Administrative burden
Companies in the 28 countries in scope of the study are estimated to spend an annual total amount estimated around EUR 204 billion to comply with obligations related to CIT, VAT, wage related taxes and contributions, property and real estate taxes and local taxes. The average enterprise incurs an annual cost in meeting its tax compliance obligations, amounting to 1.9% of its turnover. Data collection is generally the most burdensome activity induced by tax compliance (information) obligations for all five types of taxes in scope. Preparation and review make up a larger proportion of total costs when it comes to local taxes compared to other types of taxes. This can likely be explained by the larger variety of forms related to local taxes and the resulting variety in information required to fill them. Electronic filing allows for a reduction of administrative burden, the benefits are evident and solutions as “one-stop-shops” at both national and EU level are considered positively allowing for a cut in the duplication of information obligations which are the source of the administrative burden. While e-filing is adopted by several countries, there are still some margins of improvement.
SMEs vs larger enterprises
While larger enterprises incur a higher absolute cost in meeting compliance obligations than smaller ones, the relative burden of tax compliance is disproportionately higher for SMEs than for LSEs. This could indicate that compliance costs are, at least in part, fixed costs and also that larger enterprises utilise economies of scale to deal with tax compliance obligations.
Audits
The number of audits for VAT is estimated to be higher in Lithuania, Latvia and Hungary, while the number of audits for CIT is estimated to be the largest in the case of Latvia, Hungary and Slovakia.
The estimated average of audit related costs for enterprises that underwent an audit for VAT increases by enterprise size. Based on the estimations, the average cost of an audit for an enterprise is the smallest is the Czech Republic and Slovakia, and enterprises in the United Kingdom and Ireland bare the largest costs.
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