LONDON--(BUSINESS WIRE)--Among the world’s largest economies, the United States is the most business-friendly based on its stable regulatory landscape, streamlined tax and accounting administration and ease of hiring and firing employees, according to a study by TMF Group, a leading provider of international business administration services.
The Global Business Complexity Index, which compares key administrative and compliance demands across 77 jurisdictions, found that the U.S. has the second-least complex business environment for multinational firms. The most complex aspect of doing business in the U.S. is complying with 50 different state regulations pertaining to licenses, tax registrations and employment rules, TMF Group’s analysis found.
The U.S. ranking is in sharp contrast to the four next largest economies: China (6th most complex); Japan (46th); Germany (40th); and India (18th). TMF Group’s research typically has found that many of the most commercially attractive countries tend to be the most complex to operate in.
“As businesses define what success looks like after COVID-19, they may decide to move into new geographies or expand in current locations to strengthen their operating models,” said Larry Harding, head of TMF Group North America. “Our study provides insights to business leaders considering new foreign investment or how to re-allocate existing resources.”
The complexity index, which was based on a combination of statistically weighted data and qualitative research among local market experts, focuses on three areas: rules, regulations and penalties; accounting and tax; and human resource and payroll administration.
In the U.S., rules and regulations are clearly stated, publicly available and not prone to sudden change. By and large, the U.S. economy operates on a basis where companies are assumed to be complying, without stringent check-ups. China and many other large economies, by comparison, still place a heavy administrative burden on multinationals relative to verifying compliance. For example, many countries require an annual statutory audit to be completed and publicly filed, while in the U.S. audits are only legally required relative to publicly traded companies.
While Germany remains a robust place to do business, it remains a heavily regulated country, consistent with most other nations in the European Union. The EU also has enacted regional frameworks, such as General Data Protection Regulation (GDPR) that have increased business complexity in recent years.
The countries that are considered to have the least complex business environments are those that best balance stability and expense. Denmark, the Netherlands, Mauritius and Ireland joined the U.S. among the least complex, according to the TMF Group Index.
Caribbean financial centers such as the Cayman Islands, Curacao and the British Virgin Islands are also among the least complex jurisdictions in the Index because of their tax-friendly policies. But they are becoming more complicated for businesses as they respond to public pressure to enact stricter rules and supervision related to tax transparency, money laundering, and beneficial ownership.
At the other end of the spectrum, Indonesia is deemed the most complex country for multinationals. Starting a business in Indonesia remains a maze of permits and offline and online processes. Limits on foreign ownership are obstacles to doing business, and labor laws make it difficult to terminate underperforming employees. Similar challenges arise in South America, with five of the 10 most complex countries: Brazil, Argentina, Bolivia, Colombia and Ecuador. Brazil, for example, has dozens of tax regimes spread over federal, state and municipal layers of government, different rules for international versus local companies, and employment laws that can heavily favor the rights of employees compared with employers.
“Our analysis shows that local rules, regulations and penalty systems present major challenges for companies,” said Jason Gerlis, Global Head of Consultancy Solutions at TMF Group. “TMF Group is dedicated to providing the local knowledge and resources needed to help businesses thrive anywhere.”
About TMF Group:
TMF Group is the leading provider of administrative support services for international business expansion. With some 7,800 experts – in-house, on the ground in over 80 locations – and is the only company worldwide to provide the combination of fiduciary, company secretarial, accounting and tax and HR and payroll services essential to the success of businesses investing, operating and expanding across multiple jurisdictions. We know how to unlock access to some of the world’s most attractive markets – no matter how complex – swiftly, safely and efficiently. That’s why over 60% of the Fortune Global 500 and FTSE 100 and almost half of the top 300 private equity firms use us. www.tmf-group.com