* Cyprus moves up 4 places in World Bank ranking, but is it enough? *
‘+’ Faster property registration
‘-’ Paying taxes, construction permits
Cyprus has moved up four places in the World Bank’s annual Doing Business report, ranking 36th in the 2013 benchmark report, from 40th last year, but has failed to impress as regards reforms, with the biggest headache being red tape.
Some progress is seen in the areas of regulatory reforms, but Cyprus also introduced new taxes, while despite the computerisation of the Land Surveys Dept., property registration is still a nuisance and applying for a simple electricity connection could take ages.
Now in its tenth year, the World Bank report assesses regulations affecting domestic firms in 185 economies, ranking each on the basis of various criteria including ease of starting a business, insolvency resolution and cross-border trade.
The latest report, Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises, places Singapore, Hong Kong, New Zealand, the U.S., Denmark and Norway in the overall ranking of “ease of doing business”, with the UK again at the top on the ease of obtaining credit. However, some analysts suggest that the report does not give the full picture regarding access to credit and its real cost as German companies find it far easier to secure credit, while American businesses pay considerably less for it than their UK competitors.
On the other hand, while Russia moved up six places in terms of its overall business environment (it is now ranked 114th of 185 economies worldwide), it is in terms of tax regulation that the country showed its most staggering improvement – moving up 30 places from 94th to 64th, an achievement unmatched by any other country. The report attributes this success to simpler VAT filing procedures and greater use of accounting software and electronic services, an issue that should cause great concern to the professional services industry in Cyprus that relies heavily on the influx of Russian clients in recent years.
Ten countries, among them fellow-EU members Poland and Greece, improved the most in at least three areas of reforms, while a significant find in the report is that in the past ten years Eastern Europe and Central Asia economies have improved the most, overtaking East Asia and the Pacific as the world’s second most business-friendly region. OECD high-income economies continue to have the most business-friendly environment, while in general there has been more convergence in those that relate to the complexity and cost of regulatory processes (business start-up, property registration, construction permitting, electricity connections, tax payment and trade procedures) than in those that relate to the strength of legal institutions (contract enforcement, insolvency regimes, credit information, legal rights of borrowers and lenders and the protection of minority shareholders).
On the other hand, European economies in fiscal distress are working to improve the business climate, and this is beginning to be reflected in the indicators tracked by Doing Business. Greece is one of the ten most improved globally in 2011/12.
Furthermore, reform efforts globally have focused on making it easier to start a new business, increasing the efficiency of tax administration and facilitating trade across international borders. Of the 201 regulatory reforms recorded in the past year, 44% focused on these three policy areas alone.
In many of the findings regarding good practices, Cyprus does not rank among the economies showing great progress, while Latvia, that has often been mentioned as a competitive jurisdiction has been praised in the report, saying that “despite being substantially affected by the financial crisis starting in 2008, Latvia continued its reform agenda, adapting it to the new challenges the country was facing.”
In the areas for small to medium-sized enterprises (SMEs), under the key question of “Who makes starting a business easy—and who does not?” Cyprus ranks neither in the top ten nor in the bottom ten of many fields.
The property and construction sector will continue to haunt us, as Cyprus ranks second from last (behind Haiti) as the slowest to secure a construction permit at 677 days, and among the ten slowest among 185 economies in the time it takes to get electricity, at 247 days. Fortunately, Cyprus is praised for speeding up property registration by 14 days due to the computerisation of the Land Registry.
Of equal concern to the authorities should be the report’s focus on paying taxes and why, if Cyprus aspires to become an international business centre, we are not considered among those that make paying taxes easy.
In summary, the report concluded that “Cyprus made paying taxes more costly for companies by increasing the special defense contribution rate on interest income and introducing a private sector special contribution and a fixed annual fee for companies registered in Cyprus. At the same time, it simplified tax compliance by introducing electronic filing for corporate income tax.”
