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. Fundamental Analysis

    Is Brazil Currently in a Depression?

    Find out if Brazil, the world's seventh-largest economy, may have finally slipped into an economic depression, and learn the reasons why.
  2. Personal Finance

    Zika Virus: Latest Advice on Staying Safe

    Zika has hit the U.S. Here’s a quick review of what’s known about the virus, how it spreads, who’s at highest risk and how to avoid it.
  3. Taxes

    Taxes: H&R Block Vs. TurboTax Vs. Jackson Hewitt

    There are more and more tax services to help ease the pain of filing income taxes. Here's our take on three of the biggest.
  4. Investing News

    Brazil's Latest Export To China: Soccer Players

    Why are Brazilian soccer players moving to China?
  5. Taxes

    Confused About Estimated Tax Deadlines for 2016?

    If you run a business or have investment income, pay attention to this year's estimated tax deadlines. Here are the details, and what's new for 2016.
  6. Forex Education

    Four Currencies Under the Spotlight in 2016

    With currencies having become the “tail that wags the dog,” in terms of their impact on the global economy, these four currencies will be under the spotlight in 2016.
  7. Chart Advisor

    Watch For a Bounce in These Emerging Markets (BRF, PEK)

    While downtrends are clearly in control of the direction of many emerging market ETFs, short-term indicators suggest a bounce higher could be in the cards.
  8. Investing

    The High Growth Potential of Brazil's Pharma Market

    With high growth in the last decade, can Brazil’s pharmaceutical market sustain its momentum in future?
  9. Entrepreneurship

    5 Toronto Startups That Emerged This Century

    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.
  10. Mutual Funds & ETFs

    4 ETF Strategies for Growth in Latin America for 2016

    Use these strategies to invest in Latin American ETFs in 2016. The region has several underperformers such as Brazil but it still offers growth.
  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. How do I file taxes for income from foreign sources?

    If you are a U.S. citizen or resident alien, your income (except for amounts exempt under federal law), including that which ... Read Full Answer >>
  3. How Long Should I Keep My Tax Records?

    The Internal Revenue Service (IRS) has some hard and fast rules regarding how long taxpayers should keep their tax records. As ... Read Full Answer >>
  4. Does the IRS charge interest on penalties?

    The Internal Revenue Service (IRS) charges interest on any overdue taxes owed, but it does not charge interest on penalties. ... Read Full Answer >>
  5. Are tax shelters legal in Canada?

    Most tax shelters are legal in Canada. However, there have been illegal tax shelter scams that the Canada Revenue Agency ... Read Full Answer >>
  6. Can the IRS garnish your tax refund?

    Federal law states that only state and federal agencies, such as the Internal Revenue Service (IRS), are allowed to garnish ... Read Full Answer >>
Trading Center