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Business in Belgium suffers from tax uncertainty

On June 28, Deloitte announced the results of its first Europe, Middle East and Africa (EMEA) edition of “Tax Certainty – A Survey about the Relationship between companies and the Tax Authorities”. The results show that 39% of the companies doing business in Belgium experience a higher tax uncertainty in Belgium than in other countries.

By extending the Tax Certainty survey to 24 EMEA countries, Deloitte aimed for a comparison between the different countries with regard to the relation between companies and tax authorities. In most EMEA countries, including Belgium, companies and organizations have a good relationship with their local tax authorities.

In Belgium, the relationship between the business community and the local tax authorities is comparable to the EMEA average, with the majority of respondents (73%) rating it good and very good (23%). However, only 34% of the Belgian respondents claimed not to have had issues with the Belgian tax authorities (compared to 54% in 2011). Taxpayers noted that the quality of a company’s relationship with the tax authorities largely depends on the department at the local tax authorities that needs to be dealt with. In Belgium, VAT is rated the most troublesome tax field by 20% (13% in 2011), followed by corporate income tax by 17% (16% in 2011).

One out of two EMEA respondents feel that the tax uncertainty in their country impacts or even damages their business operations. The main reason for this uncertainty is the frequently changing legislation, which was indicated by almost one third of the respondents, followed by the extensive length of tax disputes (12.4%) and weaknesses and reversals in the tax authorities’ doctrine and in publicly available guidance (12.1%). In Belgium, however, the number one reason for tax uncertainty is the perceived retroactive changes to the tax legislation.

The negative perception on tax uncertainty in Belgium is more in line with results from a number of Eastern European countries, rather than those from Western European countries. “The countries where Belgium is most in competition with as a headquarter country are The Netherlands, Luxembourg and Switzerland, which score much higher on tax certainty”, says Piet Vandendriessche, Managing Partner Tax at Deloitte Belgium. In total, 39% of the companies doing business in Belgium perceive tax uncertainty to be higher in Belgium as compared to other countries. In The Netherlands and Luxembourg, over 50% of the respondents believed that local tax certainty is greater than in any other EMEA country. More remarkably, the Swiss respondents unanimously stated that no other EMEA country had higher tax certainty than Switzerland.

The majority of the respondents reported to be prepared to litigate in Court in case of administrative recourse failure. But in Belgium, fewer taxpayers (46%) perceived this administrative procedure as a satisfactory solution for issues they encountered in view of a tax audit. In all the participating countries, companies can consult an official Ruling Commission or System or other tax authorities’ departments to obtain certainty on tax matters through a ruling. Almost 70% of the Belgian respondents evaluated the Belgian Ruling System as satisfactory means of obtaining tax certainty. However, 30% reported that there is room for improvement, stating that the system is not as strong as it used to be.

AmCham Belgium’s position

AmCham Belgium welcomes Deloitte’s initiative to compare the tax certainty between EMEA countries. The results on tax uncertainty in Belgium are much in line with the issues that AmCham Belgium marked to be impeding factors for doing business in Belgium: frequent and retroactive changes to legislation, extensive length of tax disputes and haziness in the tax authorities’ doctrine. The government should therefore enable companies to focus on their business rather than on compliance with legislation by providing companies with fiscal and regulatory stability. To see all of AmCham Belgium’s recommendations for a stable business environment, please see our 2012 Priorities for a Prosperous Belgium.