High nominal tax rates, complicated fiscal legislation and tax authorities working inefficiently are to blame for the fact that particularly in developing countries many companies are driven to operate in a shadow economy. But even in Europe there are similar problems: Particularly marked are the differences between nominal and actual tax burden and this it even the case in industrialized countries such as France (difference almost 60 percent) or Italy (almost 50 percent).
A transparent fiscal system which ensures that corporation tax rates do approximately correspond to the actual tax burden would facilitate decision making and administrative processes not only within companies but also within fiscal authorities. In Denmark, for instance, each Danish krone which goes into state tax administration yields tax revenues amounting to 113 krones. In Hungary this ratio is 1:77, in Mexico even as low as 1:33. These figures come from a reliable source, i.e. a joint study by the World Bank and PricewaterhouseCoopers (PwC). Therefore Mr. Prof. Dr. Dieter Endres, member of the PwC board of directors recommends to politicians: “Transparent systems, less red tape and low tax rates will lead to higher revenues for the state and less costs for companies. Governments and companies should come up with joint concepts in order to bring about progress which is mutually beneficial.