EVCA calls for EU fiscal convergence

Unfavourable tax and legal structures are a hindrance to private equity investment especially in Austria, Denmark, Germany, Finland and Spain, according to a report published by EVCA.

A new report from the European Private Equity and Venture Capital Association (EVCA) has highlighted the disparities faced by private equity firms investing across the Europe Union.


The paper, entitled 'European Private Equity and Venture Capital: Benchmarking European Tax and Legal Environments', assesses the 15 member states of the EU on ten indicators of potential benefit to private equity investors.


The criteria employed included legislation on fund structures, merger regulation, rules governing pension funds, corporate taxation, capital gains tax for individuals, taxation of stock options, entrepreneurial environment and fiscal incentives for research and development.


The report purports to measure the entrepreneurial environment using hard factors like the tax and legal framework. However, EVCA said that soft factors that make up an entrepreneurial culture are not covered by the study, meaning that the paper has no capacity to provide an indication of competitive private equity and venture capital performance in different member states.


According to EVCA, the objective of the report was to allow member state governments, stakeholders and other interested parties to assess best practices currently in place and take action where needed. “The purpose of the report is to promote convergence and not disparity,” said Max Burger-Calderon, EVCA chairman. “This benchmark paper should be used on a national level to improve the fiscal and regulatory environment.”


The report highlights Denmark and Austria as having the least favourable tax and legal environment for private equity and venture capital within the European Union. Also among the poorer performers were Germany, Finland and Spain.


The middle-tier of EU member-states was made up of France, Sweden, Italy and Greece. The UK topped the poll of most favourable markets, followed by Ireland, Luxembourg and the Netherlands.


The Association has been keen to promote the report as a starting point for legislative development rather than classifying countries on a league table basis. “The study should therefore not be narrowed down to the ranking of countries,” said Didier Guennoc, EVCA research and public affairs director.