This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as measures the administrative burden in paying taxes and contributions. The most recent round of data collection for the project was completed on June 30, 2017 covering for the Paying Taxes indicator calendar year 2016 (January 1, 2016 – December 31, 2016).

Last year (Doing Business 2017) the scope of data collection was expanded to better understand the overall tax environment in an economy. The questionnaire was expanded to include new questions on post-filing processes: VAT refund and tax audit. The data shows where postfiling processes and practices work efficiently and what drives the differences in the overall tax compliance cost across economies.

The new section covers both the legal framework and the administrative burden on businesses to comply with postfiling processes.  See the methodology for more information.

Frequently Asked Questions

- How does the Paying Taxes indicator count procedures?
- How does Paying Taxes measure time?
- How does Paying Taxes measure the total tax rate?
- How can some economies have a total tax rate of over 100% of income per capita?
- How does the Paying Taxes indicator rank economies?
- Does the Paying Taxes indicator record the de jure (the law) or de facto (the practice) situation?


The tax payments indicator reflects the total number of taxes paid, the method of payment, the frequency of payment and the number of agencies involved for this standardized case during the second year of operation. It includes payments made by the company on consumption taxes, such as Sales Tax, VAT or GST which are collected from consumers on behalf of the tax authorities. The number of payments takes into account electronic filing. Where full electronic filing is used by the majority of firms for both filing and payment of a particular tax, the tax is counted as paid once a year even if the payment is more frequent. Additionally, taxes such as fuel tax which might be embedded in payments to third parties other than government are counted as 1 payment even though paid more than once.


The time indicator measures the number of hours per year that it takes to prepare, file tax returns for and pay VAT, Sales Tax or GST; labor taxes and mandatory contributions (including employee withholdings), and corporate income tax. Preparation time includes the time to collect all information necessary to compute the tax payable and to calculate the amount payable. If separate accounting books must be kept for tax purposes—or separate calculations made—the time associated with these processes is included. This extra time is included only if the regular accounting work is not enough to fulfill the tax accounting requirements. Filing time includes the time to complete all necessary tax return forms and file the relevant returns at the tax authority. Payment time considers the hours needed to make the payment online or at the tax authorities. Where taxes and contributions are paid in person, the time includes delays while waiting.


The total tax rate measures the amount of taxes borne by the business in the second year of operation, expressed as a percentage of "commercial profits" (defined below). The total amount of tax is the sum of all of the different business tax liabilities borne by the company. The taxes collected by the company (such as Sales Tax, GST and VAT, where not irrecoverable) but not borne by the company are excluded. The taxes included can be divided into five categories: profit or corporate income tax, social security contributions and other labor taxes paid by the employer, property taxes, turnover taxes and other "small" taxes (such as municipal fees and vehicle and fuel taxes).

Commercial profit is essentially net profit before all taxes borne. It differs from the conventional profit before tax, reported in financial statements. In computing profit before tax, many of the taxes borne by a firm are deductible. In computing commercial profit, these taxes are not deductible. Commercial profit therefore presents a clear picture of the actual profit of a business before any of the taxes it bears in the course of the fiscal year.

Commercial profit is computed as sales minus cost of goods sold, minus gross salaries, minus administrative expenses, minus other expenses, minus provisions, plus capital gains (from the property sale) minus interest expense, plus interest income and minus commercial depreciation. To compute the commercial depreciation, a straight-line depreciation method is applied, with the following rates: 0% for the land, 5% for the building, 10% for the machinery, 33% for the computers, 20% for the office equipment, 20% for the truck and 10% for business development expenses. Commercial profit amounts to 59.4 times income per capita.

The methodology for calculating the total tax rate is consistent with the Total Tax Contribution framework applied by PwC. Developed with the initial input of several multinational companies and other interested stakeholders, the Total Tax Contribution framework provides a standardized approach to identifying a company's overall tax contribution.


Where the data show that the amount of taxes due are greater than profit, it means that the company must apply a price markup of more than 120% of the cost of goods sold to pay its taxes under the assumptions of the Doing Business case study. Essentially it means that a company which has a price markup of only 20% over its costs like the Doing Business case study company, it would not be able to meet its tax obligation. These companies therefore either operate informally or underreport their tax obligations.


The ranking of economies on the ease of paying taxes is determined by sorting their distance to frontier scores for paying taxes. These scores are the simple average of the distance to frontier scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax rate. The threshold is defined as the total tax rate at the 15th percentile of the overall distribution of the total tax rate indicator for all years included in the analysis up to and including Doing Business 2015. The threshold is set at 26.1%. All economies with a total tax rate below this threshold receive the same score as the economy at the threshold. The threshold is not based on any economic theory of an “optimal tax rate” that minimizes distortions or maximizes efficiency in an economy’s overall tax system. Instead, it is mainly empirical in nature, set at the lower end of the distribution of tax rates levied on medium-size enterprises in the manufacturing sector as observed through the paying taxes indicators. This reduces the bias in the total tax rate indicator toward economies that do not need to levy significant taxes on companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology).


Both. Every tax and fee paid by the business that is required by law and mandated by any level of government is included, along with post filing processes which a typical domestic company might experience. Time to comply with 3 major taxes (corporate income tax, VAT/Sales tax and labor taxes including mandatory contributions) reflect the practical experience of tax professionals.