Brunei ranks 22nd out of 185 economies in tax payment ease: Report

Brunei ranks 22nd out of 185 economies in tax payment ease: Report

BRUNEI was ranked 22nd out of 185 economies in terms of ease in paying taxes, according to the "Paying Taxes 2013" report compiled by PricewaterhouseCoopers (PwC) and the International Finance Corporation (IFC), a World Bank Group member.

In the ASEAN region, Brunei clinched the third spot, following Singapore and Malaysia, which placed fifth and 15th respectively in the global ranking.

The annual report also placed Brunei as one of the six high-income economies that lowered the tax burden to companies in 2011/12, by reducing profit tax rate by two percentage points or more.

Along with the Sultante, other high-income economies that lowered their taxes during the period are Japan, Korea, Puerto Rico, Slovenia and the United Kingdom.

The report, released in November, ranked economies according to the ease that businesses experience in paying taxes.

According to the report, the overall ease of paying taxes was based on "mandatory contributions that a medium-sized company must pay in a given year as well as measuring the administrative burden of paying taxes and contributions".

Some of the taxes and contributions that were measured included taxes on profit or corporate income, social contributions and labour taxes by the employer, property, property transfer, dividend, capital gains, financial transactions, waste collection vehicle and road taxes and other small taxes or fees.

The report measured ease in paying taxes using three indicators: tax payments, time given to comply and the total rate imposed.

The report noted that Brunei required 27 types of tax payments from business per year, a little higher than the Asia-Pacific average of 24.8 and somewhat aligned with the global average of 27.2 payments per year.

The indicator reflects the total number of taxes and paid contributions, payment method and frequency, filing frequency and number of involved agencies for the case study.

These include taxes witheld by the company such as sales tax, value-added tax and labour taxes borne by employees.

Of the 27 tax payments required from businesses operating in Brunei, 24 were labour taxes, one was a profit tax and two were other forms of tax payments.

Under time for compliance, which is the time it takes for businesses to settle their tax obligations, Brunei clocked in 96 hours, so much quicker than the regional and global average of 231 and 267 hours, respectively.

The indicator is recorded in hours per year and measures the hours taken to prepare, file and pay three major types of taxes namely: corporate income, value-added and labour taxes which includes payroll taxes and social contributions.

Broken down, 66 of the 96 hours Brunei recorded covered time needed to pay corporate income tax, while 30 hours covered time required for labour tax.

There was no duration recorded for payment of consumption tax.

For the total tax rate indicator, which measures the amount of taxes and mandatory contributions borne by businesses expressed as a share of commercial profit, Brunei averaged 16.8 per cent. The report stated that 8.5 per cent covered labour while 8.3 per cent represent profit tax.

This figure is lower than the Asia-Pacific regional average of 36.4 per cent and the global benchmark, which stands at 44.7 per cent.

On a regional basis, the report noted a "steady but moderate" improvement trend for all three indicators in the Asia Pacific, and cites the introduction of effective electronic tax payment systems in one-third of the region, which reduced compliance time.

"The average number of payments has reduced by 2.3, the total tax rate by 2.6 per cent, while the time to comply has fallen by 52 hours," the report states.

Middle East countries topped the list, with the United Arab Emirates (UAE), Qatar and Saudi Arabia ranking first, second and third, respectively.

According to the 2013 study, Middle Eastern region had the least demanding tax system. It also had the lowest average total tax rates (average of 23.6%) and the lowest time to comply (average of 158 hours).

However, the payments indicator (17.6) suggested that improvements are possible for electronic filing and payment tax systems, the report added.

Other economies in the top 10 were Hong Kong (fourth), Ireland (sixth), Bahrain (seventh), Canada (eighth), Kiribati (ninth) and Oman (10th).

Meanwhile, African economies were classified as the most difficult in terms of ease of paying taxes.

In the bottom 10 are Cameroon, Mauritania, Senegal, The Gambia, Bolivia, Central African Republic, Congol Rep, Guinea, Chad and Venezuela. Hong Kong had the fewest number of tax payments with three, while Antigua and Barbuda has the highest, with 57.

The UAE clocked at 12 hours per year on compliance time, making it the fastest economy to adhere to tax payments, while Cameroon took longest with 654 hours.

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