Cyprus, Ireland, and Switzerland are the top three countries in a league table
of European tax systems compiled by KPMG International, in which major business
organizations across Europe assessed the attractiveness of their domestic tax
regimes.
All three countries were rated highly for their combination of consistency
in interpreting tax legislation, stability in resisting frequent changes to
tax laws, and comparatively low tax rate.
The three least attractive countries were the Czech Republic, Romania and Greece.
All three lost support for having high volumes of complex legislation, with
frequent changes.
These views were compiled from more than 400 interviews of tax professionals
in multinational companies across Europe. Survey participants were asked how
attractive they believed their country’s tax regime was compared with
other European states.
KPMG took the percentage of respondents who thought key aspects of their domestic
systems were attractive and subtracted those who felt they were unattractive,
to give a net attractiveness score for each country.
KPMG's survey also showed that being in a country with an unattractive tax
regime is not simply an inconvenience for business. Almost 70% of respondents
who thought their country’s tax regime was unattractive also believed
that this put their companies at a competitive disadvantage when competing with
foreign companies.
But in those countries with an attractive regime, just 43% of respondents felt
that this gave them a competitive advantage when competing overseas.
Sue Bonney, Head of Tax for KPMG Europe LLP and partner in the UK member firm,
commented: “I was interested to see that a complex tax regime is seen
as a hindrance to competitiveness, but relatively few people felt that a simpler
system with a low rate can help make businesses more competitive. Governments
across the world have been using tax as a lever to encourage inward investment
for many years, but these results help to confirm that a benign tax regime is
only part of the package which makes a business competitive. Good infrastructure,
a high quality workforce and access to raw materials and markets are all equally
important.”
The survey explored participants’ attitudes to particular aspects of
their home tax regime, including consistency, stability over time, volume of
legislation, the tax rate and relations with tax authorities.
At a European level, the most unattractive area was the volume of tax legislation,
with a net attractiveness score of just 28%. But this concealed a huge variation
at a country level, with 100% of respondents in Cyprus saying that the low volume
of tax legislation there made the country attractive, and all of the Romanian
respondents declaring that volume of legislation in their country was too high.
Relations with tax authorities were generally positive, with an average of
60% across Europe saying that this was an attractive part of their regime. The
countries with the highest scores in this area were Ireland, Switzerland, Estonia,
Finland, Denmark, Slovenia and Lithuania. Those with the poorest were Germany,
Spain, Italy, the Czech Republic and Greece.
“These results help to illustrate just how much businesses across Europe
dislike uncertainty and complexity. The volume of tax legislation is huge and
its interpretation is often opaque. Simplification presents a real challenge
for European tax authorities," added Bonney.
“But it is very encouraging to see that relations between tax authorities
and taxpayers are generally good. Our member firms’ view is that it is
only by co-operation and the building of trust between tax authorities, taxpayers
and tax advisers that many of the problems with today’s complex tax regimes
can be solved," she concluded.
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