Tax Certainty in Belgium is lower than EMEA average
Gap in tax certainty is even bigger with Switzerland, Luxembourg and the NetherlandsDOWNLOAD
Brussels, 28 June 2012 – Today, Deloitte announces the results of the first EMEA edition of “Tax Certainty – A Survey about the Relationship between companies and the Tax Authorities” . After two years of conducting this study in Belgium only, Deloitte extended the research in 24 countries in Europe, the Middle East and Africa (EMEA), allowing a valuable comparison between the different countries with regard to the relation between companies and tax authorities. One of the conclusions was that the local tax authorities in most EMEA countries have good relationships with their business communities – as is the case in Belgium. However, the overall tax uncertainty remains a concern: 1 out of 2 EMEA respondents feel that tax uncertainty in their country impacts or even damages their business operations. Moreover, 39% of the companies doing business in Belgium state that tax uncertainty in Belgium is higher compared to other countries.
Companies doing business in Belgium have good relationships with the local tax authorities – however the results are less positive compared to the 2011 results
The Deloitte survey results show that, overall, companies or organisations have a good relationship with their local tax authorities throughout EMEA – 65% of the respondents described this relationship as good and 27% rated it as being very good.
In Belgium the relationship between the companies and the local tax authority is comparable to the opinion at EMEA level (73% good, 23% very good). However, the survey does show a slightly less positive attitude compared to the 2011 survey results (86% good, 11% very good). Compared to last year, the Belgian respondents also seem to experience more difficulties with the Belgian tax authorities: 34% of the respondents doing business in Belgium claimed not to have had issues with any particular tax department, compared to 54% in 2011.
Taxpayers around EMEA – and also in Belgium – indicate that the quality of their company’s relationship with the local tax authorities depends on the particular department at the local tax authorities they need to deal with. This especially applies to the department dealing with corporate income taxes, where more than 21% of respondents have experienced difficulties, followed by the VAT authorities with almost 20% of respondents having had difficulties. In Belgium, VAT is rated the most difficult tax field by 20% versus 13% in 2011 followed by corporate income tax by 17% versus 16% in 2011.
39% of the companies doing business in Belgium consider tax uncertainty in Belgium to be higher compared to other countries
Throughout EMEA, 1 out of 2 respondents feel that tax uncertainty in their country impacts or even damages their business operations. This feeling of uncertainty is especially apparent in Hungary, Kenya, Poland, Portugal and Romania. The main reason for uncertainty is the frequently changing legislation, which was indicated by almost one third of the EMEA respondents. Next in line is the excessive length of tax disputes (12.4%) followed by the weaknesses and reversals in the tax authorities’ doctrine and in publicly available guidance (12.1%). Not in the EMEA’s top 3, but highest on the list of reasons causing tax uncertainty in Belgium (as well as in France) are the perceived retroactive changes to the tax legislation according to 1 out of 4 respondents doing business in Belgium.
The Swiss are the most confident about tax certainty in their country and 80% even believe no other country in the EMEA region would have a higher certainty level. On the other hand, in Hungary, Poland, Romania and Russia, over 55% of respondents believe tax uncertainty is greater in comparison to other EMEA countries. Compared to the EMEA results, the Belgian respondents are quite negative towards the current state of Belgian tax legislation and its execution. Companies doing business in Belgium have a negative perception on tax certainty in Belgium. This outcome aligns closer with the results from a number of Central European countries, rather than with the results of the other Western European countries surveyed. Piet Vandendriessche, Managing Partner Tax at Deloitte Belgium, and coordinator of this EMEA study, adds; “the countries where Belgium is most in competition with as a headquarter country, i.e. the Netherlands, Luxembourg and especially Switzerland, score much higher on tax certainty.”
Majority of respondents prepared to litigate in Court in case of administrative recourse failure, however only 1 out of 4 has actually started a Court case in the last 3 years
Disputes with local tax authorities are generally settled through administrative recourse. In Switzerland, the Netherlands, Nigeria and Sweden, a large majority (>70% in each country) is rather confident that an administrative recourse with the local authorities leads to an acceptable solution. In Belgium, the percentage of these confident respondents is only 46%, which is less compared to last year. Vandendriessche: “in conclusion, fewer Belgian taxpayers currently perceive this administrative procedure as a satisfactory solution for issues they encountered in view of a tax audit, whereas last year still the majority (i.e. over 56%) was rather confident to settle a potential dispute through the administrative recourse”. In Norway, a number of Central European countries (Hungary, Poland, Romania and Slovakia) and Russia, only a minority of respondents believes that an administrative recourse is likely to result in a satisfactory solution.
The majority of EMEA respondents (83%) trusts that their company would be treated fairly by the local Revenue service, whereas 17% rules out the chances for a fair treatment. This number is especially high in Romania where 43% of the respondents do not believe their company would get a fair treatment from the Romanian revenue service - 12% of respondents, mainly from Russia and Romania, confirmed having filed a complaint for unfair or unprofessional treatment by the local tax authorities in the past. In Belgium, in line with the EMEA average, 18% of respondents judged that their chances to a fair treatment are not good.
1 out of 5 respondents perceived an increased audit activity
During the last three years, nearly a third of EMEA respondents were audited by the VAT (Value Added Tax) and CIT (Corporate Income Tax) departments of their local tax administration. Approximately one out of ten respondents was audited in view of transfer pricing, international tax and personal income tax during this period. Less than 6% of respondents were audited in the area of customs, excise duty and property tax – audit activity in these tax fields appears to be considerably lower. Even though the majority (53%) indicates that tax audit activity remained constant during the past year, approximately a fifth (21%) of the respondents feel that the audit activity increased. This was most apparent in Russia where 50% experienced an increase in the tax authorities’ audit activity.
Digital readiness is high across EMEA, but there is room for improvement in view of Belgian tax transparency
The vast majority of the companies in the survey (83%) indicated that they provide information to their local tax office via digital communication channels. The majority (56%) of the authorities of participating countries do provide taxpayers with a public information website enabling them to verify the tax authorities’ position on a certain topic. The Danish, Swedish, Dutch and Portuguese tax websites are considered to be of high quality because the tax authorities’ position on certain tax matters is publicly available and because of the website’s good search capabilities. Piet Vandendriessche: “In Belgium, less than half (49%) of the respondents indicated they have public access to the authorities’ position on a certain matter – especially the search capabilities of the Belgian website ‘Fisconetplus’ are criticised, which is in line with last year’s results”.
Ruling Commission maintains steady reputation in Belgium, but its strength is somewhat eroding
An official Ruling Commission or System exists in all the participating countries with varied levels of familiarity with these government bodies. Almost one fourth of the respondents have consulted other tax authorities’ departments to obtain certainty on tax matters through a ruling but without interference of the official Ruling Commission.
In all countries surveyed, it is generally allowed to request a tax ruling from the local tax authorities without addressing or involving the official Ruling System. This happens relatively frequently in Sweden and Switzerland where respectively 55% and 50% acknowledges to have asked for a ruling from the tax authorities outside the Ruling Commission in the past year. The majority of the rulings throughout EMEA are obtained for corporate tax matters – 5 times more often as for VAT matters which are next in line. Rulings for personal income tax matters and customs and excise duties are rarely initiated with the local Ruling Commissions.
Almost 36% of respondents who have experience in dealing with the official Ruling System consider this to be a slow procedure, especially in Russia and Romania. The Polish, Swiss, and Dutch official ruling procedures are rated much more positively. In Luxembourg, the vast majority even perceives it as a fast procedure. According to 32% of all respondents however, there is room for improvement in dealing with the official Ruling System and 12% of all respondents perceived their experience with the Ruling Institution as poor. Belgian respondents also agree that there is room for improvement (24%). Nonetheless, with 30% evaluating the Belgian Ruling System as positive and 38% as satisfactory, the ruling system is still a valid means of obtaining tax certainty. Despite a favourable evaluation by respondents, the system is not as strong as it used to be.
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