UK amongst the top ranked countries leading the race in harnessing globalisation

Publication that covered this story; City AM, 9 December.

  • 0% tax levied on repatriated profits encourages overseas expansion

The UK is one of the world’s best placed countries in the race to capitalise on globalisation and could be set for positive future economic growth as a result, according to our new research.

Our taxation and business advisory professionals in 27 countries rated their economies on several factors including taxation and trade policy, that indicate how internationalised an economy already is and how well positioned it is to take advantage of future globalisation of trade.

The factors examined in our study included; how successful a country has been in negotiating favourable tax arrangements with potential trading partners, how successful it has been in growing exports, how important a part trade already plays in its economy, how much tax it imposes on companies ‘repatriating’ overseas profits, how it is rated in the World Bank’s ‘Ease of Doing Business’ survey and labour costs.

Assessed on these factors, the UK ranked 3rd in the study with an overall score of 6.0, beating China and on an equal footing with New Zealand and the Netherlands.

Germany topped the ratings with a score of 6.4 out of ten, while Slovakia was not far behind on 6.3 points.  China was the best performing of the world’s Top 3 economies with a score of 4.6.

Ladislav Hornan, chairman of UHY commented: “The UK ranked so well in the study as it performed well across all indicators. It came out especially well on the fact that it doesn’t levy any charges to businesses’ repatriated profits. Eliminating tax on repatriated income encourages companies to expand overseas and bring income back into UK, potentially to reinvest in the UK and create new jobs as well as boosting our pension savings.”

“In addition to this, the UK has the highest number of double tax treaties, with agreements in place with 126 countries. It gives a big boost to trade when treaties are in place to minimise or avoid double taxation, so the UK’s successful diplomacy is to be applauded for helping make the country competitive globally. ”

Elsewhere in Europe, our research points out that Slovakia, the Czech Republic and Romania have been very effective in taking advantage of the opportunities presented by the single market.  Meanwhile, Spain, pulled out of recession in the third quarter of 2013 thanks to export growth, and could potentially see its trade position improve in the future.

Would-be Chinese and American multinationals held back by tax policy

While China did far better overall than the USA, with an overall score of 4.6 out of 10, both of the world’s two largest economies’ scores were brought down by the high taxes their governments impose on corporates ‘repatriating’ overseas profits.

These taxes reduce the incentive for businesses to set up subsidiaries overseas, particularly for SMEs for whom the costs of setting up international operations would be proportionately more expensive.  Just under half of the countries in the study imposed no tax on repatriated dividends at all.

Rick David of UHY LLP USA, added: “American firms are household names around the world but actually our taxation system is very poorly geared towards encouraging US companies from growing overseas, with the highest tax on ‘repatriated’ profits of any country in the study.”

Rankings showing 27 countries’ ability to take advantage of future globalisation of trade

Ranking

Country

Marks out of 10

1

Germany

6.4

2

Slovakia

6.3

3

Netherlands

6.0

3

New Zealand

6.0

3

United Kingdom

6.0

6

Denmark

5.4

7

France

5.3

8

Czech Republic

5.1

8

India

5.1

8

Croatia

5.1

8

UAE

5.1

12

Romania

5.0

12

Brazil

5.0

12

Ireland

5.0

15

Russia

4.7

15

Australia

4.7

17

China

4.6

17

Uruguay

4.6

17

Spain

4.6

20

Mexico

4.4

21

Canada

4.3

21

Austria

4.3

23

Israel

4.1

24

Nigeria

4.0

25

Italy

3.7

25

United States

3.7

27

Japan

3.0

Notes:

Countries’ overall scores are based on their rankings for the detailed measures included in the study.

Data drawn from: the World Bank, World Trade Organisation, International Labour Organisation and national governments.