Some of the world's largest economies are the most complex and unpredictable places to do business, according to an independent report commissioned by TMF Group.
The Global Business Complexity Index, which compares key administrative and compliance demands across 76 jurisdictions, has found China, Germany and Brazil – countries with the second, fifth and eighth largest gross domestic products worldwide – among the ten most demanding in the world for multinational firms to operate in.
The report also revealed stark contrasts between global superpowers and among neighbouring countries around the world as political, socio-economic and legislative changes take hold.
"The findings confirm that the business landscape has become more challenging. Any business looking to expand into new territories faces a formidable array of potential hurdles," according to Mark Weil, CEO of TMF Group.
"Trade disputes, tariffs, rising nationalism and political unrest point to a shift from globalisation to economic fragmentation. This has made some of the world's most commercially attractive countries among the most complex to operate in. More than ever, businesses with global ambitions must have a good understanding of the rules and regulations that prevail locally, and how to manage them."
The report, 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 hiring, firing and paying employees.
Greece is deemed the most complex country overall due to frequently changing legislation, differing regional tax rates and inconsistent treatment of firms by the authorities. By contrast, the three easiest places are the Cayman Islands, Curaçao and Jersey, which thrive on the back of politically-stable and pro-business policies.
Europe is home to the most complex countries for business, with four out of the top ten, including Germany. Conversely, the continent tops the list for the ten easiest places to do business, with the Netherlands, Denmark, Switzerland and Jersey among them.
The UK was deemed the 43rd most complex country. While it remains a robust place to do business, strict governance standards, a complex tax system and anticipated legislative changes following Brexit were seen to add to complexity. It sits just below Russia but was still ranked significantly higher than France, where its President has been pushing for more pro-business policies.
While China is the ninth most complex country, with regional variations in legislation among the issues, this is a marked improvement on the 2018 compliance complexity list produced by TMF Group.
Although these legislative changes are seen as posing challenges in the short term, they are likely to bring huge benefits to international businesses investing in China in the long term.
The USA was deemed the eleventh least complex jurisdiction worldwide, due to its relatively straightforward regulatory standards and recent tax reforms making it easier for firms to repatriate profits.
"In over a third of countries analysed, local rules, regulations and penalty systems present major challenges for companies. In many of cases, frequent and significant changes, often designed to attract investors, actually add to complexity," continued Weil. "This report will help give businesses a better understanding of the idiosyncrasies that make up the global business landscape.
"Complexity is no reason to avoid investing. It is a dimension which must be managed. With the right local knowledge and preparation, good companies can thrive anywhere."
The Global Business Complexity Index – the top 10 most complex countries:
- Greece
- Indonesia
- Brazil
- United Arab Emirates
- Bolivia
- Slovakia
- Germany
- Turkey
- China
- Peru
The top 10 least complex countries:
- Cayman Islands
- Curacao
- Jersey
- Thailand
- Paraguay
- Israel
- Switzerland
- Denmark
- British Virgin Islands
- Netherlands
To read the full rankings, please click here to download the report.
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