European Tax Survey

Belgium’s competitiveness under pressure due to high level of tax uncertainty

Diegem, 28 October 2013 – Today, Deloitte announces the results of the “European Tax Survey – The benefits of stability”. The survey, which covers 27 countries, explores new and sometimes surprising trends affecting heads of tax. The European Tax Survey reveals that the overall tax uncertainty remains an important concern: 60% of all respondents feel that there is a high level of tax uncertainty in their country, in Belgium this percentage even amounts to 76,5%.

Above all heads of tax want stable tax legislation. The biggest issue many respondents cite is that already complex tax systems are being further complicated by rafts of new laws. Aside from the burden of keeping up with the changes and educating their teams, this is the main cause of tax uncertainty.  Heads of tax also think that a country’s competitiveness would improve if governments would reduce the frequent changes to legislation.

76,5% of the surveyed companies doing business in Belgium think there is a high degree of tax uncertainty in Belgium
Throughout Europe, 60% of the respondents indicate that there is a high degree of tax uncertainty in their country. This feeling of uncertainty is especially apparent in Italy, Hungary, Portugal and France.
Frequent changes to legislation are viewed as the main cause of tax uncertainty by three quarters of the respondents. The second cause of uncertainty is ambiguity, weaknesses and reversals in the tax authorities’ doctrine or publicly available guidance.

Piet Vandendriessche, Managing Partner Tax & Legal at Deloitte Belgium, adds, “It is worrisome that other headquarter countries, e.g. the Netherlands, Luxembourg, Switzerland and Ireland, score consistently higher on tax certainty compared to Belgium.”  

Rapidly changing legislation is the main reason for keeping tax executives awake at night
The overall majority of heads of tax (both in Europe as in Belgium) is mainly stressed by changing tax regulation. This is clearly an important topic throughout Europe. The request is not for lower rates or greater incentives: simplicity is desirable, and increased certainty may be an outcome of increased simplicity.

Almost half of all respondents (52% for Belgium) cited that more certainty around the future of the tax system would have a positive impact on their country’s competitiveness. Vandendriessche mentions, “If we bring up the recent law imposing the fairness tax, we notice a lot of concerns and uncertainty among our clients as it is far from clear who is affected by this tax and what its impact will be. Measures like the fairness tax certainly impact Belgium’s attractiveness. We experience that Belgium is viewed as less interesting for establishing or maintaining headquarters in Belgium.”

87% of Belgian respondents have been audited by a department of a tax authority in the last three years
During the last three years, three quarters of European respondents were audited by a department of a tax authority, in Belgium this even amounts to 87%. Only Hungary (100%), France (95,65%) and Russia (92,86%) have a higher audit rate. Croatia is the country with the lowest rate of tax audits (39%).
Corporate income taxes and indirect taxes have received the most attention from tax authorities; the complexities of the international tax system and in particular transfer pricing continue to challenge both tax authorities and multinationals.

How competitive is Belgium from a tax system perspective compared to other European countries?
The Netherlands and the UK are seen as the most favourable of the large jurisdictions to operate in from a tax perspective. Both the UK and the Netherlands have worked hard to become more attractive to multinational companies, and this seems to be working.
Looking at smaller economies, Luxembourg and Switzerland are doing very well followed by Belgium and Ireland. Belgium is performing quite well from a European point of view; however it is lacking behind. Piet Vandendriessche states; “Currently Belgium has a clear competitive advantage with e.g. the attractive notional interest deduction and the current treatment of holdings. Our ruling regime also functions well and contributes to tax certainty. It really worries me when hearing politicians think about further limiting or even abolishing these and other measures. Without these, Belgium might not be able to differentiate itself from other headquarter countries any longer. Imposing a nominal rate of 25% to everybody sounds democratic but it denies the reality in Europe: a fierce competition between the member states to attract investments. And in this battle, special tax measures play an important role. ”

Tax in the spotlight
More than two thirds (67%) of respondents have not been asked by external stakeholders to justify their tax strategy and over half (51%) have not even been asked internally. Yet a majority (58%) of respondents thinks there is generally an increased level of discussion and scrutiny around corporate tax strategy compared to a year ago. Even up to 75% of Belgian respondents share this opinion.

About the survey
Between June and July 2013, Deloitte launched the European tax survey. Thanks to the close collaboration of various Deloitte member firms located in this region, in total 938 respondents participated in the online survey, together representing 27 countries: Austria, Belgium, Croatia, Cyprus, Czech Republic, Denmark, France, Germany, Hungary, Ireland, Italy, Kazakhstan, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Portugal, Russia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine and the United Kingdom.
The objective of the survey is to track trends as viewed by heads of tax. The survey also outlines which jurisdictions are perceived as the most challenging or the most favourable and where in Europe it appears to be becoming easier to do business.
The survey respondents are heads of tax of (mainly multinational) companies.