CEOs voice concern about overregulation

Author: Amanda Visser (BD Live)

Over-regulation is the biggest concern global CEOs expressed as barriers to growth, with 72% expressing worry about government intervention, according to PwC’s annual CEO survey.

Concern about overregulation is closely followed by unease over government’s response to fiscal deficits and the debt burden (71%) of their countries and the increasing tax burden (70%), the study looking at tax strategy and corporate reputation showed.

The global survey results were based on interviews with 1,344 CEOs from 68 countries, with 105 interviews done with CEOs from South Africa.

Globally, CEOs have changed their views on emerging markets, with the majority thinking that most growth will come from the US, UK and Germany in the next 12 months. The attractiveness of the Brics countries (Brazil, Russian, India, China and South Africa) seems to have waned.

New growth areas identified by CEOs include Indonesia, Thailand, Turkey and Mexico. However, the political unrest in Thailand and the labelling of Turkey and Indonesia as "fragile" by some financial analysts added a "strong note of caution" about these countries, the study found.

PwC’s head of tax services for Africa, Paul de Chalain, said CEOs had a difficult balancing act ahead. The increasing tax burden was a serious concern for many, and changing public attitudes to corporate taxation could not be ignored. "Tax policies, even if perfectly legal, can present a serious risk to corporate reputation," he said.

The survey showed that CEOs recognised the risks associated with tax policy and were actively looking for ways to help stakeholders understand their total tax contribution to society. 

As CEOs expand their operations the tax burden was seen as a major barrier to growth, with 70% of global CEOs citing the effect of tax and its potential to affect growth as a concern, compared with 62% in the 2013 report and 55% in 2012.

In Africa 67% of the CEOs interviewed shared this concern.

Tax was also a factor when CEOs made decisions about where to operate. African CEOs were more concerned about the competitiveness of the tax regime in the areas in which they decided to operate.

Overall, 63% of global CEOs said tax policy and the competitiveness of local tax regimes were key factors in decisions about where to operate their business. This figure rose to 65% in African countries.

"The tax regime means much more than solely direct tax on corporate profits – a typical multinational will pay a range of taxes, including employment and benefits taxes, property taxes, indirect taxes, such as VAT and sales taxes, and a host of other direct and indirect taxes and tax costs," Mr De Chalain said.

This article first appeared on bdlive.co.za.