“While results showed that most companies have a good relationship with their local tax authorities, 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,” says a press release accompanying the launch of the first edition of “Tax Certainty – A Survey about the Relationship between companies and the Tax Authorities,” which polled respondents in 24 countries.
The survey also analyzed the extent to which local authorities implement digital systems in their operations, how respondents in various countries perceive disagreements with the local authorities and the advanced ruling system.
“Three years ago, Deloitte Tax issued the Romanian Taxation – X-Ray of an Incomplete Reform study, reflecting some of the challenges identified by large taxpayers in Romania. Back then we identified two very important gaps that counter-balanced the competitive advantages of the Romanian fiscal system (especially the 16% flat tax). These gaps referred to the uncertainty caused by the frequency of legislative changes and the quality of the relationship with fiscal authorities (including transparency, professional training and availability). Unfortunately, such challenges are being highlighted again in this current study, this time by – mostly- unfavorable comparisons with the rest of the region, from the business’ point of view,” said Alexandru Reff, Partner-in-Charge Deloitte Tax & Legal.
“Since this report presents statistic data for 24 countries, the frequent mentioning of Romania cannot please us, as it is the expression of our constant positioning amid extreme – not average – discontent. This is the case especially when discussing the general quality of the taxpayer – fiscal authority relationship, the efficiency of administrative recourses, the confidence in a fair treatment from revenues services in case of disputes, complaints against unfair or unprofessional treatment, the impact of fiscal uncertainty or changes in the revenue service’s approach. We have thus another confirmation that the Romanian fiscal system requires additional reform,” Reff said in the press release.
According to the survey, overall, businesses and organizations have a good relationship with the local tax authorities – 65% of respondents said they had a good relationship and 27% said they had a very good relationship. On the other hand, more than 15% of respondents in Austria, Italy, Nigeria, Poland, Romania and Russia consider their relationship 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%,” the survey found.
Tax uncertainty in EMEA varies considerably from country to country.
One in two respondents believes tax uncertainty in their country affects their companies’ operations. This feeling is strongest in Hungary, Kenya, Poland, Portugal and Romania. The principal cause is changes in legislation, as cited by almost one third of respondents, followed by the excessive length of tax disputes (12.4%), and inconsistency in the tax authorities’ doctrine and guidance (12.1%).
Tax certainty is highest in Switzerland, as indicated by 80% of respondents, but lowest in Hungary, Poland, Romania and Russia, according to more than 55% of respondents.
“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,” says the survey.
Almost 36% of respondents who have dealt with the local ruling system consider this a slow procedure, particularly in Russia and Romania. By comparison, these systems are rated positively in Luxembourg, Poland, Switzerland and the Netherlands.