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BEPS implementation forces countries to find new business incentives, EY report suggests

While countries worldwide still pursue low rate strategies, the implementation of the G20/OECD Base Erosion and Profit Shifting (BEPS) recommendations are forcing governments to look for alternative forms of business incentives for competition, according to a report by EY.

EY’s Outlook for the global tax policy in 2017, combines the surveyed forecast of EY tax policy leaders in 50 countries as well as government proposals and known legislative changes.

EY global tax policy leader Chris Sanger said: “Governments are increasingly adopting incentives as a pragmatic means to compete amid coordinated change across the tax landscape. Incentives can encourage and sustain business investment, allowing governments to respond to the dual pressures of continued weak economic growth and the introduction of new measures and legislation in response to tax reform in Europe and globally.”

According to the report, out of the 50 countries surveyed 30% want to invest in broader business incentives to encourage or sustain investment with 27% more countries than in 2016 offering new or improved business incentives. Similarly, 22% of surveyed countries plan to introduce greater incentives for research and development (R&D) in 2017, with new or improved R&D incentives already being offered in 83% more countries than last year.

Another incentive looked at by EY’s report is change in corporate income tax rate. It highlighted that eight countries, representing 16% of the participants, already have laws in place which will lower their corporate income tax rates in 2017. However this is less than in previous years when 18% of countries reduced those rates in 2016 and 22% did so in 2015.

The eight countries which will be lowering their corporate income tax in 2017 are: France, Hungary, Israel, Italy, Luxembourg, Norway, Slovakia and the United Kingdom.

While 40 out of the 50 surveyed countries (80%) do not anticipate any changes to their corporate income tax, two countries (4%), Chile and Canada will slightly increase their rates.

The report can be accessed here.

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