China tops TMF Group’s latest Financial Complexity Index

The most complex nation in terms of financial compliance is China, according to the latest Financial Complexity Index 2018 from TMF Group, largely driven by the continued embedding of the Golden Tax System, which aims to introduce stricter monitoring and enhanced data sorting and transparency. The Cayman Islands was the least complex jurisdiction out of the 94 jurisdictions covered by the index. The index looks at the world’s nations by complexity of financial compliance, defined by TMF Group as the ease with which companies can deal with taxes, adhere to reporting requirements, maintain company accounts and deal with cross-border transactions. The most complex jurisdictions for compliance were South Africa and Germany, while for tax it was Venezuela. China was the most complex jurisdiction for reporting, while Mexico was the most complex for bookkeeping. The top ten most complex jurisdictions for accounting and tax compliance are: 1. China 2. Brazil 3. Turkey 4. Italy 5. Argentina 6. France 7. Bolivia 8. Colombia 9. Mexico 10. Russia Other jurisdictions include: Belgium (20), Germany (21), Spain (34), Austria (59), Switzerland (64), Canada (70), UK (72), US (75), Ireland (76), The Netherlands (77), and Denmark (80). Turkey fell to third having held the top spot last year, as government efforts to simplify regulation begin to kick in. According to TMF, the second index (launched in 2017) is dominated by the impact of the global move towards transparency and conformity. “Many countries are working out their reaction to the OECD’s Base Erosion and Profit Shifting project, meaning transparency in ultimate beneficial owners and transfer pricing are the subject of regulation impacting on business operations. The Common Reporting Standard – designed to allow automatic exchange of information between jurisdictions by financial institutions – has also begun to make an impact. We see many countries passing reforms to simplify their economies not only to attract investment, but to ensure the country ticks the compliance box for these global movements,” said TMF. Latin America continues to make up half of the top ten most complex countries, with Brazil again ranked second. “However, change is afoot,” said TMF. “Several Latin countries have begun to digitise their filing processes, causing a short-term complexity spike. If things go according to plan though, the digital transformation should reduce complexity in the long term.” TMF said that with France, Italy and Russia in the top ten most complex, “Europe is a less simple place to do business than some might imagine”, adding: “France’s increase in complexity comes just as a new government, led by Emmanuel Macron, begins a business-friendly simplification process. In the meantime, Germany ranks just outside the top 20, but alongside South Africa, is the most complex globally for compliance.” TMF explained that the index is based on a number of considerations, including: - The accounting and tax rules and regulations in different jurisdictions, such as local Generally Accepted Accounting Principles requirements, local language requirements and the reporting period - Audit and financial reporting requirements - VAT and corporate income tax registrations, filing frequency and payment deadlines - relevant regulatory requirements that need to be incorporated into your business (such as legal representation requirements, storage requirements) - The risks associated with non-compliance - The impact of technology upon the accounting and tax compliance landscape. (www.tmf-group.com)

China tops TMF Group’s latest Financial Complexity Index

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