Cyprus, Ireland and Switzerland have Europe's top tax regime
27-Dec-2007Cyprus, Ireland, and Switzerland are the top three countries in a league table of European tax systems compiled by accountant KPMG International, in which major business organisations 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 their comparatively low tax rates.
The three least attractive countries were the Czech Republic, Romania and Greece. All three regimes featured high volumes of complex legislation, with frequent changes.
Compiled from more than 400 interviews with tax professionals in multinational companies across Europe, KPMG's survey also showed that being in a country with an unattractive tax regime is not just 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 and partner, said: "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 tested 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.
"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 said.
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