Tax Environment &
The Role of Taxpayers Associationsin Eastern Europe and Central Asia
Almaty, Kazakhstan,
August 22-24, 2002
Presented by:Nataliya Biletska, ConsultantThe World Bank, TPA Group
The World Bank
Tax Policy &Administration Group
Page 2
The World Bank
Tax Policy &Administration Group
Outline
Regulatory EnvironmentRegulatory Environment
Introduction: What is WBES?Introduction: What is WBES?1
2
Red Tape in Tax AdministrationRed Tape in Tax Administration3
Laws and RegulationsLaws and Regulations4
Taxpayer VoiceTaxpayer Voice5
The Role of Taxpayers AssociationsThe Role of Taxpayers Associations6
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The World Bank
Tax Policy &Administration Group
1. Introduction: WBES in brief
A World Bank Group initiative in partnership with other institutions.
An instrument to assess and An instrument to assess and compare the environment for doing compare the environment for doing business in countries around the business in countries around the worldworld.
A standard core enterprise survey using a uniform methodology.
The recent survey 2000/2001 covers 80 countries.
Addresses the issues of local local economic policy; governance; economic policy; governance; regulatory, infrastructural and regulatory, infrastructural and financial impediments and public financial impediments and public service quality, including tax policy service quality, including tax policy and administrationand administration.
What is WBES? …
World
BusinessEnvironmentSurvey
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The World Bank
Tax Policy &Administration Group
1. Introduction: WBES in brief
Why is WBES data is used?…
Addresses issues of local tax policy and administration; governance in tax authorities; legislation; policy- and law-making.
Provides a substantial comparative data for Transition Europe and OECD countries.
Indicates and measures the level of tax policy and administration problems in these countries.
Reveals the situation with the protection of the legal taxpayer rights.
Helps to assess the impact of businesses on policy- and law- making.
Draws lessons and perspectives for strengthening the protection of taxpayer rights and the development of taxpayers associations.
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The World Bank
Tax Policy &Administration Group
Outline
Regulatory EnvironmentRegulatory Environment
Introduction: What is WBES?Introduction: What is WBES?1
2Red Tape in Tax AdministrationRed Tape in Tax Administration3
Laws and RegulationsLaws and Regulations4
Taxpayer VoiceTaxpayer Voice5
The Role of Taxpayers AssociationsThe Role of Taxpayers Associations6
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The World Bank
Tax Policy &Administration Group
2. Regulatory Environment
Regulations Representing Major or Moderate Obstacles for Business Operation and Growth by Region (%)
0
20
40
60
80
100
Transition Europe OECD
Major barriers in both regions
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The World Bank
Tax Policy &Administration Group
Tax Environment as a Major or Moderate Obstacle for Businessesin OECD Countries (%)
0
20
40
60
80
100
UK
France
Ger
man
y
Spain
Potugal
Italy
Swed
en
Canada US
High taxes Tax regulations & administration
2. Regulatory Environment
Countries with the most unfavorable tax environment
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The World Bank
Tax Policy &Administration Group
Tax Environment as a Major or Moderate Obstacle for Businessesin Countries of Transition Europe (%)
2. Regulatory Environment
0
20
40
60
80
100
Belar
us
Bulgar
ia
Croat
ia
Czech
Rep
ublic
Estoni
a
Georg
ia
Hungar
y
Kazak
hstan
Kyrgy
zsta
n
Lithuan
ia
Polan
d
Russi
a
Slova
kia
Ukrai
ne
Uzbek
ista
n
Avera
ge fo
r OECD
High taxes Tax regulations & administration
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The World Bank
Tax Policy &Administration Group
Tax Environment as a Major or Moderate Obstacle for Businessesin Countries of Transition Europe
2. Regulatory Environment
Country:High taxes
(%)
Number of total
responses (High taxes)
Tax regulations &
administration (%)
Number of total responses
(Tax regulations &
administration)
Belarus 91.93 (N=125) 76.00 (N=124)Bulgaria 81.15 (N=124) 62.91 (N=122)Croatia 95.27 (N=127) 70.87 (N=127)Czech Republic 89.63 (N=136) 81.62 (N=135)Estonia 62.79 (N=129) 46.51 (N=129)Georgia 92.25 (N=128) 74.22 (N=129)Hungary 86.82 (N=129) 65.11 (N=129)Kazakhstan 88.71 (N=127) 69.29 (N=124)Kyrgyzstan 96.80 (N=122) 79.51 (N=125)Lithuania 91.07 (N=111) 76.57 (N=112)Poland 83.33 (N=224) 68.75 (N=222)Russia 92.33 (N=519) 79.20 (N=521)Slovakia 74.80 (N=128) 66.40 (N=127)Ukraine 95.56 (N=223) 86.10 (N=225)Uzbekistan 70.17 (N=125) 50.40 (N=124)Average for OECD 87.41 (N=98) 70.27 (N=99)
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The World Bank
Tax Policy &Administration Group
2. Regulatory Environment
Tax Regulations / Administration as a Major or Moderate Obstacleby Firm Size
Small47%
Medium45%
Large8%
Small36%
Medium45%
Large19%
Transition Europe OECD
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The World Bank
Tax Policy &Administration Group
2. Regulatory Environment
High Taxes as a Major or Moderate Obstacleby Firm Size
Transition Europe OECD
Small47%
Medium45%
Large8%
Small38%
Medium45%
Large17%
The trend in how each group of firms assesses
both tax problems is consistent in both regions.
Small and medium firms view tax environment as a bigger
obstacle than large firms in both regions.
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The World Bank
Tax Policy &Administration Group
Outline
Regulatory EnvironmentRegulatory Environment
Introduction: What is WBES?Introduction: What is WBES?1
2
Red Tape in Tax AdministrationRed Tape in Tax Administration3
Laws and RegulationsLaws and Regulations4
Taxpayer VoiceTaxpayer Voice5
The Role of Taxpayers AssociationsThe Role of Taxpayers Associations6
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The World Bank
Tax Policy &Administration Group
Corruption - Payments to Tax Authoritiesby Region (%)
60.69
26.24
10.862.22
96.86
2.420.72
0
20
40
60
80
100
Transition Europe OECD
"Never"
"Seldom"
"Frequently"
"Always"
3. Red Tape in Tax Administration
39% of firms make illegal payments to tax
authorities in countries of Transition Europe as opposed to 3.14% in
OECD countries
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The World Bank
Tax Policy &Administration Group
Corruption - Payments to Tax Authoritiesin Countries of Transition Europe (%)
3. Red Tape in Tax Administration
7.6
13.4
5.0 4.41.6
18.0
3.3
10.312.8
9.5 9.7
2.6
21.020.9
23.5
0
5
10
15
20
25
Belar
us
Bulgar
ia
Croat
ia
Czech
Rep
ublic
Estoni
a
Georg
ia
Hungar
y
Kazak
hstan
Kyrgy
zsta
n
Lithuan
ia
Polan
d
Russi
a
Slova
kia
Ukrai
ne
Uzbek
ista
n
"Always - Frequently"
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The World Bank
Tax Policy &Administration Group
Corruption - Payments to Tax Authoritiesin Countries of Transition Europe (%)
3. Red Tape in Tax Administration
58.9 53.3
79.2
60.8
31.3
54.7
72.163.2
70.9
47.0 41.7
74.0
84.876.3
81.7
0
20
40
60
80
100
Belar
us
Bulgar
ia
Croat
ia
Czech
Rep
ublic
Estoni
a
Georg
ia
Hungar
y
Kazak
hstan
Kyrgy
zsta
n
Lithuan
ia
Polan
d
Russi
a
Slova
kia
Ukrai
ne
Uzbek
ista
n
"Never"
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The World Bank
Tax Policy &Administration Group
Corruption - Payments to Tax Authoritiesin Countries of Transition Europe (%)
Country:"Never"
(%)"Always -
Frequently" (%)
Number of Total
Responses
Belarus 76.27 7.62 (N=118)Bulgaria 58.93 13.39 (N=112)Croatia 73.95 5.04 (N=119)Czech Republic 81.74 4.35 (N=115)Estonia 84.80 1.60 (N=125)Georgia 53.33 18.00 (N=120)Hungary 79.17 3.33 (N=120)Kazakhstan 60.75 10.27 (N=107)Kyrgyzstan 31.30 23.48 (N=115)Lithuania 54.65 12.79 (N=86)Poland 72.11 9.48 (N=190)Russia 63.24 9.69 (N=506)Slovakia 70.87 2.59 (N=103)Ukraine 47.00 21.00 (N=200)Uzbekistan 41.74 20.87 (N=115)
3. Red Tape in Tax Administration
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The World Bank
Tax Policy &Administration Group
Outline
Regulatory EnvironmentRegulatory Environment
Introduction: What is WBES?Introduction: What is WBES?1
2
Red Tape in Tax AdministrationRed Tape in Tax Administration3
Laws and RegulationsLaws and Regulations4
Taxpayer VoiceTaxpayer Voice5
The Role of Taxpayers AssociationsThe Role of Taxpayers Associations6
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The World Bank
Tax Policy &Administration Group
Laws and Regulations:
4. Laws and Regulations
0
20
40
60
80
Easy to Obtain ConsistentInterpretation
"Agree" "Disagree"
0
20
40
60
80
Easy to Obtain ConsistentInterpretation
"Agree" Disagree"
Countries of Transition Europe (%) OECD Countries (%)
Interesting fact:
The situation with availability and consistency in interpretation is
the same in both regions.
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The World Bank
Tax Policy &Administration Group
Laws and Regulations:
4. Laws and Regulations
Advance Information about Changes
(%)
Predictability of Changes
(%)
0
20
40
60
80
100
TransitionEurope
OECD
"Sometimes- Never"
"Always -Frequently" 0
20
40
60
80
100
TransitionEurope
OECD
"Disagree"
"Agree"
Businesses are more uncertain about changes in legislation and less frequently informed about these changes in countries of
Transition Europe than in OECD countries.
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The World Bank
Tax Policy &Administration Group
Outline
Regulatory EnvironmentRegulatory Environment
Introduction: What is WBES?Introduction: What is WBES?1
2
Red Tape in Tax AdministrationRed Tape in Tax Administration3
Laws and RegulationsLaws and Regulations4
Taxpayer VoiceTaxpayer Voice5
The Role of Taxpayers AssociationsThe Role of Taxpayers Associations6
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The World Bank
Tax Policy &Administration Group
5. Taxpayer Voice
Business Voice in Policy- and Law-Making
"Seldom"41%
"Often"9%
"Always"1%
"Never"49%
"Never"20%
"Always"2%
"Often"23%
"Seldom"55%
Transition Europe OECD
Business voice is taken into account 2.5 times more
frequently in OECD countries than in countries of Transition
Europe.
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The World Bank
Tax Policy &Administration Group
5. Taxpayer Voice
Business Voice in Policy- and Law-Makingin Countries of Transition Europe (%)
0102030405060708090
100
Belar
us
Bulgar
ia
Croat
ia
Czech
Rep
ublic
Estoni
a
Georg
ia
Hungar
y
Kazak
hstan
Kyrgy
zsta
n
Lithuan
ia
Polan
d
Russi
a
Slova
kia
Ukrai
ne
Uzbek
ista
n
Avera
ge fo
r OECD
"Always - Often" "Seldom - Never"
123
45
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The World Bank
Tax Policy &Administration Group
5. Taxpayer Voice
Firms’ Influence on the Content of a New Legislation (%)
0
20
40
60
80
100
TransitionEurope
OECD
Executive (%)
Seldom -Never
Very-Moderately
0
20
40
60
80
100
TransitionEurope
OECD
Legislature (%)
Seldom -Never
Very-Moderately
0
20
40
60
80
100
TransitionEurope
OECD
Ministry (%)
Seldom -Never
Very-Moderately 0
20
40
60
80
100
TransitionEurope
OECD
Regulatory Agency (%)
Seldom -Never
Very-Moderately
Considerably high influence in
both regions
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The World Bank
Tax Policy &Administration Group
Outline
Regulatory EnvironmentRegulatory Environment
Introduction: What is WBES?Introduction: What is WBES?1
2
Red Tape in Tax AdministrationRed Tape in Tax Administration3
Laws and RegulationsLaws and Regulations4
Taxpayer VoiceTaxpayer Voice5
The Role of Taxpayers AssociationsThe Role of Taxpayers Associations6
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The World Bank
Tax Policy &Administration Group
6. The Role of Taxpayers Associations
Ineffective tax regulations and administration in both regions although much higher in countries of Eastern Europe and Central Asia (ECA).
High taxes is a serious obstacle in both regions although much higher in ECA countries.
Small and medium businesses are more concerned about the tax problems than large businesses in ECA.
Ineffective tax regulations and administration in both regions although much higher in countries of Eastern Europe and Central Asia (ECA).
High taxes is a serious obstacle in both regions although much higher in ECA countries.
Small and medium businesses are more concerned about the tax problems than large businesses in ECA.
Illegal payments to tax authorities is a frequent phenomena in ECA countries (39%) comparing to OECD countries (3%).
Illegal payments to tax authorities is a frequent phenomena in ECA countries (39%) comparing to OECD countries (3%).
Business voice is taken into account 2.5 more frequently in OECD countries than in ECA countries.
The influence on the content of a new legislation is relatively high in both regions although lower in ECA countries.
Business voice is taken into account 2.5 more frequently in OECD countries than in ECA countries.
The influence on the content of a new legislation is relatively high in both regions although lower in ECA countries.
CorruptionTax Environment
Laws and Regulations
Taxpayer Voice
Availability of laws and regulations and the consistency in their interpretation is relatively insufficient in both regions.
Businesses are more uncertain about changes in legislation and less frequently informed about these changes in countries of Transition Europe than in OECD countries.
Availability of laws and regulations and the consistency in their interpretation is relatively insufficient in both regions.
Businesses are more uncertain about changes in legislation and less frequently informed about these changes in countries of Transition Europe than in OECD countries.
Problems Diagnosed by WBES
Solution
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The World Bank
Tax Policy &Administration Group
6. The Role of Taxpayers Associations
Promote effective tax regulations and administration
Lobby for an efficient level of taxation
Target interests of small and medium businesses (RECRUIT as members)
Promote effective tax regulations and administration
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
Protect the legal taxpayer rights in tax authorities and courts
Voice taxpayers’ interests to government and the general public
Actively participate in tax policy- and law- making
Initiate improvements in tax legislation
Voice taxpayers’ interests to government and the general public
Actively participate in tax policy- and law- making
Initiate improvements in tax legislation
CorruptionTax Environment
Laws and Regulations
Taxpayer Voice
Advocate for availability of laws and regulations
Provide information on current and new legislation affecting businesses
Fight for consistency/ uniformity in interpretation of laws and regulations
Watch for predictability of changes in new legislation
Advocate for availability of laws and regulations
Provide information on current and new legislation affecting businesses
Fight for consistency/ uniformity in interpretation of laws and regulations
Watch for predictability of changes in new legislation
Solution Taxpayers Associations
Need for Cooperation and Knowledge Sharing