Businesses looking to expand their operations internationally have a host of hurdles to overcome. Will their products be able to compete with their foreign competitors? Will language and cultural barriers inhibit sales? Will growth rates take a nose dive? While the prospect of setting up shop in a far flung country is exciting, that excitement can turn to horror when taxes enter the conversation. Not only will the hopeful business operator pay a chunk out of profits, but having to navigate regulatory paperwork to actually pay can take away from the bottom line as well.

The World Bank's "Doing Business" report aims to shed light on taxes that a medium sized business would have to pay when operating in economies across the globe. In all, 183 economies were reviewed. The report focuses on the number of tax payments a business is required to make, the number of hours per year it takes to handle those taxes, and the overall tax rate that a business has to pay.

SEE: How Large Corporations Get Around Paying Taxes

Number of Tax Payments
The more often a company has to fill out reams of paperwork, the less often it's able to focus on actually doing work.

Economies ranked by the number of required tax payments per year:

1. Hong Kong (3 a year)

2. Maldives* (3)

3. Qatar (3)

4. Georgia (4)

5. Norway (4)

179. Venezuela (70)

180. Sri Lanka (71)

181. Jamaica (72)

182. Romania (113)

183. Ukraine (135)

*While the Maldives seems to blow the competition out of the water, its position at the top spot is misleading. This chain of islands off the coast of India derives most of its revenue from hotels and tourism, so the major indicators found in the Doing Business report don't exist. This is also the case in the other rankings.

Number of Hours to Prepare, File and Pay Taxes
The more complex tax filing becomes, the more hours it takes businesses to go through the process. More hours means more employees devoted to compliance, which means less money spent on running the business.

Economies ranked by hours required to prepare, file and pay taxes:

1. Maldives* (0 hours a year)

2. United Arab Emirates (12)

3. Bahrain (36)

4. Qatar (36)

5. The Bahamas (58)

179. Venezuela (864)

180. Nigeria (938)

181. Vietnam (941)

182. Bolivia (1,080)

183. Brazil (2,600)

The United Arab Emirates, a high income economy in the Middle East, only has one primary burden: the monthly filing of social security taxes.

Those familiar with the rapid modernization and growth of the BRICS countries - Brazil, Russia, India, China, South Africa - might be surprised to see Brazil ranked where it is. Calculating its state tax on goods and services, called ICMS, is estimated to take 1,374 hours a year, with Social Security contributions (490 hours), and corporate income tax (736 hours) rounding out the large administrative burden.

Total Tax Rates
Businesses want to receive the highest benefit for the least amount of tax. They want good schools, low crime and solid infrastructure.

Economies ranked by total tax rate (includes corporate income tax, social security contributions):

179. Sri Lanka (105.2%)

180. Argentina (108.2%)

181. Comoros (217.9%)

182. The Gambia (283.5%)

183. Democratic Republic of the Congo (339.7%)

The total tax rate is different than the corporate tax rate, and is designed to show the overall tax burden by showing the actual taxes paid compared to a business' net profit before taxes. This is why the data shows taxes above 100%.

As with Brazil's ranking in the number of tax administration hours, Argentina's placement is somewhat surprising. While Argentina has a low corporate income tax (2.8%), its labor tax is on the upper end and it has a large tax categorized as non-labor and non-profit related. This includes a turnover tax of 53% to the city of Buenos Aires. The Democratic Republic of the Congo has an even higher "other" tax, amounting to 272%

SEE: Types Of Taxes

Overall Tax Burden
The overall tax burden takes into account both the tax rates levied on business profits as well as the administrative burden of paying those taxes; specifically, the number of hours that businesses have to devote to complying with regulations and the number of times they have to file over the course of the year. The number is calculated as a simple average of the three main components.

Economies ranked by overall tax burden, with additional corruption rankings:

1. Maldives* (134 out of 183)

2. United Arab Emirates (28)

3. Qatar (22)

4. Bahrain (46)

5. Oman (50)

179. Venezuela (172)

180. Nigeria (143)

181. Vietnam (112)

182. Bolivia (118)

183. Brazil (73)

Once again, the Maldives may be considered an outlier based on its reliance on tourism for funding. The other four countries in the top five have either no or low profit tax, with labor-related taxes of less than 20%. They are found in the Middle East, and all produce oil. Unlike some countries that face the resource curse, they have focused on developing businesses outside of oil, such as finance. Transparency International183, an organization that tracks corruption, considers the four to be within the top 50 least corrupt countries.

While there seems to be a correlation between the perception of corruption and tax burden, the two don't necessarily go hand in hand.

Brazil has come under increasing scrutiny as of late because of the expenses associated with its social welfare programs, though its leadership has insisted that slower growth was deliberately engineered to cool down the economy. That a new phrase, "Brazil cost," has been recently coined is not a good sign. The phrase specifically points to the growing percentage of GDP coming from taxes, which in turn fund social programs that may become increasingly unaffordable in the long-term.

The Bottom Line
Taxes and the administrative burden that they place upon businesses are important subjects. By taxing businesses, countries are able to pay for development projects and infrastructure, as well as social services such as education and healthcare. Countries have to balance the need for tax revenue with the intrusion that paying taxes can cause; the more difficult the process and higher the rate, the more likely it is that businesses will not comply. Making the filing process easier (and electronic) and reducing the number of different taxes that have to be paid are two big steps that can make an economy both business friendly and well-funded.

SEE: Do Tax Cuts Stimulate The Economy?

Related Articles
  1. Economics

    Explaining Corporate Tax

    A corporate tax is a tax levied on the profits a corporation generates.
  2. Taxes

    Countries With The Highest & Lowest Corporate Tax Rates

    The United States is No. 2 in the world for its high corporate tax rate. There are ways around paying it, and many nations with lower rates are worse off.
  3. Entrepreneurship

    START-UP NY: How a Tax-Free Zone Would Work

    START-UP NY is an initiative designed to attract companies to New York State by giving them 10 years of tax breaks. Sounds good, but is it a success?
  4. Economics

    Explaining Fair Market Value

    Fair market value is the price at which a buyer and seller are willing to exchange a good.
  5. Taxes

    4 Reasons Why Delaware Is Considered a Tax Shelter

    Understand what a tax shelter is and how one is normally created. Learn about Delaware and the top five reasons why it's considered a tax shelter.
  6. Investing

    Brazilian Real Hits 20 Year Low

    On Wednesday, the Brazilian real reached its lowest level in twenty years, as investors worried that persistent low commodity prices and political instability would hurt the Brazilian economy.
  7. Economics

    The 5 Countries That Produce the Most Coffee

    Learn where your favorite cup of Joe comes from; discover how coffee drives the economies of developing countries with the power of caffeine.
  8. Investing News

    Brazil’s Sovereign Debt Downgraded by S&P

    Standard & Poor’s Ratings Services downgraded Brazil’s sovereign debt from their hard earned investment grade in 2008 (BBB-) to BB+ (junk grade), dealing a major blow to the existing government’s ...
  9. Forex

    Brazil's Recession and its Effect on the World Economy

    In 2010, Brazil's economic growth was a precursor to arrival on the world stage. Five years later, the economy is in shambles. What happened?
  10. Entrepreneurship

    Top 5 Startups that Emerged in Toronto

    Learn how Toronto has built a fertile climate for startups, and identify some of the top companies to emerge from the city's hot startup market.
  1. In what types of societies does limited government work best?

    Limited government intrusion – economically and socially – works best in societies where private property rights are respected ... Read Full Answer >>
  2. Why is Luxembourg considered a tax haven?

    Luxembourg has been the tax haven of choice for many corporations and mega-rich individuals around the world since the 197 ... Read Full Answer >>
  3. Do financial advisors prepare tax returns for clients?

    Financial advisors engage in a wide variety of financial areas, including tax return preparation and tax planning for their ... Read Full Answer >>
  4. Is Argentina a developed country?

    Argentina is not a developed country. It has one of the strongest economies in South America or Central America and ranks ... Read Full Answer >>
  5. In what instances does overhead qualify for certain tax allowances?

    Businesses are just as keen as anyone else to keep their tax burdens low by any means possible. Overhead expenses often qualify ... Read Full Answer >>
  6. What is the difference between comprehensive income and gross income?

    Comprehensive income and gross income are similar, but comprehensive income is a specific term used on a company's financial ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!