Mauritius ranks top in ‘Paying Tax’ list in Sub-Saharan Africa

PORT LOUIS: Among the 46-Sub Saharan African countries Mauritius tops the rank in Paying Tax, followed by Botswana and South Africa in the second and third positions.
The report – a joint publication of the World Bank, International Finance Corporation, and PricewaterhouseCoopers – is the fifth edition that the World Bank Group’s Doing Business project has included the "paying taxes" indicator.
The indicator measures the ease of paying taxes in 183 economies around the world. Besides paying taxes, the Doing Business project provides quantitative measures of regulations in nine other areas: starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, trading across borders, enforcing contracts, and closing a business.
However, Mauritius ranks 12th – slipping one position down from last year’s 11th rank – among the 183 economies around the world. “A medium-size company must make seven payments in a given year in Mauritius, whereas the Sub-Saharan African average is 37.7 and OCED average is 12.8 payments per year,” according to the report.
Similarly, it takes 161 hours per year to pay the tax in Mauritius whereas in Sub-Saharan African country, it takes 306 hours in an average.
The paying taxes indicator measures tax systems from the point of view of a domestic company complying with the different tax laws and regulations in each economy. The case study company is a small to medium-size manufacturer and retailer, deliberately chosen to ensure that its business can be identified with and compared worldwide.
The indicator covers the cost of taxes borne by the case study company and the administrative burden of tax compliance for the firm. Both are important for business. They are measured using three subindicators: the total tax rate (the cost of all taxes borne), the time needed to comply with the major taxes (profit taxes, labour taxes and mandatory contributions, and consumption taxes), and the number of tax payments.
The paying taxes indicator measures all taxes and contributions mandated by government at any level (federal, state, or local) as they apply to the standardised business. The total tax rate subindicator measures the impact of taxes and contributions on the company’s income statements. It includes the corporate income tax, social contributions and labour taxes paid by the employer, property taxes, property transfer taxes, dividend tax, capital gains tax, financial transactions tax, waste collection taxes, and vehicle and road taxes. The other two subindicators, on the time to comply and number of payments, also include taxes and contributions withheld or collected, such as sales tax or value added tax (VAT).
In this year’s report, the top reformer was Timor-Leste, which introduced a new tax law, streamlined the business tax regime, and simplified tax administration. Between June 2008 and May 2009, 45 economies made it easier to pay taxes as measured by Doing Business, almost 25 per cent more than in the previous year, according to the report.
“Eastern Europe and Central Asia had the most reforms for the third year in a row, with 10 economies reforming, whereas around the world on average, the case study company faces a total tax rate (percentage of profit paid out in taxes) of 48.3 per cent and spends 286 hours a year, and makes 31 tax payments, to comply with tax laws,” the global report said.
In the EU the average total tax rate for the case study company fell from 46 per cent to 44.5 per cent reflecting in part cuts in the corporate income tax rate implemented in 2007-08 in Germany and Italy.
The number of taxes levied on the company averages 9.5 globally. The average for the EU is almost 11.
Mauritius has climbed to 17th position from 24th in the global Doing Business 2010 report. It has been ranked first among 46 Sub-Saharan Africa economies. The Indian Ocean Island country has climbed seven position up to rank 17 from last year’s 24 position, according to the Doing Business Report – measuring business regulation. Out of the 10 category in the overall report, it has improved in the four categories but slipped in the five categories, whereas it is in the bottom of one of the category – closing business – compared with last year’s report.

The top 10
Mauritius – First
Botswana – Second
South Africa – Third
Malawi – Fourth
Seychelles – Fifth
Zambia – Sixth
Comoros – Seventh
Ethiopia – Eighth
Swaziland – Ninth
Rwanda – Tenth

World Bank sheds light on power woes

It takes 73 days and needs to fulfill six procedures in Nepal to get electricity connection, according to 'Getting Electricity - A Pilot Study by the Doing Business Project' by World Bank.
However, four procedures to obtain an electricity connection is enough in Iceland that takes only 22 days whereas in Afghanistan it takes 424 days.
Getting Electricity -- the two-and-a-half-year project -- presents findings on the kinds of constraints entrepreneurs around the world face in getting access to electricity and illustrates patterns in connection processes. The study also tracks all the procedures, the time, and the cost required for a business to obtain an electricity connection for a newly constructed building.
However, in Nepal the cost of not having the electricity is higher than the cost of connection as the country reels under long hours of power outage. "The industries here have not been able to utilise their full capacity due to irregular electricity supply," said an industrialist.
World Bank Enterprise Surveys in 89 economies show that firms consider electricity one of the biggest constraints to their business. The constraints stem from inadequacies in several aspects of electricity service-access to electricity, availability of electricity and reliability of supply-as well as from cost.
"Electricity matters for private businesses, along with other infrastructure services such as roads, water and telecommunications. Where the quality and accessibility of infrastructure services are good, they encourage investment, productivity and growth. But where they are poor, companies' productivity and growth suffer," according to the report.
Many businesses lack access to electricity connections and so are prevented from moving into higher-value-added activities that rely on electricity-based technologies. In 2005, according to the International Energy Agency, more than a quarter of the world's population lacked access to electricity. South Asia has the lowest electrification rates.
Businesses also care about the cost of both the electricity connection and the electricity supply-because electricity-related expenditures eat up a significant share of their revenue.
Managers responding to World Bank Enterprise Surveys estimated that on average their spending on electricity amounts to four per cent of their annual sales-while that on all other infrastructure services like fuel, communication services and water combined accounts for 6.4 per cent.
Among the 140 economies surveyed for Getting Electricity, Ukraine ranks in the bottom 10 on the number of procedures required to connect a new customer to electricity. Economies such as Denmark, Germany, Japan and Mauritius make it much easier for businesses to connect to electricity. The pilot study sheds light on the interactions of businesses with distribution utilities. In doing so it covers only a small part of electricity service for the 140 economies surveyed. The survey has detailed the efficiency and cost of the services provided to commercial customers by distribution utilities, the complexity of procedures, and the resources expended by businesses in obtaining a connection.
"In the 10 economies with the fewest procedures, the process of obtaining an electricity connection takes only 56 days on average and in the 10 economies with the most procedures, it is 215 days," the report says.
The study also finds that connection delays increase where opportunities are missed to streamline approvals with other public agencies; where customers face multiple procedures related to the quality and safety of the internal wiring; where utilities do not have the materials needed to connect customers readily available.

Doing Business Report 2010: Status quo in ranking, thanks to lack of reforms

The nation has seen no tangible reforms in the last one year, as per the annual Doing Business Report 2010. The report, published by the World Bank, examines business environment on the basis of the 10 indicators — facilities and sops offered for a start-up, access to construction permit, recruitment procedure, registration of property, tax benefits, cross-border trade, investors’ safety and security and closure of a venture. Last year, Nepal ranked 123rd. And the status remained virtually the same this year as well.
“The government has done precious little to improve any of the indicators as far as entrepreneurship is concerned,” said Dr Shanker Sharma, former vice-president, National Planning Commission and envoy-designate to the US. Of the 10 indicators, the only discernible improvement, albeit marginal, is in the process of registration of property. The ranking has gone up by three notches, from 29 to 26.
“The ongoing political instability and the government’s apathy towards economic growth are largely responsible for the poor report card. The powers that be have no time for reforms. Add to that, overdependence on remittance has made it even more laggard,” he explained.
Last year, Nepal stood 75 in Starting Business. And in a year’s time, the ranking has fallen to 87. Inordinate procedural delays are a hallmark of the problem. Recruitment, too, is a major hurdle. Interestingly, the nation fared better than Bhutan and India, who have been ranked 126 and 133, respectively. While the rest of the South Asian nations are ahead of Nepal. China ranks 85.
The rankings do not factor in macro-economic policy, security, labour skills or the strength of the financial system or financial market regulations.
Singapore, a consistent reformer, tops the chart for the fourth consecutive year. The city state is followed by New Zealand. The action, however, is in the developing economies. For the first time, a Sub-Saharan economy, Rwanda, is the world's top reformer for its liberal policies in business regulation.

Ups and downs of indicators in comparision to last year
Ease of doing Business — 123 (status quo)
Starting Business — 87 (down 12)
Dealing with Construction Permits -- 131 (down 1)
Employing Workers -- 148 (down 1)
Registering Property -- 26 (up 3)
Getting Credit -- 113 (down 4)
Protecting Investors -- 73 (down 3)
Paying Taxes -- 124 (down 13)
Trading Across Border -- 161 (down 2)
Enforcing Contracts -- 122 (status quo)
Closing a Business -- 105 (status quo)