A Look at S&P Downgrades in the Eurozone
Credit rating downgrades may be worrying but German Chancellor Angela Merkel and other European leaders must resist hasty tax policy changes. In light of recent credit downgrades - and in some cases the mere threat of such downgrades throughout the Eurozone from credit rating agencies such as Standard and Poor's, many affected countries have taken to re-assessing their economic and tax policies.
'A number of multinationals have been scared off by rash changes to policy that have come to fruition at very short notice,' said Donnedieu de Vabres.
Donnedieu de Vabres said he is presently seeing clients adopt a wait and see approach, waiting to be convinced by the long term intentions of governments' tax policies before committing to significant investment.
Multinationals are 'fed up of short term reactive change' and countries should accordingly focus on cultivating a stable tax environment for investments.' Donnedieu de Vabres feels past the experiences should be enough to ensure this is the case.
'With fragile governments learning from such examples, the downgrades are unlikely to spark an overhaul of long term tax policy across the region,' he said.
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Published on ITR, 14 February 2012
Also published on GT News, 9 February 2012