Lloyd’s: Global Business Leaders Worry about Taxes

High taxation has become the number one threat to global business, soaring up the rankings from 13th to 1st place in the last two years, according to the third Lloyd’s Risk Index.

Other top risks concerning more than 500 of the world’s most senior business leaders in 2013 are loss of customers/cancelled orders, cyber risk, increased material costs and excessively strict regulation.

Interestingly, the survey found that U.S. businesses feel even more unprepared to deal with the risk of high taxation than their European counterparts.

While both regions put high taxation as their number one risk, U.S. respondents rank their preparedness at 37 out of 50, compared to European businesses at 21 out of 50.

But does the increase in volume on the subject of corporate taxation reflect reality? Not necessarily, Lloyd’s says.

It cites data showing that corporate taxes have actually declined or remained static in the past few years, despite the financial problems of most major economies.

Still, personal tax rates in some economies have risen, which particularly affect global businesses competing for international talent, it adds. Indirect taxes are also on the increase.

Lloyd’s says:

The reality for businesses appears to be that government ambiguity about business taxes, whether about extending jurisdictions, amending legislation or changing rates, may actually be more damaging for business confidence than the reality.”

In a press release Lloyd’s chief executive Richard Ward warns that focusing on near-term issues at the expense of longer-term strategic decision making can leave organizations over-exposed to future business challenges:

With business tax in the spotlight and rising up the political agenda, executives are understandably concerned. Yet the danger is that an emphasis on near-term, operational issues comes at the expense of significant, strategic decisions that have previously exercised business leaders.”

First published in 2009, the Lloyd’s Risk Index is run in conjunction with Ipsos MORI.