Pension reform done. Next on the agenda in Brazil: taxes!

Taxes are – for most people and businesses – notoriously opaque and complex. It is highly technical, time-consuming, and errors can be costly. Consequently, a simple, transparent and efficient tax system is invaluable if you aim to reduce the time and cost spent on paying your taxes. Furthermore, a simple tax scheme is essential to attract foreign capital, stimulate entrepreneurship, and ultimately improve economic growth.

Norway scores well…

Norwegians are quite lucky in that regard. Norway is one of the most efficient countries when it comes to preparing and paying your taxes[i]. A typical Norwegian company spends about 83 hours a year to prepare and pay taxes, according to the World Bank. That is almost 50% more efficient than in Sweden, and over 100% more efficient than in the US, where the hours an average company spends on taxes are 122 and 175, respectively. Arguably, then, Norway’s score is a testament to the relative simplicity of our tax system.

… other countries are not so lucky

Companies in less developed countries, on the other hand, are not so lucky. The least lucky of them all are Brazilian companies. Now, how many hours does a typical Brazilian firm spend a year to comply with all the local, state and federal taxes, you ask? The answer is a shocking 1,958(!) hours. This puts Brazil squarely at the bottom of the global ranking (190thout of 190 countries).

The diagram shows how many hours companies spend to comply with all taxes in their countries.

Why does Brazil score so low?

Brazil is a country generally considered to be quite advanced. What makes taxes so particularly complex in Brazil?

The key reason is that Brazilian companies have to deal with five separate indirecttaxes: