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KPMG International compiled a list in which major business organisations across Europe assessed the attractiveness of their domestic tax regimes.

All three countries were rated highly for their combination of consistency in interpreting tax legislation, stability in resisting frequent changes to tax laws, and comparatively low tax rate.

The three least attractive countries were the Czech Republic, Romania and Greece. All three lost support for having high volumes of complex legislation, with frequent changes.

Net attractiveness score 

These views were compiled from more than 400 interviews of tax professionals in multinational companies across Europe. Survey participants were asked how attractive they believed their country’s tax regime was compared with other European states.

Taking the percentage of respondents who thought key aspects of their domestic systems were attractive and subtracting those who felt they were unattractive gives a net attractiveness score for each country.

The survey also showed that being in a country with an unattractive tax regime is not simply an inconvenience for business.

Almost 70 percent of respondents who thought their country’s tax regime was unattractive also believed that this put their companies at a competitive disadvantage when competing with foreign companies.

In those countries with an attractive regime, however, just 43 percent of respondents felt that this gave them a competitive advantage when competing overseas.

Lever to encourage inward investment 

Sue Bonney, head of tax for KPMG Europe LLP and partner in the UK member firm, said she was interested to see that a complex tax regime is seen as a hindrance to competitiveness, but that relatively few people felt that a simpler system with a low rate can help make businesses more competitive.

“Governments across the world have been using tax as a lever to encourage inward investment for many years, but these results help to confirm that a benign tax regime is only part of the package which makes a business competitive. Good infrastructure, a high quality workforce and access to raw materials and markets are all equally important,” she added.

The survey explored participants’ attitudes to particular aspects of their home tax regime, including consistency, stability over time, volume of legislation, the tax rate and relations with tax authorities.

At a European level the most unattractive area was the volume of tax legislation, with a net attractiveness score of just 28 percent.

This concealed a huge variation at a country level, however, with 100 per cent of respondents in Cyprus saying that the low volume of tax legislation there made the country attractive, and all of the Romanian respondents declaring that the volume of legislation in their country was too high.

Dislike of uncertainty and complexity 

Relations with tax authorities were generally positive, with an average of 60 per cent across Europe saying that this is an attractive part of their regime.

The countries with the highest scores in this area were Ireland, Switzerland, Estonia, Finland, Denmark, Slovenia and Lithuania. Those with the poorest were Germany, Spain, Italy, the Czech Republic and Greece.

Sue Bonney said that the results helped to illustrate just how much businesses across Europe dislike uncertainty and complexity. She added that the volume of tax legislation is huge and its interpretation is often opaque, and that simplification presents a real challenge for European tax authorities.

“It is very encouraging to see that relations between tax authorities and taxpayers are generally good. Our member firms’ view is that it is only by co-operation and the building of trust between tax authorities, taxpayers and tax advisers that many of the problems with today’s complex tax regimes can be solved,” Bonney concluded.

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