2,000,000 2,000,001 – 5,000,000 More than 5,000,000 Average among allS SPsS Annual turnover of enterprisesIO Manually PC using non specialized software PC using specialized softwareN 26 26
  • 27. Ways of submitting tax reports in ArmeniaDR Sole proprietorsA EnterprisesFT On paper in 61.3% personF On paper in person 78.4%OR On paper via post 36.6% On paper via post 21.6%D Electronically via 2.2%I internetSC The most recent way of submission, The most recent way ofU submission, share of enterprises share of sole proprietorsSSIO The most popular answer among those who submitted tax reports onN paper in person is – “it was the most reliable way” 27 27
  • 28. OUTSOURCING VERSUSIN-HOUSE TAXCOMPLIANCE 28
  • 29. Outsourcing patterns in South Africa Small and large businesses are more likely to outsource than medium sized businesses 35 44 20 45 Le s s than R300K 31 56 13 41 R300K to R1000K 43 48 9 33 R1000K to R6000K 45 49 6 30 R6000K to R14000K 49 42 9 26 Ove r R14 m illion 43 46 11 34 Total Com ple te ly outs ourcing Partially outs ourcing Not outs ourcing at all Outs ourcing inde x 29
  • 30. Why outsourcing is and is not usedin South Africa Reasons for the decision … to outsource or not to outsource It is not difficult to It is difficult to Other complete keep up-to- 1% tax forms date with for my changes in It costs too business Tax laws much to 10% 7% outsource 10% Tax expertise of my current Tax is a specialist field Have Tax 73% sufficient in- Practitioner house tax 9% expertise 80% No time to do it internally 10% 9 30
  • 31. Cost of tax compliance for those who fullyoutsource versus those who do everything in-house in South Africa 0 10000 20000 30000 40000 50000 60000 Less than R300K Full outsourcing Full in house R300K to R1000K R1000K to R6000K R6000K to R14000K Over R14 million Total 31
  • 32. Cost of partial outsourcing versus nopartial outsourcing in South Africa Cost of partial outsourcing is significantly higher than either doing everything in house or fully outsourcing everything. Cost of tax compliance - thousands of Rands 0 10 20 30 40 50 60 70 80 90 Less than R300K R300K to R1000K R1000K to R6000K Turnover groups R6000K to R14000K Over R14 million All turnover groups No partial outsourcing Some partial outsourcing Total 32
  • 33. TAX INSPECTIONS ANDOTHER VISITS 33
  • 34. Ukraine - High incidence of inspections tax authority Pension fund social insurance funds 76% 73% 60% % of inspected companies 50% 48% 48% 45% 40% 42% 35% 37% 36% 35% 32% 31% 30% 32% 29% less than UAH UAH 300 000 - UAH 1 million - UAH 5 million - over UAH 35 Ukraine 300 000 UAH 1 million UAH 5 million UAH 35 million million (average) Anuual turnover, UAH 34
  • 35. Length of KRA inspections – registeredbusinesses in Kenya 1 Hour or Less 65% 2 to 3 hours 20% 4 to 5 hours 1% 6 to 10 hours 10% More than 10 5% 0% 20% 40% 60% 80% 35
  • 36. South Africa: Incidence of inspections by region Income tax VAT Employees’ tax 0.5 1.5 2.5 3.5 0.5 1.5 2.5 3.5 4.5 5.5 0.5 1.5 2.5 3.5 4.5 5.5 6.5 Northern Cape 0.9 2.2 6.2 Freestate 3.0 1.7 4.3 North West 1.9 4.4 1.7 Mpumalanga 1.5 5.7 0.5 Gauteng 1.8 3.3 2.0 Kwazulu Natal 1.4 3.2 1.5 Eastern Cape 1.3 2.1 2.4 Western Cape 1.5 2.7 1.1 Limpopo 1.6 1.6Mean by respondents 1.7 3.1 2.2 Mean by provinces 1.7 3.0 2.3VAT related inspections seem to be more frequent than inspections related toother taxes 36 36
  • 37. Georgia: Control of Proper Usage of Cash Registersis the most Frequent Type of Tax Inspection Frequencies of Different Types of Tax Inspections per Inspected Firm Control of cash register usage 2.5 Stock-taking/inventory 0.1 Visual Inspection 0.5 Controlling purchases 0.8 Chronometrage 0.0 Unplanned/control field tax audit 0.3 Planned field tax audit 0.1 Desk tax audit 0.1 0 1 2 3 37 37
  • 38. Georgia: Penalties & Fines are the Most CommonNegative Events Associated with Tax Inspections Negative Events Associated With Tax Inspections Experienced by Inspected Respondents in 2009 0% 10% 20% 30% 40% 50% 60% 70% 47% Penalties and/or fines 45% 66% 50% 30% Wasted time of employees 21% 33% 28% 10% Closure or delay in operations 12% 30% 14% 0% Necessity of unofficial costs 2% 3% 1% 1% Confiscation of goods 0% 1% 1% Micro Small Medium Overall 38 38
  • 39. INFORMAL BUSINESSESAND THEIR PERCEPTIONSABOUT TAX COMPLIANCE 39
  • 40. Lack of information can be a substantial problem :e.g., Kenya, where they know they need a license… Non-registered businesses in Kenya: Are you required to have licenses? (Correct answer – YES) 6% Yes No 94% 40 40
  • 41. … but don’t seem to understand they are requiredto get registered for tax! Non-registered business in Kenya: Are you required to pay taxes? (Correct answer: YES) 24% Yes 77% No 41 41
  • 42. Reasons for not registering with Kenya Revenue Authority Top reasons not to pay or file for taxes No local government office Weak enforcement/ no punishment The products are already taxed Most businesses dont, why should I?Lack of information about "what and how to do it" Registration would result in tax administration… Tax compliance is too difficult I simply do not see any benefitRegistration would impose excessive tax financial… My businesses profit margin is too low to pay for… 0% 20% 40% 60% 80% 42 42
  • 43. Disadvantages of not registering with KRA Others No disadvantages whatsoever Theft by employees/suppliers/buyers No inspections Large labor turnover/limited skills development Limited access to raw materials No access to broader market No access to Government programs No tax reclaimsNo access to and insecurity of premises/land/legal rights Inability to sell to/buy from formal enterprises Limited access to finance (loans) Fear of government retribution Need to pay bribes to avoid "formal" procedures 0% 10% 20% 30% 40% 50% 60% 43
  • 44. Informality comes with significant costsfor many firms – evidence from Yemen• Percentage of informal Yemeni businesses facing costs to avoid tax payments/ remain informal 44 Source: FIAS Tax Compliance Cost Survey in Yemen, 2008 44
  • 45. Reported incidence of bribes to tax officialsby formal businesses in Yemen (%) 68 70 60 50 41 37 39 38 40 30 20 10 0 Micro Small Medium Large Total 45
  • 46. WHO AMONG INFORMALBUSINESSES MIGHT BEWILLING TO FORMALIZE?A CASE STUDY FROMSOUTH AFRICA 46
  • 47. S. Africa - Likelihood of registering for tax(by sector) among informal businesses 62 Services 38 66 Trade 34 Sector Agriculture, 78 construction, manuf acturing 22 66 Total 34 0 20 40 60 80 100 Percentage of inf ormal businesses likely or not likely to register f or tax in the next 2 years Not likely/Neutral Likely 47
  • 48. Record keeping and likelihood of registering Not keeping complte 63 f inancials Record keeping practices Keeping complete f inancial on paper or 75 computer Total 66 50 55 60 65 70 75 80 Percentage of inf ormal businesses likely to register 48
  • 49. Renters are more likely to formalize Place of business 59 changes Separate premises - 74 Place of business operation rented Separate premises - 65 ow ned Same premises 62 w here you live Total 66 50 55 60 65 70 75 80 Percentage of inf ormal businesses likely to register 49
  • 50. Location vis-à-vis SARS office andlikelihood of registration Doesnt know w here 57 SARS of f ice is Distance to SARS office More than 30 minutes 67 30 minutes or less 75 Total 66 50 55 60 65 70 75 80 Percentage of inf ormal businesses likely to register 50
  • 51. View of government services andlikelihood of registration Attitude: Government gives a good return on taxes paid Agree 80 Disagree 57 Total 64 50 55 60 65 70 75 80 85 Percentage of inf ormal businesses likely to register 51
  • 52. Perceived ease of bookkeeping andlikelihood of registration 2 2.5 3 3.5 4 Keep the accounting 3.2 Bookkeeping and tax accounting related tasks records and books for the business 3.8 2.8 Fill out and submit tax forms 3.4 To be able to hire and pay 2.4 for a bookkeeper/accountant to prepare tax returns 2.6 Average score on 1 - 7 scale, 1 being "very dif f icult", 7 being "very easy" Not likely/Neutral to register Likely to register 52
  • 53. Perceived ease of tax complianceand likelihood of registration 2 2.5 3 3.5 4 Business capability for tax compliance in terms of... 3.2 The required skills and expertise 3.9 3.2 The cost to your business 3.9 Average score on 1 - 7 scale, 1 being "Not at all capable", 7 being "completely capable" Not likely/Neutral to register Likely to register 53
  • 54. TAX MORALE AND TAXEVASION 54
  • 55. Tax morale (agreement with statement,scale 1 – 5) in Yemen, 2008 55
  • 56. Percent of taxes businesses say they “get back”through government services in Yemen 56
  • 57. Estimated profit reported for tax purposesin Yemen Micro 46 27 10 16 Groups by turnover and size Small 53 30 4 12 Medium 26 46 2 26 Large 53 17 13 16 Total 48 29 8 15 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 25% or less 26% - 50% 51% - 75% 76% - 100% 57
  • 58. Armenia: Tax evasionDR The main popular ways of tax evasion forAF enterprises and sole proprietors*T EnterprisesFOR Declare only part of the revenue 52.4%D Payment of unofficial salary 26.0%IS Overstate of costs 8%CU Use fiction firm 7.4%SS Fraudulent abuse of tax privileges 5.1%IO No way 1.5%N Among the share of respondents who reported at least one way of tax evasion 58 58
  • 59. Armenia: Tax evasionDR What allows evading of taxes?*A EnterprisesFT Fallibility of legislationF 55.2%O Possibility of conclusion unofficial agreement 25.7% with control authoritiesR Bad control system 8.1%DIS Incompetence of control authorities 7.7%CU Small amount of penalties 2.6%SSI Nothing .6%ON * The share of respondents who reported at least one reason 59 59
  • 60. Businesses with Bank Accounts Percent of businesses with a bank account in Nepal 120 Percent of Businesses 100 80 Yes 60 No 40 20 0 Less than Rs. 2 Million Rs. 2 to 10 Million Rs. 10 to 250 Million Turnover 60
  • 61. For businesses with bank account, percentof transactions using cash - Nepal 61
  • 62. PERCEPTIONS ABOUT TAXOFFICIALS 62
  • 63. Kenya: KRA perceived as relativelyuncorrupt Corruption presence by office Judiciary 1% Ministry of Land offices 1% Ministry of Immigration 1% Busy Town Centers 2% Health 2% Others 2% KRA 3% Everywhere 6% Government Offices 7% Police 9% Inspection officers 9% License Offices 17% None 21%Local government Offices 37% 0% 5% 10% 15% 20% 25% 30% 35% 40% 63
  • 64. Kenya - Perception of KRA - competence 64 64
  • 65. Perception of KRA - helpfulness 65 65
  • 66. Perception of KRA - fairness 66 66
  • 67. RESEARCH AGENDA FORTCCS 67
  • 68. Hypotheses to be tested: • Simplified tax regimes can reduce TCC for small businesses • Accounting software and e-filing can reduce TCC • E-filing and e-payment can reduce opportunities for corruption • Risk-Based Audit can reduce TCC and opportunities for corruption • What else??? 68