Tax Environment The Role of Taxpayers Associations in

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Tax Environment & The Role of Taxpayers Associations in Eastern Europe and Central Asia

Tax Environment & The Role of Taxpayers Associations in Eastern Europe and Central Asia Almaty, Kazakhstan, The World Bank Tax Policy & Administration Group August 22 -24, 2002 Presented by: Nataliya Biletska, Consultant The World Bank, TPA Group

Outline P 1 Introduction: What is WBES? 2 Regulatory Environment 3 Red Tape in

Outline P 1 Introduction: What is WBES? 2 Regulatory Environment 3 Red Tape in Tax Administration 4 Laws and Regulations 5 Taxpayer Voice 6 The Role of Taxpayers Associations The World Bank Page 2 Tax Policy & Administration Group

1. Introduction: WBES in brief What is WBES? … Ø A World Bank Group

1. Introduction: WBES in brief What is WBES? … Ø A World Bank Group initiative in partnership with other institutions. World Business Environment Survey Ø An instrument to assess and compare the environment for doing business in countries around the world Ø A standard core enterprise survey using a uniform methodology. Ø The recent survey 2000/2001 covers 80 countries. Ø Addresses the issues of local economic policy; governance; regulatory, infrastructural and financial impediments and public service quality, including tax policy and administration The World Bank Page 3 Tax Policy & Administration Group

1. Introduction: WBES in brief Why is WBES data is used? … Ø Addresses

1. Introduction: WBES in brief Why is WBES data is used? … Ø Addresses issues of local tax policy and administration; governance in tax authorities; legislation; policy- and law-making. Ø Provides a substantial comparative data for Transition Europe and OECD countries. Ø Indicates and measures the level of tax policy and administration problems in these countries. Ø Reveals the situation with the protection of the legal taxpayer rights. Ø Helps to assess the impact of businesses on policy- and lawmaking. Ø Draws lessons and perspectives for strengthening the protection of taxpayer rights and the development of taxpayers associations. The World Bank Page 4 Tax Policy & Administration Group

Outline 1 Introduction: What is WBES? 2 Regulatory Environment 3 Red Tape in Tax

Outline 1 Introduction: What is WBES? 2 Regulatory Environment 3 Red Tape in Tax Administration 4 Laws and Regulations 5 Taxpayer Voice 6 The Role of Taxpayers Associations P The World Bank Page 5 Tax Policy & Administration Group

2. Regulatory Environment Regulations Representing Major or Moderate Obstacles for Business Operation and Growth

2. Regulatory Environment Regulations Representing Major or Moderate Obstacles for Business Operation and Growth by Region (%) Major barriers in both regions The World Bank Page 6 Tax Policy & Administration Group

2. Regulatory Environment Tax Environment as a Major or Moderate Obstacle for Businesses in

2. Regulatory Environment Tax Environment as a Major or Moderate Obstacle for Businesses in OECD Countries (%) Countries with the most unfavorable tax environment The World Bank Page 7 Tax Policy & Administration Group

2. Regulatory Environment Tax Environment as a Major or Moderate Obstacle for Businesses in

2. Regulatory Environment Tax Environment as a Major or Moderate Obstacle for Businesses in Countries of Transition Europe (%) The World Bank Page 8 Tax Policy & Administration Group

2. Regulatory Environment Tax Environment as a Major or Moderate Obstacle for Businesses in

2. Regulatory Environment Tax Environment as a Major or Moderate Obstacle for Businesses in Countries of Transition Europe The World Bank Page 9 Tax Policy & Administration Group

2. Regulatory Environment Tax Regulations / Administration as a Major or Moderate Obstacle by

2. Regulatory Environment Tax Regulations / Administration as a Major or Moderate Obstacle by Firm Size Transition Europe OECD The World Bank Page 10 Tax Policy & Administration Group

2. Regulatory Environment High Taxes as a Major or Moderate Obstacle by Firm Size

2. Regulatory Environment High Taxes as a Major or Moderate Obstacle by Firm Size Transition Europe The World Bank The trend in how each group of firms assesses both tax problems is consistent in both regions. OECD Small and medium firms view tax environment as a bigger obstacle than large firms in both regions. Page 11 Tax Policy & Administration Group

Outline 1 Introduction: What is WBES? 2 Regulatory Environment 3 Red Tape in Tax

Outline 1 Introduction: What is WBES? 2 Regulatory Environment 3 Red Tape in Tax Administration 4 Laws and Regulations 5 Taxpayer Voice 6 The Role of Taxpayers Associations P The World Bank Page 12 Tax Policy & Administration Group

3. Red Tape in Tax Administration Corruption - Payments to Tax Authorities by Region

3. Red Tape in Tax Administration Corruption - Payments to Tax Authorities by Region (%) 39% of firms make illegal payments to tax authorities in countries of Transition Europe as opposed to 3. 14% in OECD countries The World Bank Page 13 Tax Policy & Administration Group

3. Red Tape in Tax Administration Corruption - Payments to Tax Authorities in Countries

3. Red Tape in Tax Administration Corruption - Payments to Tax Authorities in Countries of Transition Europe (%) The World Bank Page 14 Tax Policy & Administration Group

3. Red Tape in Tax Administration Corruption - Payments to Tax Authorities in Countries

3. Red Tape in Tax Administration Corruption - Payments to Tax Authorities in Countries of Transition Europe (%) The World Bank Page 15 Tax Policy & Administration Group

3. Red Tape in Tax Administration Corruption - Payments to Tax Authorities in Countries

3. Red Tape in Tax Administration Corruption - Payments to Tax Authorities in Countries of Transition Europe (%) The World Bank Page 16 Tax Policy & Administration Group

Outline 1 Introduction: What is WBES? 2 Regulatory Environment 3 Red Tape in Tax

Outline 1 Introduction: What is WBES? 2 Regulatory Environment 3 Red Tape in Tax Administration 4 Laws and Regulations 5 Taxpayer Voice 6 The Role of Taxpayers Associations P The World Bank Page 17 Tax Policy & Administration Group

4. Laws and Regulations: Countries of Transition Europe (%) OECD Countries (%) Interesting fact:

4. Laws and Regulations: Countries of Transition Europe (%) OECD Countries (%) Interesting fact: The World Bank Tax Policy & Administration Group The situation with availability and consistency in interpretation is the same in both regions. Page 18

4. Laws and Regulations: Advance Information about Changes Predictability of Changes (%) The World

4. Laws and Regulations: Advance Information about Changes Predictability of Changes (%) The World Bank Tax Policy & Administration Group Businesses are more uncertain about changes in legislation and less frequently informed about these changes in countries of Transition Europe than in OECD countries. Page 19

Outline 1 Introduction: What is WBES? 2 Regulatory Environment 3 Red Tape in Tax

Outline 1 Introduction: What is WBES? 2 Regulatory Environment 3 Red Tape in Tax Administration 4 Laws and Regulations 5 Taxpayer Voice 6 The Role of Taxpayers Associations P The World Bank Page 20 Tax Policy & Administration Group

5. Taxpayer Voice Business Voice in Policy- and Law-Making Transition Europe The World Bank

5. Taxpayer Voice Business Voice in Policy- and Law-Making Transition Europe The World Bank Tax Policy & Administration Group Business voice is taken into account 2. 5 times more frequently in OECD countries than in countries of Transition Europe. OECD Page 21

5. Taxpayer Voice Business Voice in Policy- and Law-Making in Countries of Transition Europe

5. Taxpayer Voice Business Voice in Policy- and Law-Making in Countries of Transition Europe (%) 5 3 4 2 1 The World Bank Page 22 Tax Policy & Administration Group

5. Taxpayer Voice Firms’ Influence on the Content of a New Legislation (%) Considerably

5. Taxpayer Voice Firms’ Influence on the Content of a New Legislation (%) Considerably high influence in both regions The World Bank Page 23 Tax Policy & Administration Group

Outline 1 Introduction: What is WBES? 2 Regulatory Environment 3 Red Tape in Tax

Outline 1 Introduction: What is WBES? 2 Regulatory Environment 3 Red Tape in Tax Administration 4 Laws and Regulations 5 Taxpayer Voice 6 The Role of Taxpayers Associations P The World Bank Tax Policy & Administration Group Page 24

6. The Role of Taxpayers Associations Problems Diagnosed by WBES Tax Environment l Ineffective

6. The Role of Taxpayers Associations Problems Diagnosed by WBES Tax Environment l Ineffective tax regulations and administration in both regions although much higher in countries of Eastern Europe and Central Asia (ECA). l High taxes is a serious obstacle in both regions although much higher in ECA countries. l Small and medium businesses are more concerned about the tax problems than large businesses in ECA. The World Bank Tax Policy & Administration Group Laws and Regulations Corruption l Illegal payments to tax authorities is a frequent phenomena in ECA countries (39%) comparing to OECD countries (3%). l Availability of laws and regulations and the consistency in their interpretation is relatively insufficient in both regions. l Businesses are more uncertain about changes in legislation and less frequently informed about these changes in countries of Transition Europe than in OECD countries. Solution Taxpayer Voice l Business voice is taken into account 2. 5 more frequently in OECD countries than in ECA countries. l The influence on the content of a new legislation is relatively high in both regions although lower in ECA countries. Page 25

6. The Role of Taxpayers Associations Solution Tax Environment l l l Taxpayers Associations

6. The Role of Taxpayers Associations Solution Tax Environment l l l Taxpayers Associations Laws and Regulations Corruption Promote effective tax regulations and administration l Lobby for an efficient level of taxation Target interests of small and medium businesses (RECRUIT as members) Protect the legal taxpayer rights in tax authorities and courts l Advocate for availability of laws and regulations l Provide information on current and new legislation affecting businesses l l Fight for consistency/ uniformity in interpretation of laws and regulations Taxpayer Voice l Voice taxpayers’ interests to government and the general public l Actively participate in tax policy- and lawmaking l Initiate improvements in tax legislation Watch for predictability of changes in new legislation The World Bank Tax Policy & Administration Group Need for Cooperation and Knowledge Sharing Page 26

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