Deloitte survey on tax certainty held in 24 countries shows
Tax certainty across EMEA varies considerably from country to countryDOWNLOAD
Hungary, Poland, Romania and Russia are least tax certain; Switzerland, Denmark, Luxemburg, The Netherlands and Sweden rate their tax certainty to be highProduct innovation, combined with effective pricing strategies, will be key areas of focus for companies in 2012 and beyond
Frequent changes in legislation seen as main reason for tax uncertainty in EMEA
Moscow, 28 June 2012 - Deloitte announces the results of the first EMEA edition of “Tax Certainty – A Survey about the Relationship between companies and the Tax Authorities”. The Deloitte survey, which aimed at understanding various aspects of the relation between companies and tax authorities in 24 countries in EMEA, noted that most countries have a good relationship with their local tax authorities. However, the overall tax uncertainty is a concern: 1 out of 2 respondents feel that the tax uncertainty in their country impacts or even damages their business operations. The survey also investigated to which extent local Tax Authorities are implementing digital information in their operations, how respondents in the different countries look at disagreements with Tax Authorities and how they evaluate their local Ruling Practices.
Overall good relationship with the local tax authority throughout the EMEA region
The Deloitte survey results show that overall companies or organisations have a good relationship with their local tax authorities – 65% of the respondents described this relationship as good and 27% rated it as being very good. However, in Austria, Italy, Nigeria, Poland, Romania and Russia more than 15% of the respondents consider their relationship to be bad or very bad. Taxpayers around EMEA 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 – more than 21% of respondents have experienced difficulties with this department, followed by the VAT department with almost 20%.
Tax (un)certainty across EMEA varies considerably from country to country. Frequent changes in legislation seen as main reason for tax uncertainty in EMEA
Throughout EMEA, 1 out of 2 respondents feel that the 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 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%).
The Swiss are the most confident about the tax certainty in their country and 80% even believes 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.
Advanced Ruling System can partially mitigate perception on tax certainty
The Ruling Systems in Belgium, Denmark, Finland, Luxembourg, Poland, Sweden and Switzerland are well known in the respective business communities and as such contribute to the level of tax certainty. In addition, taxpayers also consulted other tax authorities’ departments to obtain certainty on tax matters through a ruling but without interference of the official Ruling Commission. In general, almost one fourth of all respondents initiated a ruling request through these channels.
Almost 36% of respondents who have experience in dealing with the official local Ruling System consider this to be a slow procedure, especially in Russia and Romania. The Luxembourgish, Polish, Swiss and Dutch official ruling procedures are rated much more positively. In Luxembourg, the vast majority even perceived it as a fast procedure. According to 32% of all respondents however, there is room for improvement in dealing with the local official Ruling System and 12% of all respondents perceived their experience with the local Ruling Institution as poor.
1 out of 5 perceived an increased audit activity across EMEA
During the last three years, nearly a third of the respondents were audited by the VAT (Value Added Tax) and CIT (Corporate Income Tax) departments of their local tax administration. Approximately a tenth of respondents were 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 audit activity.
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. On the other hand, in Norway, Russia and in a number of Central European countries as Hungary, Poland, Romania and Slovakia, only a minority of respondents believes that an administrative recourse is likely to result in a satisfactory solution.
Approximately 78% of respondents confirm their company would be prepared to litigate in Court in case of failure of the administrative recourse; in France, Portugal, Russia and Sweden this concerns more than 90%. Even though the likelihood of going to court in case of disputes is significant, only 26% of respondents confirmed that their company actually started a Court case during the last 3 years. Poland, Portugal and Russia are on top of the list of countries where such Court cases took place.
The majority of respondents (83%) is confident their company would be treated fairly by the local Revenue service, whereas 17% rules out the chances on 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.
Digital readiness is high across EMEA
The vast majority of the companies surveyed (83%) indicated they can provide information to their local tax office via digital communication channels. According to the majority of the participating countries (56%), local tax authorities provide taxpayers with a public information website enabling them to verify the tax authorities’ position on a certain topic. The Danish and Swedish 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. The Netherlands and Portugal also score well in this regard.
About the survey
Between March and May 2012, Deloitte launched the EMEA survey on companies' relationships with tax authorities throughout Europe, Middle East and Africa. Thanks to the close collaboration of various Deloitte member firms located in this region, in total 1,328 respondents participated to the online survey, together representing 24 countries: Austria, Belgium, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Hungary, Iceland, Ireland, Italy, Kenya, Luxembourg, the Netherlands, Nigeria, Norway, Poland, Portugal, Romania, Russia, Slovakia, Sweden and Switzerland.
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