Chief among the concerns of the 150 finance executives polled by E&Y are keeping abreast of tax rules in each state, meeting tax deadlines and setting and documenting internal controls.

The report singled out countries where tax compliance was considered a particular headache for multinationals; four out of five Italian tax directors stated that Italy was a likely source of tax related problems, while Dutch tax directors cited UK and German tax laws as especially difficult to comply with.

Interestingly, the issue of tax planning seems to have been relegated down the list of priorities for multinational corporations, contrasting with a similar survey conducted in 2002 which found that tax directors spent nearly half their time on tax planning, and intended to spend more.

The survey also pointed to emerging concern over compliance problems and penalties in Eastern European states, as well as in Eastern Asia.

"It is not surprising to hear that tax departments are losing sleep when criminal sanctions are in place for tax reporting errors - as is the case, for instance, in Poland," observed Ernst & Young.

However, Switzerland was singled out as one of the easiest places to do business, with its relatively light tax and regulatory burden. Only 7% of Swiss tax directors reported that they were likely to encounter compliance problems in Switzerland.

Validating the survey's findings, chief executive of US packaging firm O-I, Steve McCracken, recently derided the legal structures of most EU countries as "socialistic" and an impediment to business. Formerly known as Owens-Illinois, O-I recently decided to locate its European head office in the Swiss city of Lausanne, where, according to Mr McCracken, the authorities have a more "capitalistic" approach to business.

In comments published by the Financial Times, Mr McCracken mused:

“I wonder if they [people in these countries] get it--by this I mean the link between labour, companies and government and how this influences the economy. It is hardly news that the EU has competitiveness problems.”