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Thursday, November 17, 2011

Doing Business in the U.S.

With Global Entrepreneurship Week covering November 14-20, it’s time to take a look at how hard or easy it is to do business in the United States.

On October 20, the World Bank and International Finance Corporation released “Doing Business 2012: Doing Business in a More Transparent World.” The report looks at regulations in 183 economies and ranks those nations based on 10 areas of business regulation – starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.

What were some key developments since the previous report?

• “…more and more economies are focusing their reform efforts on strengthening legal institutions such as courts and insolvency regimes and enhancing legal protections of investors and property rights.”

• “Overall in 2010/11, governments in 125 economies implemented 245 institutional and regulatory reforms as measured by Doing Business—13% more than in the previous year. A faster pace of regulatory reform is good news for entrepreneurs in developing economies.”

As for the United States, it ranked fourth best among the 183 nations. That was unchanged from last year. Even though, as recent as 2009, the U.S. came in third best, ranking fourth among 183 nations is a huge positive.

The following breaks down U.S. rankings in the ten categories, along with the average rankings for OECD high-income nations:

• Starting a business:
United States – 13th
OECD – 57th

• Dealing with construction permits:
United States – 17th
OECD – 53rd

• Getting electricity:
United States – 17th
OECD – 53rd

• Registering property:
United States – 16th
OECD – 58th

• Getting credit:
United States – 4th
OECD – 41st

• Protecting investors:
United States – 5th
OECD – 62nd

• Paying taxes:
United States – 72nd
OECD – 62nd

• Trading across borders:
United States – 20th
OECD – 33rd

• Enforcing contracts:
United States – 7th
OECD – 37th

• Resolving insolvency:
United States – 15th
OECD – 27th

There’s actually more good news here than probably meets the eye. How some of these indicators are gauged – specifically, starting a business, construction permits, getting electricity, registering property, and paying taxes – has much to do with state and local government in the U.S., as opposed to what the federal government is doing. And “Doing Business 2012” uses New York City to assess each. Of course, New York City is far more burdensome, complicated, costly and unfriendly towards business than are most other locales across the nation. That being the case, most of the U.S. would then rank even better when compared to other nations than our overall “Doing Business” rankings would suggest.

Finally, it is worth noting how poorly the U.S. ranked on paying taxes – and that includes “the administrative burden of complying with taxes” and “how much do firms pay in taxes.” This is another notable call for elected officials at the federal, state and local levels to ease tax burdens on business, and to simplify their tax systems.

The “Doing Business 2012” report provides some helpful information and comparisons. For the sake of entrepreneurship and our overall economic well-being, the U.S. should note its excellent position, while working to improve that position and fend off all efforts that would diminish our competitiveness.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

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