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World Bank Must Permanently End Ideologically Driven Doing Business Rankings

Originally published at http://www.commondreams.org/views/2020/09/08/world-bank-must-permanently-end-ideologically-driven-doing-business-rankings

This is a poorly researched outburst. The author is clearly unfamiliar with the Doing Business methodology. For example, Doing Business report does not measure any regulation specific to agricultural sector, nor does it look into foreign investor activities. The project is about business regulations for local small and medium firms. Registering property indicator evaluates procedures, time and cost to transfer a title to a warehouse in a peri-urban area between two domestic companies. The indicator also looks at the quality of regulation, including transparency of information about land and real estate, availability of IT infrastructure to support property transactions and availability to guarantees, should there be a problem with the title. I fail to see how this can violate peoples’ land rights. Do familiarise yourself with facts before embarrassing yourself by writing an utter nonsense.

The article is based on and cites the World Bank’s own internal review, the published opinion of the Bank’s former chief economist (who went on to win a Nobel prize) as well as extensive research that shows the impact the rankings have had on millions of people. You may want to “familiarize yourself with the facts” in some of the many references cited in the article. Also the Oakland Institute’s extensive research provides much evidence of how Doing Business relates to land rights, for instance how African countries are pushed to lower corporate tax and environmental safeguards so that palm oil corporations get more incentives to ‘invest’ there. Please read and educate yourself.

I’d be curious to know specifics of the research showing “impact of the rankings on millions of people”. It is laughable to suggest causality between the Doing Business rankings and alleged lower corporate tax rate and diminishing environmental safeguards. It is arrogant to accuse any government in being reckless to implement reforms just to move up in some not so important rankings. In any case, Paying taxes indicator has 4 components. Total tax rate accounts for 25% of the overall rankings and the threshold is set at 26.1%. This means that no extra points could be gained by pushing the tax rate below 26%. The focus of this indicator is provision of electronic services to calculate, file and pay taxes as well as improving risk management and auditing efficiency of the tax authorities. Think about this: today an average total tax rate in OECD High income countries is 39.9% (notably, taxation in OECD provides great public benefits), while in Sub-Saharan Africa it is 47.3%, while taxes collected do not trickle down back to the taxpayer as roads, schools and healthcare. Would you say that environmental safeguards in any OECD country are lower than those in Central African Republic (total tax rate 73.3% of profit) or Chad (63.5%)? Could you give me any scientific reasons why taxation should be higher in Africa than in Europe? In Comoros, if a company were to pay all mandatory taxes it would have to come up with 219.6% of its profit. This is a county with one of the lowest income per capita rates in the world. I hope you understand the obvious consequences of this fantastical tax rate. There is a wealth of literature in top peer-reviewed journals showing detrimental effect of overtaxation in combating informality and enabling job creation.