European Union: European Tax Survey - The Benefits Of Stability

Last Updated: 13 November 2013
Article by Deloitte Tax Group

EXECUTIVE SUMMARY

Background

The external environment has rarely been more challenging for heads of tax. Governments and tax authorities traditionally seek to increase tax receipts in times of austerity. Public scrutiny has increased for many, particularly in Western Europe.

Looking inwards, changes within businesses are driving an evolution of the tax department. Tax compliance increasingly operates on a current (real‑time) basis. Tax specialists need to combine business and technical expertise to drive value for their organisations.

But how much has this really affected heads of tax? What keeps them awake at night? Which jurisdictions are perceived as the most challenging and where in Europe it is seemingly becoming easier to do business?

In order to help understand this fast-changing landscape, Deloitte undertakes an annual survey to track trends as viewed by heads of tax.

Almost 1,000 companies across Europe participated in the Deloitte Tax Survey in 2013. The responses were often surprisingly unanimous for organisations that vary in size and structure, operating in different economies.

Headline findings

  • The Netherlands and the UK were seen as the most favourable of the large jurisdictions, from a tax perspective, for inward investment. Both had worked hard to become more attractive to multinational companies, and this seemed to be working.
  • Italy and Russia were viewed as the most challenging of the large jurisdictions, due to rapid legislative changes, ambiguity and different views of how tax positions should be interpreted.
  • Above all, heads of tax wanted stable tax legislation. The biggest issue many cited was that already complex tax systems were being further complicated by rafts of new laws. Aside from the burden of keeping up with the changes and educating their teams, this was the main cause of tax uncertainty – frequent law change was also the thing that most would reduce in order to make their own countries more competitive.
  • 75% of respondents had been subject to a tax audit in the past three years. More than a third would be likely to litigate if they felt that a tax investigation was unjust, either in terms of the process or the outcome.
  • There was a clear divide with regard to the level of public debate around tax. The west of Europe – in particular Luxembourg, Switzerland, the UK, and the Netherlands – were facing media scrutiny, pressure from special interest groups and heated discussion around what constitutes a just and fair tax system. In the first three, this scrutiny was focused on multinationals; in the Netherlands the issue was mainly directed at the government. Eastern European countries, such as the Czech Republic and Hungary, were not recognising tax as a major public issue.
  • Contrary to some public perceptions, the measure of success for heads of tax was not lowering the effective tax rate (or ETR), but strongly compliance‑focused: filing of returns in a timely manner and working with the business to ensure there are no nasty surprises around the corner.
  • Heads of tax were also changing where they spend their time as they become more integrated with the business and in direct discussion with its operational parts. Tax technical roles may form part of the team, but the communication skills and focus needed by the head of tax these days are much broader.
  • Respondents appeared to be stretched. Many had demanding roles but relatively small teams. Most (55%) had global or regional responsibilities and yet were operating with teams of fewer than three people.
  • Shared Service Centres (SSCs) are available to support over half of those who responded. Two thirds used SSCs for some or all of their tax compliance work.

OPERATING IN EUROPE

Most favourable jurisdictions from a tax system perspective

Respondents were asked to rate the major European economies – France, Germany, Italy, the Netherlands, Russia, Spain and the UK – in terms of which was deemed to be the most favourable from a tax system perspective. The reason for restricting views to the major economies was to recognise that many organisations do business in those economies and, therefore, their tax regimes affect many multinational groups.

The most favourable major economy to operate in was the Netherlands, closely followed by the UK.

The Netherlands was cited as having an easy and 'professional' tax system. It was seen as predictable, easy to contact the tax authorities and to receive a ruling within a few weeks. Respondents continually referred to the simplicity of its tax system and the ease of dealing with authorities.

For the UK, the tax officials were often praised as being helpful, and many of the respondents viewed it as operating international best practice. The tax authorities were viewed as pragmatic, clear and open.

Most favourable smaller jurisdictions from a tax system perspective

Respondents were then asked to select from the smaller European economies whether there was another country more favourable than the major economy already rated. Luxembourg and Switzerland were viewed as most favourable by the highest number of respondents, followed by Belgium and Ireland.

47% of respondents from the Netherlands picked their own country as the easiest to operate in and only 43% had experienced a tax authority audit in the Netherlands in the past three years. 58% of UK respondents picked their own country as the most easy to operate in, even though 73% had experienced a tax authority audit.

Most challenging large jurisdictions from a tax system perspective

Respondents were also asked to consider which of the major European economies were the most challenging from a tax system perspective. Russia was viewed as the most difficult of the seven largest European economies in which to operate. The main reasons stated were uncertainty and complexity. Comments also included that rules appeared opaque and arbitrary, or difficult to understand.

Italy was also viewed as challenging. Comments from respondents pointed out that the Italian tax system – being subject to frequent changes in tax law – suffered from different interpretations over time. This, combined with a very general anti‑abuse rule and criminal sanctions for tax issues, were the main reasons for its less favourable ranking.

Finally, respondents were asked whether there was a smaller economy that was more challenging than any of the large economies. Here, many respondents stuck with their chosen large economy as the most challenging, particularly Russia. However Greece, Portugal, Poland and Hungary also featured, in that order.

Comments on tax regimes

The reasons given for finding tax regimes favourable were strikingly similar – transparency, certainty, a well‑designed tax system, and the possibility of forming sensible working relationships with the tax authorities.

There was also widespread consensus over why jurisdictions can be challenging from a tax perspective. Respondents did not like uncertainty, legislative change, and tax authorities that are unable or unwilling to find solutions to tax issues created by commercially motivated transactions. Russia, specifically, was cited as having a 'very different tax regime from the rest of Europe' that 'did not mesh well' with other commonly accepted structures for tax systems internationally.

Interestingly, few respondents referred to tax rates in their answers, which suggests that jurisdictions can afford to have relatively high tax rates, provided that their tax systems are uncomplicated and flexible.

Respondents were generally more critical of their own jurisdictions than of foreign jurisdictions. A third of French respondents picked their own country as most challenging versus only 15% overall. 37% of German respondents selected their own country versus 17% overall. This may reflect that, for many respondents, their local jurisdiction is where their group's regional or worldwide headquarters are based, and therefore their local tax affairs are likely to be more complex (for example, due to the need to navigate debt financing complexities or controlled foreign company compliance and reporting obligations) than those of their (often relatively straightforward) subsidiary operations.

To read this Survey in full, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions