Using a case scenario, Doing Business measures the taxes and mandatory contributions that a medium- size company must pay in a given year as well as the administrative burden of paying taxes and contributions. This case scenario uses a set of financial statements and assumptions about transactions made over the year. Information is also compiled on the frequency of filing and payments as well as time taken to comply with tax laws. The ranking of economies on the ease of paying taxes is determined by sorting their distance to frontier scores on the ease of paying taxes. These scores are the simple average of the distance to frontier scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax rate5. The financial statement variables have been updated to be proportional to 2012 income per capita; previously they were proportional to 2005 income per capita. To make the data comparable across economies, several assumptions are used.
TaxpayerCo is a medium-size business that started operations on January 1, 2012.
The business starts from the same financial position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded.
Taxes and mandatory contributions are measured at all levels of government.