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US falls behind Europe and China in globalization

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US falls behind Europe and China in globalization

US hurt by tax policy, report indicates.

The USA is falling behind Europe and China in the race to capitalize on globalization, and could potentially miss out on future economic growth as a result, according to a new survey by UHY, the international accounting and consultancy network.

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

The factors examined in the study included how successful a country has been in negotiating favorable 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 labor costs.  

"At 35%, the USA levied the highest gross tax charge on repatriated profits of any country looked at."

Assessed on these factors, the USA scored 3.7, surprisingly far behind both China, with its score of 4.6, and the EU member states, with an average score of 5.2 out of a maximum of 10. 

While the USA did well on their Ease of Doing Business rating - placing 4th globally - its economy still remained more aligned to domestic activity than many of their competitors.  UHY explains that this means companies in the USA are not fully exposed to international competition, which may make them less efficient.  Additionally, the USA also had low scores for certain factors measuring success in negotiating favorable tax treatment by trading partners. At 35%, the USA levied the highest gross tax charge on repatriated profits of any country looked at.

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, and India was the best-performing BRIC country with a score of 5.1, helped by its low labor costs with an average monthly salary less than half as high as China’s. 

Richard David, Chief Operating Officer for UHY Advisors, Inc., a member firm of UHY in the USA, stated: “The USA ranked poorly in the survey suggesting that while it is cushioned by the sheer size of its own domestic economy, it could achieve more by doing more to encourage and support American companies in exporting and expanding overseas.

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