According to the Eighth Global Business Complexity Annual Report Index (GBCI), Brazil is ranked as the most complex jurisdiction this year, leading a list of six Latin American countries in the top ten, including Mexico, Colombia, Argentina, Bolivia. And Costa Rica is behind. ) by professional services firm TMG Group.
The comprehensive report analyzes rules, regulations, tax rates, penalties and compliance issues in 77 jurisdictions, accounting for 92% of total world GDP and 95% of global net FDI inflows.
Brazil owes much to the classification bureaucracy: companies register at three different levels of authority (federal, state and municipal) on incorporation. Also, tax rates vary from city to city and state to state.
Some of the most lucrative markets to trade are some of the most complicated and most punishing for realizing that things are wrong. ”
France and Poland lead the European rankings as the second and 10th most complex places. Indonesia, at number six, is the only jurisdiction in the top ten in the APAC.
Denmark and Hong Kong are the simplest jurisdictions, followed by the Cayman Islands, Ireland and Curaçao. Denmark’s success has been driven by a straightforward process of incorporation, acceptance and digitization of English documentation.
The UK is ranked 58th, which means it is easier to do business. The conclusion of Brexit, along with new international trade agreements, brings more clarity and stability. Familiarity with digital tax procedures has increased and the legislative environment has stagnated – changes in legislation that result in high economic substance requirements are unlikely to be passed in the next five years.
The United States remains an attractive destination, ranking 7th least complex. Factors that drive ease of doing business include a three-week return for inclusion through the same agency, the ability to pay taxes from a foreign bank account, and the company’s directors need not be US residents.
Mark Weil, CEO of TMF Group, said: “Our 2021 report was written in the shadow of COVID-19 and looked at disruptions to travel, commerce and healthcare. In this difficult environment, attracting and encouraging business investment is critical to the global economy and local prosperity, and we at TMF Group are pleased to play our part in encouraging facilitation by regulators and governments.
“Our ongoing observation from eight years of reporting on complexity is that some of the most lucrative markets to trade are some of the most complex and most punishable for making mistakes. Companies often have large bases of large numbers, Often in relatively simple locations to operate. Then they have the long tail of small scale offices in more complex locations. Because of its ‘complex tail’ it is where risk is concentrated.”
In addition to analyzing 77 locations, the report identifies key themes that shape the global business landscape and regulatory environment. There has been an overall increase in penalties for non-compliance. Penalties for accounting and tax misconduct are the most common penalties imposed for doing business without a tax record in 93% of jurisdictions in 2021, compared to 84% the previous year.
The penalties are more severe in complex jurisdictions. While 45% of jurisdictions worldwide can suspend an operating license for doing business without tax registration, this rises to 70% in more complex jurisdictions. There has also been an increase in fines for errors in filing and paying taxes from 2020 onwards.
rise of responsible governance
There is a renewed focus on ensuring that companies behave responsibly in all business activities, from hiring workers to paying taxes and ensuring transparent structures.
Requirements such as UBO and PSC have remained stable since 2020, as has the percentage of jurisdictions adopting property registries, indicating that transparency procedures are consistent from year to year. The report shows that the requirement to provide UBO and/or PSC information to the Central Registry is higher in EMEA in 82% of jurisdictions, compared to 43% in APAC.
Compulsory involvement of third parties in business operations has increased. In 2020, 17% of jurisdictions required an entity to name and register a certified accountant, compared to 27% in 2021.
Impact of COVID-19 on Digitization, HR and Payroll
COVID-19 accelerated the trend of digitizing processes and simplifying interactions between companies and government officials. By 2021, automatic notification to all relevant state authorities when a company is incorporated increases to 14% of jurisdictions worldwide, up from 6% in 2020.
Some jurisdictions are temporarily allowing digital signatures, a move that our experts predict will become a long-term change. On the other hand, there have been significant delays in jurisdictions such as Colombia and Argentina, where in-person appointments are required to process the incorporation document.
The report highlights how the pandemic has changed the way companies manage their employees. In 2021, 20% of jurisdictions allow companies to fire an employee for no reason, down from 29% in 2020. The 14 jurisdictions in North America contributed the most to this decline, with 64% allowing such layoffs in 2020, compared to 23% in 2021.
Telecom and a global workforce, inside and outside jurisdictions, brings challenges on hiring and payroll. In the US, companies that hired remote workers in different states were facing payroll challenges in the wake of COVID-19 as income taxes are determined and reported at the state level.
top ten and top ten
9. Costa Rica
69. El Salvador
71. United States
72. British Virgin Islands
75. Cayman Islands
76. Hong Kong
The eighth annual Global Business Complexity Index (GBCI) focused on good governance and responsible business; harsh punishments for violation of the rules; Long-term impact of COVID-19 on the global business landscape.
The report by TMF Group, a leading professional services company, analyzes rules, regulations, tax rates, penalties and compliance issues in 77 jurisdictions, accounting for 92% of total world GDP and 95% of global net FDI inflows.
292 metrics, monitored annually, provide data on key aspects of doing business, including incorporation, payroll and benefits programs, and how to stay in compliance.