international article

Denmark Tops List of Best Countries in the World for Doing Business Forbes, by Simon Constable, Jun 30, 2021

For running a business in Europe, it can be the best of times or the worst of times. It all depends where you set up shop. In addition, that is something investors need to consider when sinking money into ventures overseas.

Denmark, the Scandinavian country squished between Germany and Sweden, is ranked the easiest place to do business in the world, according to the recently published Global Business Complexity Index 2021.

France came second to worst of the 77 countries ranked. “France’s place as the second most complex jurisdiction is driven by complexities in accounting and tax processes, and heavily employee-centric HR regulations,” the report states.

Brazil was the most complicated place to do business. The 77 countries accounting for 92% of global GDP, the report’s authors claim.

The survey measured the complexity of accounting, tax, and legal matters such as setting up and maintaining a corporation or other business entity, as well as human resources and payroll rules.

The report finds that ease of doing business does not necessarily go hand in hand with the size of the market: “A continuing observation, from our now eight years of reporting on complexity, is that some of the most attractive markets to operate in are both the most complex and the most punitive for getting things wrong.”

Tougher Regulations for Employing People Emerge

Rules regarding employees are getting irksome almost no matter where you locate your business. During 2020 it became harder to dismiss employees without giving a reason. Moreover, government of Argentina now says it is against the law to fire workers, “for any reason,” the report states.

“Our experts predict that employers will continue to see the rise of pro-employee legislation, which simultaneously encourages companies to act responsibly in their local communities and increases the level of complexity that they must navigate.”

It Should Matter to Investors

Investors should consider the tradeoff between investing in a country with a complicated business environment against the potential profits that can be made in that country.

For instance, the USA, still ranks near the top of the countries with the least complicated business environment and is by far the richest country in the world.

Meanwhile, Argentina is one of the most complicated places to do business and has a dodgy economy that is around $400 billion in size, compared to $21-22 trillion for the U.S. In other words, the US still remains a good bet and Argentina is not.

United States (one of the top 7 countries in which to do business)

The USA has a simple legislative environment, particularly at the federal level, though differences between states can add to complexity for businesses.

The accounting system in particular is predominantly trust based, as there are no requirements to submit accounts, contrasting with other locations in the Americas where monthly reporting requirements are often incredibly detailed.

The incorporation process is simple and sequential, despite requiring communication with multiple levels of government. Companies are required to notify the local state government of their wish to incorporate, before requesting a tax ID from the federal government, which is usually returned in two days if the process is done online. The tax ID then enables a corporate bank account to be set up, meaning the entire process of getting a business up and running often takes around two to three weeks.

However, regional complexity can come into play when it comes to ongoing entity management. Taxes are decided at state level, so there are different taxes paid in different states, as well as different thresholds for those same taxes. Income taxes are also levied at state level, so companies that employ workers across various states will have to keep track of local payroll practices – something that has become more common as remote working has become more prevalent throughout Covid-19.

There are possible distant changes to the tax system, with a new president setting out an agenda of corporation tax increases. However, any changes will take time to implement as they will have to be debated and ratified, giving corporations enough time to act.