Differences in national tax and legal regimes across Europe are hampering the development of Europe's private equity and venture capital sector, the European Venture Capital Association (EVCA) said this week.
The organization compared factors including merger regulation, pension funds, company tax rates (also for small to medium enterprises) and capital gains tax systems across the different member states to reveal which countries were most favourable.
The resulting paper, European Private Equity and Venture Capital: Benchmarking European Tax and Legal Environments, aims to provide a tool to allow both the supply-side of private equity (private equity practitioners and investors) and the demand-side (entrepreneurs) to compare the different legal and tax frameworks affecting private equity and venture capital.
"This benchmark paper should be used on a national level further to improve the fiscal and regulatory environment of this dynamic, growth driving industry and to inspire decision-makers to develop favourable, harmonized tax and legal policies with respect to private equity," said Max Burger-Calderon, EVCA's chairman.
The study found that the UK and Ireland are the countries with the most favourable regulatory environment for the private equity and venture capital industry followed by Luxembourg, the Netherlands and Italy. Countries with lower than average conditions included France, Belgium, Spain and Germany with Denmark and Austria providing the least favourable tax and legal environment for private equity and venture capital.
EVCA intends to extend and update the study on an annual basis wanting the information to be seen as stimulating change rather than merely listing the best countries for private equity.
Javier Echarri, EVCA's secretary general said: "Member states and the EU have made little progress in harmonizing their serious tax and legal disparities."
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