Does Argentina collect its taxes more efficiently and effectively than Azerbaijan? Brazil than Burundi? Chad than Colombia? You can find some numbers that throw some light on the question.

In particular, for the countries of the OECD and now for Latin America we have relatively good data on the money consumed by tax agencies relative to the revenue they collect. But, beyond that, we are largely in the dark. It is not that you cannot go to the Web and find figures. Indeed, you can find rather a lot of them.

Every year, the World Bank and PriceWaterhouseCoopers (PwC) publish a report called Paying Taxes. This is an offshoot of the World Bank’s annual Doing Business report.

Looking at the world from the perspective of business people, Paying Taxes provides information on three variables for 185 countries:

– on the total company tax rate (where lower is considered better);

– on the number of separate tax transfers (‘payments’) that a representative small company has to make to government each year; and

– on the number of person hours that the company devotes each year to sorting out its tax affairs.

It also combines these three measures to produce an overall ranking.

You might be a little surprised to see that in 2013 the top three rankings were awarded to the United Arab Emirates, Qatar and Saudi Arabia respectively.

Are the oil-rich kingdoms of the Gulf renowned for the quality of their tax administrations? Not in the least. Indeed, as you probably suspect, they have not needed to raise much tax revenue for decades because they finance themselves directly from their oil and gas fields. Compared to most other countries, their tax administrations are skeletal. We would indeed hope and expect that the tax agencies of governments that have little need to tax would not be a burden on local businesses. But are we seriously to believe that the United Arab Emirates, Qatar or Saudi Arabia prove the best taxing models for governments that actually need to raise more revenue?

How do we interpret the figures and the national rankings in  Paying Taxes?

Some very sensible answers to that question are to be found in the report of the Independent Panel Review of the Doing Business Report that became publicly available in June year.

In sum, the panel found the data and the rankings relating to tax to be misleading and in need of major revision. Some of their criticisms are complex and technical, and are best accessed by reading the report. But their main conclusions are easily summarised.


Let us take first the ‘total tax rate’. There are two major criticisms.

First, it is very controversial to assume that companies are always better off if they pay less taxes. If low taxes mean that governments cannot afford to maintain roads, educate children for employment or provide a competent policing service, business – and the national economy, and human welfare – will suffer.

The second criticism is that the ‘total tax rate’ used in Paying Taxes is not a good indicator of the actual corporate tax burden. The figures on the ‘total tax rate’ are based on the ‘headline’, normal rates for individual taxes, such as corporate income tax, payroll taxes or VAT. But many companies do not pay ‘headline’ rates. Every country has a variable range of tax exemptions, tax ‘incentives’, tax holidays, tax credits, etc. There can be large differences between ‘headline’ rates and what the typical or average company actually pays. For example, the main rate for corporate income tax in the UK at present is 23%. But larger UK-based companies that pay more than half that figure will in most cases be sending warning signals to the senior staff of their tax divisions about career prospects.

What about the Paying Taxes practice of taking, as one measure of the tax-paying burden on business, the number of separate tax payments that the representative company has to make to government in a given year?

At first that might sound sensible. But read what the Independent Panel has to say on this:

The number of tax payments a business has to make is a poor measure of the ease of doing business. Some corporations may prefer to file and pay on a monthly basis rather than on a once-off annual basis. Furthermore, taxes like VAT are structured in a way that requires periodic rather than once-off payments. It is also relatively easy to affect this indicator by artificially amalgamating the payments of different taxes into one payment schedule. For the purposes of this indicator, countries with provisions for electronic filing and payment of tax automatically receive a measure of one transaction per year. The Panel questions this assumption because providing an option for electronic filing and assessment does not mean that the majority of firms will use it. This is why many countries have felt the need to make electronic filing mandatory.


‘Number of payments’ is in fact a misleading measure of the costs of paying taxes. There seems little doubt that it has been used as an indicator in large part because it generates a simple number with relatively little effort.

I have more sympathy with the people who compile Paying Taxes than my tone might imply. It is genuinely very difficult to find reliable measures of those aspects of tax agency performance that we really would like to monitor. And the need for good indicators is real. In the absence of better measures, tax agencies will be judged wholly or mainly by the amounts of money they raise each month or quarter, and whether this meets the targets set for them. Tax agencies that are judged by collections alone have insufficient incentives to engage constructively with taxpayers and find ways of changing their policies and practices to benefit everyone involved: taxpayers, collectors, and the public treasury. More diverse and nuanced indicators are needed.

It is then fortunate that the Independent Panel are rather in favour of the third of the three indicators used in Paying Taxes: the number of person hours that representative small companies have to devote annually to sorting out their tax affairs.

In 2013, the average for all 185 countries surveyed was 267 hours, but Brazil came bottom of the rankings, at 2600 hours. Brazil could and should do better, and it does seem a good idea for the World Bank to publicise such extraordinary numbers. However, the Independent Panel explains that there is a great deal of scope for improving the accuracy of these figures, and suggests that this is where the World Bank and the other producers of Paying Taxes should focus their energies.

Does this mean that in a few years we can expect the World Bank to publish improved measures of the tax burden and tax collection efficiency?

Unfortunately, we have to be sceptical. It is not that the Independent Panel failed to make a good case. But tax indicators were only a part of its mandate. It was reviewing the full range of measures of ‘business regulation’ that appear in the annual Doing Business report. Tax is the subject of one of eleven chapters. The other chapter topics range from ‘starting a business’ through ‘protecting investors’ to ‘resolving insolvency’. The details of how these aspects of regulation are measured have been controversial for years within the ranks of economists and other professional experts. But this review was politically sensitive from the beginning. It was in part stimulated by the concerns of the Government of China – that is still in 2013 only ranked number 91 in the world on the aggregate Doing Business measure despite its stellar macroeconomic performance. The perception that the World Bank was under pressure to either cease ranking countries or even completely drop the whole Doing Business report generated public lobbying. The World Bank found itself in the middle of an unwelcome political spat over an issue in which it also has an institutional interest. The Bank is fond of the publicity that is generated when Doing Business and Paying Taxes are published each year. The financial press at least run articles pointing out which countries have moved up in the rankings and which have moved down.

The World Bank responded to these contradictory pressures by trying to play down the Independent Panel’s report. It was launched in London not in Washington, to a hastily convened and very small press conference. The media coverage was slight.

The World Bank President said that he needs time to think about the report. That is quite understandable. It will however be a great pity if the broader political scuffles lead to a quiet burial for this very sensible document.


Mick Moore

Mick Moore is a Professorial Fellow at the Institute of Development Studies and the founding CEO of the International Centre for Tax and Development. He is a political economist whose broad research interests are in the domestic and international dimensions of good and bad governance in poor countries, focusing specifically on taxation in Asia and Africa.