It Takes 175 hours for a U.S. Business to Comply with U.S. Taxes May 1, 2014 Kyle Pomerleau Kyle Pomerleau The real cost of taxation goes beyond the amount that is written on the check to the IRS. Another important cost of taxation is compliance. Compliance is the real cost associated with just calculating and making the payment. These costs can be substantial, especially for businesses. One way of measuring the compliance costs associated with taxation for businesses is to measure the number of hours it takes a business to calculate and pay its taxes. Taking the time to just figure out what you owe, calculate it, then send it in, requires a business to give up a more productive activity: one hour of tax preparation is one fewer of research and development. In total, a U.S. business needs to devote 175 hours a year to comply with corporate, labor, and sales taxes every year. This is about the middle of the pack for the OECD. To put this in perspective, this would take one person more than 4 full-time weeks to comply with these taxes. Now imagine the total cost to the economy when you consider there are more than 20 million active businesses in the United States. PWC in their Doing Business annual report estimates the time it takes a “case study” business to comply with three taxes: corporate income taxes, labor taxes, and consumption taxes. These compliance times are calculated by constructing a hypothetical firm. They then make assumptions about what sorts of transactions the business will perform and the amount and type of business it will do during the year. The table below displays the compliance time results from the 2014 Doing Business report for corporate income taxes, labor taxes, and consumption taxes for OECD countries. The United States’ worst rank is on its corporate income tax. It takes the case study business 87 hours per year to comply with just the corporate income tax. This is the 6th longest time in the OECD and 35 hours longer than the average OECD country. The United States is in the middle of the pack in compliance time with labor taxes. It takes the hypothetical business an average of 55 hours a year to comply with the taxes it has to pay to the government on behalf of its workers (for example: employer-side social security tax). This is 20 hours faster than the average OECD country. The United States ranks best in regard to compliance time with consumption taxes. It takes the business an average of 33 hours a year to comply, which is about 23 hours faster than the OECD average (56.5 hours). Of course, the “typical” business is not all businesses. Certainly there are businesses—especially large multinational corporations—that have to devote many more hours to comply with taxes. Time it Takes a Case Study Business to Comply with Taxes in the OECD, 2014 (Hours Per Year) OECD Country Corporate Tax Compliance Labor Taxes Compliance Consumption Taxes Compliance Total Compliance Rank Time Rank Time Rank Time Rank Time Australia 20 37 32 18 16 50 28 105 Austria 13 47 22 52 12 67 18 166 Belgium 30 20 26 40 6 100 19 160 Canada 14 45 30 36 15 50 23 131 Chile 15 42 6 125 1 124 4 291 Czech Republic 4 94 1 217 3 102 1 413 Denmark 26 25 14 65 20 40 24 130 Estonia 31 20 31 34 28 27 31 81 Finland 29 21 24 48 32 24 29 93 France 25 26 13 80 29 26 22 132 Germany 17 41 5 134 19 43 12 218 Greece 8 78 25 46 11 69 14 193 Hungary 22 35 3 146 8 96 6 277 Iceland 18 40 19 60 21 40 21 140 Ireland 34 10 28 40 27 30 32 80 Israel 3 110 18 60 13 65 10 235 Italy 19 39 2 198 26 32 8 269 Japan 2 155 4 140 23 35 3 330 Korea 7 82 11 80 30 25 15 187 Luxembourg 32 19 34 14 33 22 34 55 Mexico 1 170 15 64 5 100 2 334 Netherlands 27 25 16 64 24 34 25 123 New Zealand 23 34 20 59 14 59 20 152 Norway 28 24 33 15 18 44 30 83 Poland 10 62 7 124 4 100 5 286 Portugal 9 63 8 116 9 96 7 275 Slovak Republic 16 42 17 62 2 103 13 207 Slovenia 5 90 9 96 10 74 9 260 Spain 24 33 10 90 17 44 17 167 Sweden 11 50 29 36 22 36 26 122 Switzerland 33 15 27 40 34 8 33 63 Turkey 12 49 12 80 7 97 11 226 United Kingdom 21 37 23 48 31 25 27 110 United States 6 87 21 55 25 33 16 175 Average 52.0 75.9 56.5 184.4 For information on how PWC calculates these numbers Stay informed on the tax policies impacting you. Subscribe to get insights from our trusted experts delivered straight to your inbox. Subscribe Share Tweet Share Email Topics Center for Federal Tax Policy Business Taxes Corporate Income Taxes Individual Tax Compliance and Complexity
