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Deloitte European Tax Survey - The benefits of stability

Fiscal uncertainty and complexity continue to cause headaches for tax directors in Belgium

Diegem, 10th December 2014 – Deloitte today revealed the results of its “European Tax Survey – The benefits of stability”.

This survey, conducted in 29 countries, assesses the findings of tax directors from (multinational) companies regarding the fiscal climate in Europe and the challenges facing them.

The most striking results from the survey are as follows:

  • A stable fiscal climate, administrative simplification and a lessening of fiscal and non-fiscal pressures on employment rank highly on the wish-list of tax directors in Europe;
  • Slightly over half (51%) of those surveyed believe that the OECD action plan in relation to the ‘Base Erosion and Profit Shifting Project (BEPS) is important to very important for their company.

Fiscal uncertainty and complexity continue to cause headaches for tax directors in Belgium

The study shows that fiscal uncertainty and complexity in our country are still the main sore points in the eyes of the tax directors of multinationals located in Belgium.

The majority of the tax directors surveyed in Europe (54%) believe that fiscal uncertainty in their country is one of the major challenges facing them. In Belgium, the percentage rises to 74%, leaving our country at the back of the bunch in the country rankings in terms of fiscal stability. Other countries that score poorly are Italy and France.

The main causes of uncertainty in Belgium and other European countries are the frequent changes to the legislation and a lack of clarity and unambiguity in the way the taxman thinks.

Piet Vandendriessche, Managing Partner Tax & Legal at Deloitte Belgium, adds: “Our main rivals for attracting investments – the Netherlands, Luxembourg, Switzerland and Ireland – all score significantly better in the area of tax certainty. Which gives us food for thought. Hopefully, the new federal government can make some changes here. In any event, the government agreement contains a number of passages that focus specifically on increasing legal certainty and strengthening the mutual trust between taxpayers and the tax authorities. For example, there is talk of the taxman publishing “Frequently Asked Questions” after a change in the law, as well as the softening of the fiscal treatment of secret commissions already announced and the concluding of a ‘Fiscal Pact’ to encourage legal certainty.”

Administrative simplification and fiscal stability as leverage for competitiveness

Almost half of respondents in Belgium and Europe say that simplifying the taxation system and great security regarding the future of the tax system would have a positive impact on their country’s competitiveness. For Belgium, the lowering of fiscal and parafiscal charges on employment was ranked in third place (28%).  Taking the whole of Europe, however, the third most important consideration was the importance of having predictable and helpful tax authorities.

Piet Vandendriessche: “Companies have a preference for countries that have a transparent and straightforward (tax) system, as well as a stable fiscal climate. In our country at least, the new federal government has indicated that it intends to work on reducing administrative charges in relation to taxes. The government agreement has the harmonisation of fiscal procedures and the reform of the VAT penalty system in its sights. It is no surprise that reducing employment charges also scores highly in Belgium. Hopefully, the federal government will also be able to achieve its aims in that area, too.”

Impact of the OECD’s “Base Erosion and Profit Shifting” action plan

In 2013 the OECD launched its “Base Erosion and Profit Shifting” (BEPS) Action Plan, which is aimed at calling a halt to a number of “anomalies in international tax matters”, such as hybrid financing. This plan also has the approval of the G20 countries.

To the question of whether the BEPS project is important for their tax department, just over half (51%) of tax directors in Europe said that it is important or even very important. In Belgium, that percentage is somewhat higher. Of those respondents who consider BEPS to be important, most also expect it to lead to higher administrative charges.

At the same time, this means that almost half of those surveyed are of the opinion that BEPS will not have an impact for their companies’ tax department. Only 35% of respondents think that BEPS is important in the eyes of their company management, while 69% say that they have not yet done anything to accommodate the effects of the action plan.

Piet Vandendriessche again: “This last point is rather surprising. BEPS will certainly have an impact for those multinationals that have chanced their arm on international tax engineering. But those multinationals that conduct a more conservative policy on tax will also have the bear the consequences of BEPS, for example in the form of more detailed reporting on transfer pricing.”

Holland and the United Kingdom the most attractive countries from a tax point of view

The countries that come out of the survey well in terms of tax certainty and administrative simplification are Holland and the United Kingdom.

Those surveyed praise the competitiveness of the UK tax system, as well as the British tax authorities themselves for their transparency and uncomplicated formalities. They also give plaudits to the Dutch tax authorities for their speed of response and approachability, access to information and clear, straightforward procedures. These are all elements that help promote the business climate and overall economic growth.

Piet Vandendriessche: “We can see clearly from our day-to-day contacts with our clients that in recent years Belgium has lost ground in terms of fiscal competitiveness. The reasons for this are a perception of constantly being called into question and the reviews of tax benefits such as notional interest deduction and the introduction of a number of complex fiscal measures, such as the so-called Fairness Tax, which is something that Europe now appears to have serious questions about.”

Tax matters in the spotlight

More than half of the tax directors surveyed (56%) were of the opinion that in comparison with last year, there is greater attention being paid to and debate about business tax strategies. In Belgium, that figure rises to 68%.

On the other hand, the majority of respondents in Europe indicated that they have never had to justify their tax strategy to external (77%) or internal (60%) stakeholders.

About the survey

Deloitte conducted its European tax survey between September and October 2014. In total, 814 tax directors from (mainly) multinational companies in 29 European countries took part in the online survey.

The purpose of the survey is to obtain a picture of the fiscal climate in European countries, as well as the challenges facing tax directors in their job. The survey shows which countries that are considered to be the most difficult or most appealing in terms of attracting investments and managing a company.

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