France has been identified as having Europe’s most attractive tax and legal environment for private equity firms in a benchmarking exercise conducted by the European Private Equity and Venture Capital Association (EVCA).
The fourth study of its kind, which compared the tax and legal environments in 27 European countries, awarded France a score of 1.23 (the best possible score being 1.0 and the worst possible score being 3.0). The last time such a study was conducted, in 2006, France was in second place with a score of 1.36 behind Ireland (1.27). This time, Ireland comes second on 1.32.
Having come top in 2003 and 2004, the UK fell to third in 2006 and this time drops even further to fourth, with a score of 1.45. Belgium, which came fourth in 2006, has moved up to third this time with a score of 1.33. A statement accompanying the results noted that Belgium “has made beneficial changes to its pension fund environment and new fiscal R&D incentives”.
Overall, the tax and regulatory environment for European private equity has marginally worsened. The average score recorded in this year’s study is 1.85, compared with 1.84 in 2006.
Over that period, the study found improvements in the ease with which pension and insurance companies can invest in the asset class, the provision of company incentives and the availability of fiscal R&D incentives. However, the environment for fund structuring and the ability to retain talent had got worse.
Notable among the poorer performers is Germany, which was ranked 22nd of the 27 countries in total. The majority of the lowest-ranked countries are from Central and Eastern Europe. The Czech Republic is ranked last of all with a score of 2.40.
Commenting on the findings, EVCA secretary general Javier Echarri said: “Several European countries have shown good progress in the past two years in improving the environment for private equity capital. But those countries slipping down the rankings should take this as a wake up call that their long-term economic health is in jeopardy.”