Executive summary - Udo Bullmann

equity value chain. The main areas of regulation cover• Management of funds• Placement to eligible investors• Tax incentives and restrictions• Funds and product terms and conditionsThose in the industry who have developed specific products for retail consumers complywith a full range of different regulatory measures enforced by regulators with a strongmandate to protect retail investors.As mentioned, the LBO industry would like to see less regulation and restrictions. In theEVCA report 30 , one can see a list of criteria assessing the “friendliness” of the nationalenvironment for funds, managers, and investors. Among those criteria, the following are to benoted as they represent at the same time the points where possible regulatory changes wouldtake place:• no additional quantitative restrictions for pension funds to invest in private equity orventure capital on top of IORP directive 2003/41/EC requirements• no geographical conditions for pension funds to invest outside EU countries• no additional quantitative restrictions for insurance companies to invest in privateequity or venture capital on top of Insurance Directive 2002/12/EC requirements• no geographical conditions for insurance companies to invest outside EU countries• existence of appropriate fund structure or investment vehicle to be used to invest inprivate equity and venture capital• tax transparency 31 for domestic and non-domestic investors• non-domestic investors are exempted from having a permanent establishment in thecountry when investing• exemption of VAT on management fees 32• exemption of VAT on the carried interest 33• no investment restrictions• tax incentives to encourage investment in private equity and venture capital• the nominal company tax rate is below the EU average (26.23% including any localand municipal taxes and/or other charges on income)• there is a special tax rate for SMEs• there are specific fiscal scheme for supporting the creation and growth of young andinnovative companies• there are fiscal incentives on R&D• the income tax for private individuals is below the EU average ( 43.03%)• the taxation of stock options is made “upon sale” and not when they are granted,vested or exercised.The country where all these conditions are met gets the best evaluation (1) and the worstget (3).The table below gives an overview of the ranking of European countries according to the30 European Private Equity and Venture Capital association and KPMG: "Benchmarking Tax and legalenvironments", Dec 2006.31 See Glossary32 idem33 idem58