World Bank rates NZ easiest place to do business

New Zealand has the most business-friendly regulations in the world, as measured by the indicators in the annual World Bank "Doing Business" survey.

Singapore is the runner-up. The United States is third. Five other East Asian countries -- Hong Kong (China), Japan, Thailand, Malaysia and Korea -- are among the top 30. So are the Baltic countries -- Lithuania, Estonia and Latvia.

The authors caution that direct comparisons with last year's survey are not appropriate because three new sets of indicators -- on dealing with licenses, paying taxes and trading across borders -- have been added this year.

According to the economy summary for NZ, New Zealand ranks at number one on ease of doing business, registering property, and protecting investors.

It does less well on trading across borders (15th), paying taxes (16th) and closing a business (21st).

Some of New Zealand's high placement may be down to a lack of data, however.

In the analysis of how difficult it is to hire and fire workers, the data show a zero value (the most flexible on a scale of 0-100) for several key categories, including rigidity of hours, hiring cost and firing cost.

On paying taxes, the country survey says entrepreneurs in New Zealand must make 8 payments, spend 70 hours, and pay 44.2 per cent of gross profit in taxes (the OECD high income country average payout is 46.1 per cent, but for East Asia & Pacific the payout averages 31.2 per cent).

In a number of countries, paying all taxes requires far more than the total profit earned by a company -- and in some, like Saudi Arabia, Iraq and Kuwait, the tax burden (1.4 per cent, 5.6 per cent and 8.2 per cent, respectively) is negligible.

Against principal trading partners, with the exception of the UK, the comparative picture for tax paying New Zealand businesses is often grim.

The tax burden in the US, for example, is 21.5 per cent, in Australia 37 per cent and in the UK, 52.9 per cent.

Tax payout figures do not include labour taxes.

Some economies were undone by high scores on peripheral issues.

Australia, for example, scored very well overall -- except when it came to registering property, on which is scored 34 points, enough to drag it down substantially, to number 6 overall.

That's because, although it takes only a modest takes 5 steps and 5 days to register property, the cost of registering property is 7.1 per cent of overall property value -- well above an OECD benchmark of 4.7 per cent.

In Australia, where employment is widely considered an easier issue for business to navigate than it is here, a zero score appears only for the "difficulty of hiring" index (which means employers have no difficulty hiring employees). When it comes to rigidity of hours, Australia scored 40 points where New Zealand scored zero (zero indicates NZ has the maximum possible flexibility).

The cost of a hire is estimated in Australia at 21 per cent of salary (zero costs were associated with New Zealand) and the cost of firing an employee were estimated at 4 weeks of wages (against a zero cost in New Zealand).

That indicates that New Zealand's ranking is at least suspect, but Finance Minister Michael Cullen celebrated the overall ranking anyway, saying it was "a credit to the quality of our regulatory regime and to the government’s economic management."