Paderborn "Tax Complexity Results" discussed in US magazine "Forbes"
Tax complexity has become increasingly important as a potential threat to the economy and society in recent years and has developed into a global phenomenon. But how can it be measured? The team of researchers from the Collaborative Research Centre/Transregio TRR 266 "Accounting for Transparency" at Paderborn University and LMU Munich has developed an innovative, survey-based measure for analysing the complexity of income taxes in a large number of countries: the "Tax Complexity Index". It can be used to analyse the tax complexity faced by multinational companies worldwide. The renowned US business magazine "Forbes" recently published an article highlighting the growing tax complexity in uncertain times and emphasising the increasing relevance of the Tax Complexity Index.
Challenges due to international regulations and a lack of transparency
The latest analysis of the Tax Complexity Index for 2024 shows that tax complexity has continued to increase since 2016. This trend is particularly pronounced in the 38 member states of the Organisation for Economic Co-operation and Development (OECD). The OECD, which includes many EU countries as well as Norway, Switzerland, Canada, Japan, the USA and the UK, is committed to sustainable economic growth, stable prices and social progress, among other things, and sponsors cooperation between governments to tackle global economic challenges.
Respondents emphasised the potentially negative economic impact of increasing tax complexity. The regulations on transfer pricing are proving to be particularly challenging. This refers to legal and administrative requirements that companies must comply with when setting prices for internal transactions between affiliated companies or parts of a group, e. g. between subsidiaries in different countries. Tax regulations on corporate reorganisations and combating abusive tax structuring also contribute to a high degree of complexity. In addition, the lack of transparency in tax audits in many countries is seen as a decisive uncertainty factor and makes planning more difficult for companies. "Our analyses show that increasing tax complexity not only creates bureaucratic hurdles, but also results in concrete economic costs. However, not all multinational companies are equally affected. Small and medium-sized companies in particular, which have less capacity to deal with this complexity, are reaching their limits," explains Prof. Dr. Dr. h.c. Dr. h.c. Caren Sureth-Sloane, spokesperson for TRR 266 and professor at Paderborn University.
Clear, transparent tax rules, but above all reliable administrative tax processes, prove to be essential to enable innovation and stimulate investment activity in a country," says Prof. Sureth-Sloane. She adds: "Our surveys are highly relevant to society, both now and in the future, and provide important guidance for policymakers and businesses. Especially against the backdrop of current debates on the reform of international tax policy and national discussions on strengthening business locations - such as the further US tax reforms being discussed by US President Donald Trump or the European discussion on how Europe, and thus also Germany, should position itself in the international competition between business locations."
"Tax Complexity Index" as an important guide since 2016
The team of researchers at TRR 266 - which consists of more than 100 academics from eight German universities and is funded by the German Research Foundation (DFG) - compiles the Tax Complexity Index based on surveys in almost 100 different countries and has updated it every two years since 2016. The researchers differentiate between the complexity of tax laws ("Tax Code Complexity"), i.e. the difficulty of reading, understanding and complying with them, and the complexity of the tax framework ("Tax Framework Complexity"). The latter refers to the complexity resulting from the fulfilment of tax obligations and the associated processes - and which makes efficient, reliable compliance more difficult for companies. This includes legislative processes, tax declaration and tax payment processes, guidance provided by administrative regulations, tax audits and complaints procedures.
This text was translated automatically.
