Luxembourg should aim to slide lower in an index that names and shames jurisdictions where regulatory complexity is a barrier to financial business.

As a rule, jurisdictions such as Luxembourg aim to be as close as possible to the top of the ever-proliferating rankings and indexes of countries and territories covering the financial industry and other sectors. But not so the Financial Complexity Index, in which the grand duchy’s decline of three places in 2018 is cause for satisfaction rather than disappointment.

The index, compiled by international business services provider TMF Group, assesses 94 jurisdictions in terms of the complexity of their financial compliance, covering aspects such as tax, reporting requirements, accounting and ease of cross-border transactions.

Luxembourg is one of nine EU member states in the top 30--the most complex--jurisdictions in the rankings, but it’s down to 27th this year, suggesting an advantage over neighbours such as Germany (21st) and Belgium (20th). France (6th) and Italy (4th) are in the company of countries like China--top thanks to a new system to enforce tax compliance--as well as Brazil, Turkey, Mexico and Russia.

One of the striking features of the index is the presence of Hong Kong, which is legally part of China, as one of the five lowest-ranked--least complex--jurisdictions. Four of the bottom five places are occupied by what are politely called low-tax jurisdictions and impolitely tax havens, with the Cayman Islands followed, in ascending order of complexity, by the British Virgin Islands, Jersey and Curaçao.

Cynics would say that compliance is obviously a lot less complex with a corporate tax rate of 0% or not much higher, and offshore business companies that are not subject to local reporting requirements.

The more charitable might note that small island territories that depend completely on commercial relationships with the outside world have a vested interest in keeping red tape to a minimum, and that complicated domestic customer protection rules make little sense for financial products and services destined for markets abroad.

It’s not particularly easy to find the right way of describing a ranking in which last place is the ultimate goal, rather than first. However, the Financial Complexity Index has the merit of coherence, being based on the assessments of TMF’s network of offices around the globe.

The better-known Global Financial Services Index is based in part on the views of a self-selecting group of individuals that complete an online questionnaire--canvassing for ‘votes’ is not unknown--and this March’s latest report saw a mysterious surge benefitting North American financial centres, suggesting at the least a significant change in methodology.

As for Luxembourg, should it be concerned by being assessed as among the world’s more complex financial jurisdictions? To some extent regulatory complexity is part and parcel of the harmonised rulebook underpinning the EU single market. But the presence in the lower half of the index of the UK (72nd), Ireland (76th) and the Netherlands (77th) suggest there’s plenty of room for a further decline in the rankings.

Simon Gray is editor-in-chief of VitalBriefing