Regulation

Turkey Is Most Difficult Market for Regulatory Compliance

Tax and accounting compliance can be an overwhelmingly monumental task as companies expand their geographic footprint. Analysts agree that a company should work with partners, advisors and technologies that can help them manage their compliance demand across borders. Not only do regulations vary from jurisdiction to jurisdiction, but the consequences of non-compliance vary greatly, too.

In a new report by TMF Group, analysts aimed to understand exactly how compliance demands change in various parts of the world. In its Financial Complexity Index 2017 report, TMF Group examined 94 jurisdictions in Europe, the Middle East, the Americas, Asia Pacific and Africa, diving into how various regulations change and how those changes might affect corporate finance.

Through a 70-question survey, TMF Group asked the accounting and tax professionals to assess their local regulatory climates.

Turkey, the report found, was the most complex market for regulatory compliance, followed by Brazil, Italy, Greece and Vietnam. Rounding out the list are Colombia, China, Belgium, Argentina and India.

The ranking suggests Turkey is the most difficult market for companies to remain compliant, researchers explained, attributing its ranking to the demand that reporting is done in the Turkish language and the Turkish currency. There are also an “extremely high number” of tax rules.

Frequent regulatory changes in Turkey make the market an especially large challenge for companies, the report said, and are likely to keep Turkey in a top spot when it comes to ranking the most complex markets for compliance. Efforts to promote fair competition and boost international trade could offer some relief eventually, especially as the nation aims to harmonize its regulations with those of the European Union.

When broken down by region, Italy and Greece are the most complex jurisdictions in Southern Europe, thanks to Italy’s complex tax rules at the local, national and municipal levels, and the complicated  tax categorization in Greece.

In South and Central America, compliance complexities are attributed to complex tax layers, though Argentina is the region’s most complex country for reporting, while Mexico is its most complex for bookkeeping. Brazil, however, is the most complex market in the region, and the second-most complex in the world, thanks to more than 90 taxes, duties and contributions charged by the local authorities. TMF Group dubbed its tax enforcement policy as “aggressive,” while high data reporting requirements and investments in electronic reporting solutions are likely to make the country even more complex, the report predicted.

Invoicing, filing and auditing, meanwhile, are key areas of complexity in the Asia Pacific region, where Vietnam, China and India top the list of most difficult jurisdictions in which to remain compliant.

Top Challenge Areas

TMF Group identified three areas that yield the greatest levels of complexity and determined how easily a company can stay compliant in a market.

The first, unsurprisingly, is regulation. The rate of change of legislation around bookkeeping, reporting, tax and other financial demands on companies can have a significant effect on the level of complexity of compliance, researchers said.

Knowledge, and the demand for companies to gather as much knowledge and information about local markets, is the second key area that can determine compliance complexity. And that doesn’t just mean knowledge about local regulations, either. TMF Group noted that other areas, like understanding the local language and currency, “can prove vital in meeting reporting and compliance requirements.”

The third and final area is technology. With local authorities increasingly turning to technology to boost transparency,

“More and more jurisdictions, in all parts of the world, are now automating and digitizing their information storage and reporting requirements,” the report said.

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