EMEIA tax policy outlook

The outlook for global tax policy in 2013

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A number of lessons can be drawn from the responses of the 28 countries of EMEIA covered in this report.

First and foremost is the assumption that, while many countries are now rethinking their strategy in regard to austerity, the macroeconomic situation would seem to indicate that a heightened tax burden is here to stay for at least five years.

And with a couple of years of trends data now available to review since the height of the financial crisis, it is clear to see that the bulk of consolidation efforts continue to occur within personal and indirect tax classes. Of course, corporate taxation has not and will not be immune.

Although an earlier trend of introducing corporate tax rate surcharges seems to have slowed (and, unless they are extended, measures such as France’s two-year surcharge will expire at the end of 2013), according to our country respondents, the underlying trend of slowly but surely whittling down various deductions and exemptions (especially around the payment of interest and other financial expenses) continues to traverse the region.

Another trend that is either slowing or is perhaps taking a pause is that of rapid and profound reductions in headline corporate income tax (CIT) rates. Of the 26 countries that levy CIT, only the United Kingdom is anticipated to move in that direction in 2013 and then, only by a single percentage point.*

Countries such as the Netherlands, which had traded base expansion for rate reduction in pursuit of tax competition, have now seemingly reached the point where further base expansion to fund such rate reduction is either unattractive or politically unachievable. In terms of setting out their stall as a headquarters location, bets have now largely been placed.

Within the region, countries such as Portugal, Ireland, Italy, Greece and Spain (the so-called PIIGS grouping) may have had the full levers of sovereign policymaking confiscated in the short term and should therefore be viewed through a different lens.

To a degree, and judging from the number of active or proposed tax policy changes, France may be judged via a similar lens. But whatever policy measure contemplated and whichever area of tax impacted, one thing is clear: much can be learned from the experiences of countries that have already traveled in one particular direction.

Austerity or stimulus in 2013? Or neither?

Anticipated changes in tax burden in EMEIA countries

Tax type Increase in burden in 2013 Decrease in burden in 2013 No change in burden in 2013 Total countries  levying tax type
CIT 7 5 14 26
PIT 11 5 10 26
VAT/GST/sales tax 10 1 15 26
Total for all tax types 28 11 39  

Are there key events in 2013 that will influence tax policy?

Major tax reform efforts or policy shifts driven by political change are not anticipated in 2013 — at least notwithstanding deterioration in the European theatre. That said, some events do merit evaluation, including Germany’s election in September, alongside tracking of the success (or otherwise) of the country’s 12-point tax action plan first unveiled in 2012.

Greece is likely to see reform of the tax legislative framework in the first six months of 2013, while the Indian Government’s decision on whether to adopt the Shome Expert Committee recommendations on the indirect transfers of assets will be a key event of the year for multinational companies.

*2011 is the latest year for which actual data is available from the IMF, instead of projected data.