Because the UK doesn’t levy any tax on businesses repatriating profits back to the UK, and has a very high number of tax treaties (126 in total) – it beats both China and the US to come third – behind Germany, first, and Slovakia, second, – in a UHY list which ranked nations in terms of "the world’s best placed countries to take advantage of the future globalisation of trade".
UHY taxation and business advisory professionals in 27 countries rated their economies on several factors including taxation and trade policy, that indicate how internationally focussed an economy already is and how well positioned it is to take advantage of future globalisation of trade.
The factors examined in UHY’s 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, and how it is rated in the World Bank’s ‘Ease of Doing Business’ survey and labour costs.
Assessed on these factors, the UK ranked third 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. Ladislav Hornan, chairman of UHY said “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.”
Hornan added that 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, UHY pointed out that Slovakia, the Czech Republic and Romania had been "very effective" in taking advantage of the opportunities presented by the single market.
UHY also noted that Spain had 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."
While China did far better overall than the US in UHY's study, 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 corporate ‘repatriating’ overseas profits.
According to UHY, 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 in UHY’s US office, 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.”
Top 20 countries ranked according to ability to take advantage of future globalisation of trade:
- 1. Germany 6.4/10
- 2. Slovakia 6.3/10
- 3=Netherlands 6/10
- 3=New Zealand 6/10
- 3=UK 6/10
- 6 Denmark 5.4/10
- 7 France 5.3/10
- 8=Czech Republic 5.1/10
- 8=India 5.1/10
- 8=Croatia 5.1/10
- 15= Russia 4.7/10
- 15 =Australia 4.7/10
- 17= China 4.6/10
- 17= Uruguay 4.6/10
- 17=Spain 4.6/10
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20 Mexico 4.4/10
