ECONOMIC incentives and stability are more important than tax incentives for multinational companies in choosing where to invest, according to a survey by Deloitte & Touche.
The survey found that the countries which offer the most popular tax incentives - Ireland, Belgium and Holland - are not among the most favoured for investment. Nevertheless, 80 per cent of the companies surveyed said tax issues are influential.
Ireland is one of the most successful EU countries at using tax incentives to attract multinationals to invest. The 10 per cent corporate tax rate here is the most popular tax incentive in the EU and has influenced 58 per cent of those who have invested in Ireland.
Overall, many investors are not well informed about the many tax packages available in the EU. Greece, Portugal and Spain have the least well recognised tax breaks of all EU countries while Belgium and Ireland have the best known. Despite this, Ireland's tax exemptions for expatriates and for inventions were known to fewer than 50 per cent of companies which have invested here.
Over 50 per cent of respondents said that economic incentives, such as grants, are more important than tax incentives. This is particularly true in the banking and finance industries. Almost 60 per cent believe that economic and political stability, as well as geographic location and infrastructure, are more important Only 4 per cent believe that tax incentives are more important.
A skilled work force and strong currency also have a major impact on investment decisions, with over 80 per cent of firms citing these as influential.
The survey also found that a common system of taxation in the EU would not narrow the gap between the most and least favoured regions. "Tax incentives are often important and effective tools for the smaller, less attractive EU countries.
"The 10 per cent corporation tax for various business activities in Ireland are an example of a smaller EU country with high unemployment, seeking openly to counteract economic disadvantages with attractive incentives for overseas investment, the survey noted.
Only 14 per cent of manufacturers and 8 per cent of non manufacturers said they are not influenced by tax issues. "We would have built our factory anyway - it was an added bonus that the operations were only taxed at 10 per cent," one firm said.
Questionnaires were sent to 350 major multinational companies and almost 100 were returned. Of these, 43 per cent have a turnover of over $1 billion (£639 million) a year.
Over 60 per cent were manufacturers, with the others in banking and finance, healthcare, natural resources, leisure, transport and construction. One quarter had invested in 10 or more EU countries, in the last 10 years and the average number of countries invested in by each company was six.
