Cyprus, Ireland, and Switzerland are the top three countries in a league table of European tax systems compiled by KPMG International, in which major business organizations 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.
DOES IT SAY ANYTHING NEW?
The only redeeming feature was this comment by Sue Bonney of KPMG:
I was interested to see that a complex tax regime is seen as a hindrance to competitiveness, but 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.
That sounds about right but who pays for good infrastructure, a high quality workforce and access to raw materials and markets? That is a question she clearly did not ask herself or ignored the answer to. Ms. Bonney of KPMG also made the following prescription:
These results help to illustrate just how much businesses across Europe dislike uncertainty and complexity. The volume of tax legislation is huge and its interpretation is often opaque. Simplification presents a real challenge for European tax authorities.
Which is not, of course, what the survey found. But it is what KPMG wants. KPMG is, after all, the biggest tax haven operator in the Big 4. We can agree with her statement that the volume of tax legislation is huge. However, those who interpret tax legislation often do so in an opaque manner. And tax opinions issued by the Big 4 to clients many are sometimes of poor quality technically. In fact, they are sometimes plain wrong and are almost invariably couched in caveats and disclaimers. All that makes these opinions unfit from the client’s perspective who is trying to get an answer to a burning question.
METHODOLOGY
These views were compiled from 402 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.
KPMG took the percentage of respondents who thought key aspects of their domestic systems were attractive and subtracted those who felt they were unattractive, to give a net attractiveness score for each country.
Worst is that the study tells us nothing about how many people refused to participate in the study, in some countries we heard less than 6 people were asked ….. and the instrument or questions used for the telephone survey were not published.
Hence, this seems to be another type of ranking from one of the Big 4 consulting firms that is of neither great quality, substance nor does it provide new insights.
MEDIA INCLUDING NZZ Did WHAT THEY ARE SUPPOSED TO NAMELY
In the case of the Neue Zuercher Zeitung or NZZ for short (Switzerland’s most prestigious daily), the KPMG press release made it pretty much verbatim into the editorial content of the Wirtschaft (p. 23 – 2007-12-21) section.
The result Table as provided by KPMG was copied without even questioning its content and validity of data used to arrive at these rankings.
Not something one would expect of a high quality newspaper.
CONCLUSION or CyTRAP Lab’s take
These days nearly every big service firm produces some kind of of study about some type of issue. The study is outsourced to one of the survey firms that takes a few of its research staff to man the phone lines ….. and interview some people out of their proprietary dataset listing firms or people that can be used (remember when you got called the last time to participate in yet another study?) …. and voila, the client can write up another ranking that tells us little if anything but receives much coverage in the media.
Information derived from such work does neither help management cope better with risks nor does it facilitate making sound decisions about where to locate a business, for instance.
Sad is that a high quality newspaper such as the Neue Zuercher Zeitung does not have staff that can see when they have a lemon in front of them…. namely a study that does not merit being written about. But today nobody seems to have time to check up on facts and when it comes from one of the Big4 firms, it gets printed…. brand is everything while quality means nothing…
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QUESTIONS WE ASKED KPMG ABOUT THE STUDY – 2007-12-30 – NO ANSWERs SO FAR
1) you got 402 responses, what percentage does this represent of the people you asked to participate?
2) how did Lighthouse, the firm that conducted the study on KPMG’s behalf select the people that were interviewed by phone?
3) how was the ranking exactly calculated – statistical issues – since the number of respondents in some countries are way below 10 = reliability of results?
4) what is the logic behind the way you calculated the index?
5) did you control for any variables that might have influenced your responses?
6) were the questions of this survey translated into different languages or was it done in English only?
….. without answers the these questions it is impossible to decide if this survey was done well enough to draw some conclusions from its findings.
But it surely was a great publicity stunt and many newspapers and their editors fell for it.
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