World Bank: Bolivia among the worst countries to pay taxes

The Total Tax Rate includes data per country on the total tax burden for people and firms and “measures the amount of taxes and mandatory contributions payable by businesses after accounting for allowable deductions and exemptions as a share of commercial profits. Taxes withheld (such as personal income tax) or collected and remitted to tax authorities (such as value added taxes, sales taxes or goods and service taxes) are excluded” from the analysis, explains the WB.

Only Eritrea (83.7%), Argentina (137.4%) and Comoros (216.5%) rank higher than Bolivia. This means that the tax burden for companies in these countries tends to discourage taxpayers from participating in the formal sector of the economy.

“The design of a tax system can influence firms’ decisions on whether to operate in the formal sector as well as have other important economic effects. And analysis suggests that where the tax system makes compliance more difficult, firms are more likely to perceive corruption as a problem”, the report highlights.

Thus, while taxes are essential for public finances that make possible the financing of social programs and public investments which in turn promote economic growth and development (health, education, infrastructure, etc…), the challenge is to design tax systems that do not discourage taxpayers from participating in the formal sector.

Therefore, in addition to measuring the tax burden, the TTR also considers two other fundamental aspects: the time it takes to comply with the main taxes, and the number of payments.

The time taken to comply with taxes measures the time required to prepare, file, queuing and paying each tax type. The number of payments measures the frequency with which a company has to file and pay different types of taxes and contributions, adjusting on how these filings and payments are made.

With this, the index seeks to measure the financial and administrative burdens that businesses and citizens must assume in order to comply with their tax obligations.

Bolivia in the region and the world

The global average TTR is 40.8%, and complying with tax regulations requires making 26 payments and takes 261 hours per year, also on average. Compared to five years ago, this situation is an improvement as it has been reduced by 4 payments and 15 hours per year, as highlighted in the WB’s repot Paying Taxes.

South America, however, is the region with the highest TTR in the world (55%) and it is where companies and citizens spend more time complying with taxes (615 hours per year). Africa, in contrast, has a 46.9% TTR and a compliance time of 313 hours. South America appears to be doing better in the number of payments (23,5).

Meanwhile, Bolivia ranks as one of the worst countries in South America and the world to pay taxes.  Bolivia’s TTR is 83.7%, well above the South American (55%) and global (40.8%) average.

According to the WB, many of the taxes included in Bolivia’s TTR are municipal taxes; labor taxes also stand out, whereas income taxes are very few or low.

It is worth noting that Bolivia’s TTR has grown steadily in recent years: in 2011 it was 80%, increasing in 2012 to 83.4%, and since 2013 it rose to 83.7%, where it remains to this day.

Bolivia is also one of the worst countries regarding the amount of time it takes to comply with tax obligations, given its average of 1.026 hours a per year, also well above regional and global averages. Only Brazil, with 2.600 hours per year, is worse than Bolivia in this regard.

Similarly, Bolivia is one of the countries with the highest number of payments per year (42), also well above regional and global averages. Only Venezuela, with 70 annual payments, is worse than Bolivia in this aspect within the South American region.

The index

This index incorporates data from tax systems in 189 countries worldwide. “The study’s databank provides a unique insight into how governments around the world choose to tax companies operating in their jurisdictions and the mechanisms by which those taxesare levied”, details the WB.

Furthermore, the index oversees data of the past 11 years, with which the WB has been able to analyze how tax systems have evolved over time. “Increasingly we have seen governments recognize that tax is an important dimension of an economy’s competitiveness with an ability to help encourage domestic growth and to help attract investment. And it is not just the rate of tax which is important here. The way in which the tax system collects and administers its taxes has an impact onbusinesses in terms of the time required and the costs associated with that time”. 

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Bolivia entre los peores países para pagar impuestos según BM