Tax Certainty in the Czech Republic Deloitte Survey in European Countries. March th edition

Transcription

1 Tax Certainty in the Czech Republic Deloitte Survey in European Countries March th edition

2 Presentation Contents Presentation of the Survey Companies experience with taxes and tax administration Perception comparison between Czech and foreign companies Development between 2014 and 2015 Areas of Focus Relationship to tax authorities Tax audits Tax certainty perception Summary 2

3 About the Survey It is the 5th regional survey conducted in Europe, including the Czech Republic The data collection took place in late 2015 It saw the participation of over 800 respondents across 21 European countries Participating companies by industry (largest share) Consumer goods and retail 24,7% Manufacturing 21,3% Other 15% Technologies, media and telecommunications 10,6% Financial services and insurance Energy & resources Engineering / construction Health care & biomedicine 7,9% 7,9% 6,9% 6,1% 0% 5% 10% 15% 20% 25% 30% 3

4 Relationship to Tax Authorities 4

5 Relationship to Tax Authorities in the Czech Republic 2014/2015 Comparison In general, how would you describe your company s relationship to the tax authority? ,3% ,5% 9% 10% 26,9% 62,8% Very good Good Neither good, nor bad Bad 50,0% 38,5% Excellent Very good Good Bad Very bad In 2015, most of the Czech taxpayers stated that they had a positive relationship with tax authorities (TA). According to our findings, one in ten respondents has excellent experience with tax authorities, with more than one third of the respondents describing the relationship as very good (38.5%). Half the respondents stated the relationship was good. The survey results show that the relationship with the TA has not been adversely affected by the wave of in-depth tax audits to any substantial degree. 5

6 Relationship to Tax Authorities in Selected Countries In general, how would you describe your company s relationship towards the tax authority? 7% 1,5% 3% 0% 0% 3% 50% 50% 59% 25% 53% 61% 32% Very bad Bad 34% 38,5% 35% 63% 39% 29% 51% Good Very good Excellent 9% 10% 3% 13% 8% 8% 14% Europe Czech Republic Belgium France Germany Austria UK In Europe, individual companies have relatively good relationships with tax authorities. Czechs describe their relationship in a nearly identical way to that of Germans and similarly to Austrians or Belgians. Britons have the best relationships with tax authorities, while the French have the worst. 6

7 Relationship to Tax Authorities in the Czech Republic What field does your tax administration focus on the most? ,0% 90,0% 80,0% 70,0% 60,0% 50,0% 40,0% 30,0% 20,0% 10,0% 0,0% 89,6% 89% VAT 61% 63% Corporate income tax 10,4% 13% Personal income tax 31,1% 16,9% 3% 2% 5,2% 0% 2,6% 0% Customs and excise duty Transfer pricing and international tax Nothing in particular Other (eg grants) As in previous years, tax authorities continue to focus on traditional fields VAT and corporate income tax. The survey suggests that compared to last year, the number of transfer pricing inspections significantly decreased. However, experience shows that transfer pricing inspections might be less frequent but they are more sophisticated and, therefore, more time- and expertiseintensive. A more active approach on the part of the General Financial Directorate might be expected in terms of future inspections as it plans to collect up to CZK 5 billion a year through better transfer pricing inspections. 7

8 Relationship to Tax Authorities in the Czech Republic Factors that could lead to an improved relationship with tax authorities More comprehensive approach and instructions on the part of the tax authority 62% 81% Focus of the tax authority on risky transactions 16% 29% More conservative approach of the taxpayer to tax strategies 2% 9% Czech Republic Europe Out of the options suggested, clear and comprehensive instructions from tax authorities would be the most beneficial for companies in the Czech Republic as well as other European countries. The survey results suggest that Czech taxpayers do not have worsened relationships with the TA on account of the selected tax strategies, but of ambiguous instructions related to the correct application of taxes. 8

9 Tax Audits 9

10 Tax Audits (Czech Republic and Europe) Has your company been inspected by the tax administration in the past three years? No Yes 34,6% 40,9% 50% 50% 59,1% 65,4% % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 35% 65% 50% 50% Yes No 3% 5% 97% 100% 95% 12,0% 88% 37,0% 63% Just like last year, the Czech Republic is among those countries in which the respondents stated the lowest frequency of tax audits. Half of the companies questioned have not been inspected by the tax authorities at all in the past three years. In Belgium and Germany, over 90% of the respondents were inspected and in France it was 100%. 10

11 Tax Certainty Perception 11

12 Tax Certainty Perception Do you think there is a high degree of tax uncertainty in your country (in which you are based)? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 0% 0% 0% 0% 24% 32% 46% 39% 59% 56% 100% 100% 100% 100% 76% 54% 61% 68% 41% 44% Europe Czech Republic Belgium France Ukraine Greece Sweden Germany Austria UK No Yes Overall, the number of respondents who believe that there is a high degree of tax uncertainty in the country where their company is based has not changed. Year-on-year comparison suggests that Czech respondents are a bit more optimistic. A high degree of tax uncertainty is perceived by 61% of Czech respondents, which is 10% less than last year. The highest degree of uncertainty is perceived in France, Greece, Sweden or Ukraine. In contract, the lowest degree of tax uncertainty is perceived in the Netherlands, Switzerland or Luxembourg. 12

13 Tax Certainty Perception in the Czech Republic and Europe (2014 and 2015) What are the two most significant causes of tax uncertainty in your country? Frequent changes to tax legislation Ambiguity, weaknesses and sudden reversals in the tax authorities doctrine or publicly available guidance Weaknesses and ambiguity in advance clearance or ruling system Retrospective changes to tax legislation 8% 14,8% 8,9% 9,3% 27,7% 39,3% 63% 88,9% Europe (2014) Frequent changes to tax legislation Weaknesses and ambiguity in advance clearance or ruling system Ambiguity, weaknesses and sudden reversals in the tax authorities doctrine or publicly available guidance Retrospective changes to tax legislation 36% 53% 14% 29% 25% 26% 8% 5% Europe (2015) Long duration of tax disputes 12,1% 5,5% Czech Republic (2014) Long duration of tax disputes 2% 17% Czech Republic (2015) In the Czech Republic, similarly to other European countries, the respondents agreed that the main cause of tax uncertainty lies in the frequent changes to tax legislation, as well as the ambiguity, weaknesses and reversals in the tax authorities doctrine. For taxpayers, tax uncertainty represents a major decisive factor in doing business and making investments. 13

14 Tax Certainty Perception in the Czech Republic and Europe (2014) What change(s) to your country s tax legislation do you think would have the greatest positive impact on your country s commercial competitiveness? (The respondents were supposed to select up to two choices.) Simplification of the tax system Greater certainty regarding the future of the tax system Predictable and collaborative tax authority Simpler compliance systems and processes Reduction of the indirect tax burden VAT of 1-2% in the rate Improved tax incentives Reduction of the corporate tax rate of 1-2% in the rate Reduction of the tax on dependent activities of 1-2% in the rate Reduction of the income tax burden/tax rate of 1-2% in the rate Fewer tax audits 16,1% 15,2% 6,8% 5,1% 14,5% 5% 9,5% 3,8% 12,1% 2,5% 6,4% 0% 2,7% 0% 27,7% 24,1% 48,6% 47,9% 67,1% 74,7% Europe (2014) Czech Republic (2014) 14

15 Tax Certainty Perception in the Czech Republic and Europe (2015) What change(s) to your country s tax legislation do you think would have the greatest positive impact on your country s commercial competitiveness? (The respondents were supposed to select up to two choices.) Simplification of the tax system Greater certainty regarding the future of the tax system Predictable and collaborative tax authority Simpler compliance systems and processes Improved tax incentives Reduction of the indirect tax burden VAT of 1-2% in the rate Reduction of the income tax burden/tax rate of 1-2% in the rate Reduction of the corporate tax rate of 1-2% in the rate Reduction of the tax on dependent activities of 1-2% Fewer tax audits 3% 3% 2% 0% 6% 7% 5% 6% 5% 12% 21% 17% 21% 15% 13% 28% 43% 44% 58% 68% Europe (2015) Czech Republic (2015) First and foremost, companies would welcome a streamlined tax system and greater certainty regarding the future of the tax system. In the long term, the Czech respondent s call for these changes has been more pronounced than that of the respondents from other European countries. Lower taxes and fewer tax inspections do not, according to respondents, have such a major influence on the competitiveness of their companies. 15

16 Tax Certainty Perception Czech Republic (2015) Do you believe tax uncertainty in your country is: 3% Greater than in other European countries 53% 44% Lower than in other European countries About the same as in other European countries Only 3% of the respondents assess the tax certainty in the Czech Republic as being greater than in other European countries. 16

17 Survey Conclusions In 2015, most of the Czech taxpayers stated that they had a positive relationship with tax authorities (TA). According to our findings, one in ten respondents has excellent experience with tax authorities, with more than one third of the respondents describing the relationship as very good (38.5%). As in previous years, tax authorities continue to focus on traditional fields VAT and corporate income tax. The survey suggests that compared to last year, the number of transfer pricing inspections significantly decreased. First and foremost, companies would welcome a streamlined tax system and greater certainty regarding the future of the tax system. Out of the options suggested, clear and comprehensive instructions from tax authorities would be the most beneficial for companies in the Czech Republic as well as other European countries. 17

18 Contacts Jaroslav Škvrna Partner in Charge, Deloitte Tax & Legal Function Tel.: jskvrna@deloittece.com Marek Romancov Partner, Deloitte Tax & Legal Function Tel.: mromancov@deloittece.com Radka Mašková Director, Deloitte Tax & Legal Function Tel.: rmaskova@deloittece.com Petr Neuschl Senior Manager, Deloitte Tax & Legal Function Tel.: pneuschl@deloittece.com 18

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