EVCA Calls For Harmonization Of European Tax And Legal Environment

by Ulrika Lomas, for LawAndTax-News.com, Brussels

03 April 2003

The European Private Equity and Venture Capital Association (EVCA) on Monday released the results of a new study examining the tax and legal frameworks of European Union member states as they relate to the private equity and venture capital industry.

The review, entitled 'European Private Equity and Venture Capital: Benchmarking European Tax and Legal Environments', was conducted between February and November 2002, and found that the fragmentation of tax and legal regimes across the EU is hindering the industry's progress.

Speaking on the release of the report, EVCA Chairman, Max Burger-Calderon explained that: 'The purpose of the report is to promote convergence and not disparity,' continuing:

'This benchmark paper should be used on a national level further to improve the fiscal and regulatory environment of this dynamic, growth driving industry and to inspire decision-makers to develop favourable, harmonised tax and legal policies with respect to private equity.'

The EVCA looked at 10 indicators which contribute to a favourable environment for both the supply side of private equity (the private equity practitioners and investors), and the demand side (the entrepreneurs).

These were: fund structures, merger regulation, pension funds, company tax rates, tax rates for SMEs, capital gains tax for individuals, tax incentives for individual private equity investors, stock option taxation, the entrepreneurial environment, and fiscal incentives for research and development (R&D).

Using these criteria, the industry body found that the UK and Ireland were overall the most favourable environments (in terms of their tax and legal regimes) for private equity and venture capital investment. Luxembourg and the Netherlands followed closely behind, and Denmark and Austria were to be found at the bottom of the list.

However, according to Didier Guennoc, the EVCA's Research and Public Affairs Director:

'The study should...not be narrowed down to the 'ranking' of countries. Its importance lies in the fact that it provides a stimulus for change by creating a platform for discussion with policy makers in pursuit of private equity friendly policy making throughout Europe.'

A comprehensive report in our tax shelters series describing tax incentives for venture capital in a number of advanced economies is available in the Tax News Reports Shop at http://www.tax-news.com/reportshop

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