Global Trends in VAT/GST and Direct Taxes

S. 112I. Introduction to tax compliance

A. The taxpayer’s burden

Tax compliance from the taxpayer’s point of view is associated with the administrative burden. This comprises procedures and resources used in order to fulfil all legal requirements and maintain evidence to avoid (or at least to limit) possible future tax penalties. In the academic literature, three terms are often used interchangeably: ‘compliance cost’, ‘administrative burden’ and ‘administrative cost’. Practically – in addition to these elements – other costs should also be included in the cost of compliance, such as invoicing costs, costs of auditing, answering questions from the tax authorities and setting up ERP systems.

The taxpayers’ situation around the world was summarized by the PWC in its annual publication “Paying Taxes”. According to the published results – on average, across the nine years of the study – the time needed to comply has fallen by 55 hours (per year). The overall compliance burden continued to fall in 2012, but the rate of decline slowed. On average, the consumption taxes have always taken the longest time to comply with.

In addition, the PWC report reveals the interesting situation in the European a...