Podcast transcript: How tax incentives are being offered around the world

Introduction

Susannah Streeter 

Hello and welcome to the EY Tax and Law in Focus podcast, bringing you ideas for leadership from one of the world's top C-suite advisors. I'm your host Susannah Streeter. As countries attempt to recover from the economic impact of COVID-19 governments around the globe are increasingly searching for foreign investment to try and boost growth. And to lure companies in there's a whole array of incentives on offer from subsidies and cash grants to tax deductions. On the face of it this is a welcoming environment for international businesses, many of which are still in recovery mode, seeking new avenues of revenue. However, even in the seemingly benign ocean of global tax incentives, companies can risk swimming into murky waters, as there are significant hidden challenges. The benefits, qualifying, criteria, terms, conditions and enforcement methods can vary widely, and not just between nation states but even between regions and local authorities. In this episode of Tax and Law in Focus, we're going to explore this increasingly complex world of global tax incentives. We'll look at the mounting competition between countries to entice investment, look at the structural changes underway to incentivize administration and assess why finding the perfect incentive takes expertise and experience on a global scale. We're also going to explain the best ways MNEs can identify the right locations, and negotiate the best possible long-term incentives, navigating any pitfalls along the way. And I'm really delighted that I have three esteemed thought leaders from across the globe to lead us through these topics and offer their expertise. But before I introduce them, please remember conversations during this podcast should not be relied upon as accounting tax, legal investment, nor other professional advice. Listeners must of course consult their own advisors. We'll be discussing and probing a whole range of issues. So first, I'm really pleased to be joined by EY ASEAN tax leader Amarjeet Singh, who joins us from Kuala Lumpur, Malaysia. Welcome to the show Amarjeet.

Amarjeet Singh 

Hi, Susanna. Thank you. It's really a pleasure to be here.

Susannah Streeter 

Also, we're joined by Kerstin Haas heading EY's global incentive practice in Germany and the market region Europe West. Hello there, Kerstin.

Kerstin Haase 

Hi Susannah. Pleasure to be on the show today.

Streeter 

Great to have you. And Brian R Smith, EY Global Incentives Innovation and Location Services Leader who joins us from Phoenix in the US. Hi, Brian.

Smith 

Hi, Susanna. Great to be with everyone. And looking forward to the discussion today.

Streeter 

I certainly am as well, Brian, thank you to Amarjeet, Kerstin, and Brian. So first of all, we're going to define what we mean by tax incentives as they can come in so many forms, can't they Brian?

Smith 

They indeed can Susanna, and when companies are looking at what incentives are available, clearly tax incentives play a key role in folks making decisions across the globe. And also, incentives can come in above the line savings which are more cash oriented. So, when we look at where the incentives typically lie, a lot of countries will have tax-related incentives really to try to incentivize investment, job creation, R&D and sustainability type initiatives. And those tax incentives can come in the regards of tax holidays, which is very common over in Asia, they can come in the form of sustainability grants and R&D and innovation such as in EMEA, and then here in the Americas, they can come across all shapes and forms. When we think of tax, we think of various credits that will offset corporate income tax. But there's many above the line savings that I noted earlier. So, when you think of indirect tax, thinking of property tax abatements or sales tax abatements, and really the one that's most intriguing to a lot of companies is those cash equivalent type of incentives where they can offset certain capital expenditures, as well as job subsidies, Susannah?

Streeter 

Absolutely so many different incentives out there. And let me ask you, Kerstin, are you seeing a surge in in the level and type of these incentives, particularly in the EMEA region?

Haase 

Indeed, we do. So not surprisingly, the level of incentives be it in form of tax centers on cash grants has risen significantly. This is just also due to the fact that to cope with the COVID-19 crisis member states decide to inject strong stimulus packages into the economy but as well fueled through the European recovery science package. So, it's indeed that we see the level of incentives rise. But on the other hand, I think that's very interesting, we'll cover later on as well, is that the focus on this intervention mechanism as to direct investments into future topics such as health and decarbonization, as well as technology are key drivers. And when it comes to the types of incentives, it's equally it's tax incentives and cash funds. But certainly, the direct effect of cash grants in Europe is highly viewed and valued.

Streeter 

Kerstin, thank you very much for that overview in Europe. Well, let me go over to Amarjeet. Now Amarjeet, Malaysia, like many other countries has brought in huge stimulus packages. So, there's a drive to increase tax revenues and tax incentives for multinationals can be quite a hard sell in such an environment. But how do you see them as potentially helping Malaysia and other countries and the ASEAN region recover from the pandemic?

Singh 

Well Susannah I think you're absolutely right. You know, many countries, including those in ASEAN, not just Malaysia, spent millions on stimulus measures. I mean, if you look at the top six ASEAN countries, more than $700 billion was spent on stimulus measures. And this was massive. And it's only natural, I think, for us to see policy responses that are aimed at ensuring economic resilience and managing debt. So, there is now focus on revenue raising to pay down debt, we are seeing tax increases, increase in tax enforcement, and also consideration of new taxes. And we see this across ASEAN. Indonesia, for example, is trying to gradually increase their VAT rates from 10 to 12%, and many others, right, and the theme is across ASEAN, but notwithstanding, you know this bit about having to increase tax revenue to now pay down debt. I also observe and notice that across ASEAN countries are now becoming fairly aggressive in granting incentives to attract FDIs. And this is really to help economic recovery. And you know, Malaysia, for example, announced the policy now known as the relocation incentives, where the government has generously offered up to between 10 to 15 years of tax incentives subject to you know, investors bringing in the minimum threshold of investment. So, I think these incentives are aimed to attract targeted investments that potentially will generate high-value jobs, replace the jobs lost due to pandemic, create the demand for local economic activity that in turns create the multiplier effect in the economy leading to a faster recovery of the respective economies.

Streeter 

It's really interesting. You speak there Amarjeet about targeted incentives. Kerstin, let me bring you in. Because do you think the pandemic has had an effect in terms of a renewed focus on incentives and trying to decouple economies from being over reliant on global supply chains because of what we've seen during the pandemic in particular?

Haase 

Well to answer his question, I think there are two sides of it. And, of course, there have been a number of conversations, discussions and actually quite intense discussion around the question of pandemic preparedness. So, in the area of health, of pharma to make sure that we have the technology, the production capacities on boarding or direct towards a pandemic crisis. So, we have seen significant grants under temporary state agent regime directing into this direction, or targeting into this direction. And on the other hand, there are current conversations being taken up in respect to an important project of common European interest where technologies and production technologies, among other things shall be targeted as a joint effort between European member states. But I think it's not that much about decoupling, but it's about making sure that we have the strength and form of technology production capacity also in important sectors such as decarbonization, or also cloud infrastructure and systems in order to make sure that of course, Europe is strong, but can also build from the strength alliances across the globe.

Streeter 

 Yeah, really interesting take on what's happening in Europe. I want to move to the US now because Brian, give me your perspective, you've helped companies secure incentives in more than 30 US states and across five continents and in what ways do you think incentives can really help secure capital investment and propel job creation?

Smith 

Well, I think we're in a really dynamic stage with investment, as Amarjeet and Kerstin stated, a lot of countries are looking at how do we recover from the pandemic, but we're also seeing a mix of other decisions that are associated with that. We've talked about supply chain for example, Susannah over the last few years, about whether or not companies would be moving closer to their end user, and we're starting to see that in particular in the Americas. But what we're seeing is trends that states are becoming much more competitive against one another. Not only are they trying to attract foreign direct investment, as well as domestic investment, but they're also competing against one another. So, when we look at the landscape in the US, we're looking at supply chain reconfiguration. We're looking at green-field expansions of companies, whether they're from Korea, Japan, or Germany, for example, looking to make initial investments in the US in a lot of modernization projects that these companies are looking for, really to become more innovative, because one of the biggest issues here in America is there is a labor shortage. Irrespective of the jobs, whether it's technology, whether it's skilled or unskilled labor. That is a huge challenge right now, and what states are doing is looking at ways to subsidize first to get the overall investment as I just discussed with the different triggers. But then secondly, once that investment is potentially coming there, how do they subsidize wages. And those come through a myriad of negotiated wage withholdings and cash grants for job creation. But then how do they also help those companies attract labor, as I noted, that's a big challenge. The second part where the US in particular when competing against lower cost jurisdictions, for example, in Central and Eastern Europe or in ASEAN, they have become much more aggressive with upfront incentives and looking to really offset the operating costs within the first 10 years and then ongoing. And then secondly, that labor cost. So, if you pre-actively plan, you can really map out incentives assistance in most US states to offset operational cost, labor cost, taxes, as well as infrastructure. And if you have that plan, in that negotiating strategy up front, you can then offset anywhere typically between five to 25%. And if you have these large-scale investments, we can see up to 40% return on investment through subsidies to make it more attractive to invest in the US.

Streeter 

Really interesting stuff that, Brian, as you say, for example, when you look at labor with this labor crunch intensifying, are you seeing an increasing competition between states in terms of incentives to sweeten the deal? Because of course, these issues are affecting almost every part of the country, even the world.

Smith 

We are absolutely seeing that. You have the first issue, as you noted, how do the states or local communities demonstrate to those companies that they do, in fact, have their labor supplied, and each state's gonna compete and then sell their own pluses. Then part two to that is how do they then close the deal? Once they mitigate the concerns there, what we're seeing is a lot of aggressive governors closing funds. So, think of when there's two or three states left in that competition, in terms of deciding where to locate, a lot of times the governor will come to the table with a closing fund, one to attract the ability to offset those incentives, as well as then attract and then retain going forward. And we could be talking, depending upon the scale of investment, anywhere from five million upwards to $100 million-plus.

Streeter 

Really interesting. That increased competition, Amarjeet are you seeing a similar level of competition across the Asia Pacific? What are the most popular forms of incentives on offer?

Singh 

Yeah, no, I do see a similar trend across Asia Pacific, but I think it will be, you know, more regional. So, if you look at, say, ASEAN, amongst the top six countries, each is aggressive in their own way. In terms of granting of incentives, and today, predominantly, the incentives are fiscal incentives. As Brian mentioned earlier, you know, these, these take the form of either tax concessionary rates, or full tax exemptions, or, you know, sort of capital base incentives where tax allowances are granted, on capital spent, that will have the effect of reducing the effective tax rate. So, these are traditionally the form of incentives that have been granted across Asia PAC, I would say, we do see grants as well, especially in the more developed economies within Asia PAC. So, for example, Australia, I think, has a massive number of R&D incentives. And what we do see is, you know, across these jurisdictions, there is always the competition, one always trying to outdo the other across the regions and across Asia PAC.

Streeter 

So overall it appears to be a win/win situation. But companies can get caught out, can't they? Due to the varying application and rules surrounding incentives? Amarjeet, where would you say this is most evident?

Singh 

Actually, I would say this, this is actually across Asia PAC, Susannah. I mean, if I if I look closely within ASEAN, each one of these markets have various incentives. And it's not just, you know, the competition is not just amongst countries, it's quite similar to the US, it's actually amongst the states. So, if I speak about my own home country, Malaysia, you know, we've got at least six if not seven, economic corridors. So, you've got the southern corridor, which is right, right, up north of Singapore, we've got the Northern Corridor, we've got the Eastern corridor, we've got the Saba corridor, we've got the Sarabah corridor, and each one does make an attempt to attract investments in their respective corridors. And, you know, whilst incentives are a federal matter, there have been, you know, a lot of lobbying efforts by each one of these corridors to try to have the ability to grant you know, more generous incentives than the other.

Streeter 

It seems to be an intense playing field Amarjeet. Kerstin, let me bring you in, what other complexities do you think should be on company's radar? Do you think there's enough understanding, for example, about restricted clauses, which could include lock-in periods, which are quite common in India?

Haase 

Yeah, besides the sheer number of programs and as the competition between states and locations and regions, public funding comes actually with a quite broad set of rules to be followed. So, it ranges from what you would expect, documentation needs and requirements, but also goes to information duties and things to be obliged with in respect to the exploitation and IP strategy. So, starting with that point, exploitation and IP strategy. So of course, even though at the point in time one has applied for funding, everything is fine. But in the course, especially when we talk about new business model, an area of [inaudible] cloud computing or in other sectors, IP structure and exploitation plan and strategy might change, might further develop and evolve, and this might have an impact on the funding granted, besides all duties on the creation and the safeguarding of jobs, I mean, which is the most prominent when erecting new industrial premises. And when it comes to the understanding of the level of complexities within entities and between companies, I think there is certainly a group of companies who take a very systematic approach and where there's a good view and overview of the different types. But what we quite often see is that this systematic approach is certainly not the rule. So, it's often rather decentralized funding management we see. So that one business unit maybe copes with this topic differently than the other and something we see quite regular as a pattern that the process has been set up well at the project planning product development phase. But of course, then people change when going into an implementation mode. And some, then some information is not transferred respect to the duties imposed on a funding granted. And that might then in the end, post some difficulties because if you have a product implementation period of three to five years, and then post processing periods, binding periods of another five years, that's quite a timespan to be overlooked at company level. And that creates certainly a challenge.

Streeter 

It certainly does. And how tough can the penalties be, if companies get the rules wrong?

Haase 

Generally speaking, without going to country specific details, but as a general rule, of course, you have the reclaimant risk. So, defining is reclaimed, plus interest to be paid. Of course, you have a reputational risk. And what is also important is that if you show a strong discrepancy and deviation in complying with rules and posts, you can be excluded from the application for new programs at European level but also at national level.

Streeter 

Okay, Kerstin, thank you. Well, let me cross back to Brian, because Brian, we've also witnessed structural changes due to incentive administration, such as the transition from pre-approval mechanisms to post-filing review. Now, this has happened in in China recently. What impact has this had for some companies?

Smith 

I think the overall impact is one that a company has to be prepared going in and understanding the form of incentive and the commitments that they're agreeing to. And that's in line really with what Kerstin had spoken about just a moment ago. So, when you think of the incentives, Susannah, you mentioned the pre-certification and that whole process, it really comes in three buckets. The first is statutory. And then that review is just simply typically when you submit the claim, because it's an as of right benefit with the department of revenue, or taxation department, depending upon where you're at in the world. But that second point where you mentioned precertification, and negotiation, which is the discretionary aspect. So, for those two forms, you have two things that a company needs to consider. The first is how does the company itself be qualified. So, a pre-certification or discretionary incentives is going to have to be where the company enters into the incentive agreement or incentive arrangement prior to making an investment, job creation entering into a lease, or perhaps breaking ground. So, there's going to be a bet upfront, where they're going to do the analysis, meaning the government, to make certain that they're qualified, etc. And then there's going to be an application phase. Part two is the post, meaning once we've actually negotiated it, where once we've actually received that certification, as you note, for example, with certain other Chinese programs, there's going to be a subsequent review. And typically, that's done on an annual basis. So, each year the company is going to be required, typically, to file a form, that form is going to indicate whether they're meeting their investment job commitments, or tax depending upon what those parameters are. So really, it's understanding what is the process upfront? What are the commitments that you as a company need to make today and then in the future? And if things change along the way, how does one mitigate that through proactive discussions with the taxing and or economic development authorities?

Streeter 

So, some pretty complex layers to unpick there Brian. Amarjeet, do you think some companies underestimate the level of detail required in business cases to demonstrate why they think they're eligible for beneficial rates of tax, and if so, why do you think that is?

Singh 

Yeah, so, let me address this by saying my observation right, so, I think the investment promotion agencies and the various policymakers are becoming more and more targeted in the kinds of investments that they are looking for, I mentioned this earlier. Now, each of these jurisdictions as I see them, carry out continuous review and studies on the type of investments that they want to bring in, the type or the level of IRR or the specific benefits that they hope to bring to the nation from granting these incentives. So, as such, I think it is really crucial for investors to start to understand the ask or what the governments are looking for and provide evidence in their respective applications to ensure that, you know, they are able to demonstrate to the policymakers and to the stakeholders, the benefits that they are bringing to the nation. So, calculations such as cost benefit analysis, IRR contribution to the GDP, economic impact studies are all I think, increasingly becoming more and more important, I think the days of, you know, just giving a basic, you know, filling a simple basic application form are long gone.

Streeter 

Okay. Well, thank you very much. I want to switch focus again, back to Europe. And, Kerstin, the region does seem to be ripe with opportunity as far as incentives are concerned, as you explained earlier, but there can be a lot of red tape can't there, given certain agreements, certain large agreements, in particular need approval from the European Commission. So just how complex could this process be? And what else do you think companies should be aware of when seeking incentives in Europe?

Haase 

Point taken and I agree that maybe with a look from the outside and the other regions of the world to Europe, this might certainly feel or look a bit complicated, but actually, as we have the European state aid regime, which is currently being adopted and streamlined the challenges we see today, it's also a phase of unperceived opportunities and those state aid guidelines or state aid regime gives us also the view on and to compare different member states. Of course, they can adapt those regimes according to their strategy and current needs. But to take a very broad view, there are two sides because up to a certain amount of cash grants member states don't have to seek the approval of the European Commission. We're currently discussing three-digit million-euro budgets and of course those need to be approved. That's certainly administrative. I'm aware of the fact that this might be different, for example, in the United States, but what we also see at the European Commission, because with the new decarbonization technologies coming in, and the large scale investments that are required to transform energy intensive industry, we see a certain tendency that in the future as well when national pros are being notified under those data regimes, that the threshold might be increased when member states have to ask permission from the European Commission.

Streeter 

Certainly, does seem to be an exciting, although complex time so thank you very much, Kerstin. A reminder that you're listening to the EY podcast, Tax and Law in Focus with me, Susannah Streeter and our panel of thought leaders in the tax world, Amarjeet Singh, Kerstin Haase and Brian R Smith. So, mastering the small print should clearly be top of the agenda for companies wishing to make the most of myriad tax incentives on offer. But that's no mean feat, is it Brian? Just how should they approach this?

Smith 

I think you have to look at it in two prongs. The first one is when finalizing the incentives agreements or even looking to see whether you qualify for the incentives is really understanding the overall framework as to what the company is committed to. So, mapping out what those commitments are. Clearly the most definitive ones are the investment and job numbers. But a lot of time incentives agreements will have certain fees associated with utilizing an incentive, perhaps a 1% economic development or promotion agency fee. And those sometimes go unnoticed, although they can be relatively minimal. If you have a large incentives package, it can be large. But secondly, and more importantly, is proactively having the ability to put what I consider benchmarking or performance-based type scenarios. Again, a lot of times countries or states will have boilerplate clauses for a number of the incentives. But there is a lot of grey area that allows upfront negotiation to more favorable terms in the contract. So, for example, in the US, we're able to put in certain language within the covenants where we may have a plus or minus 15% in making investment, or we may have where we have ramp-up times where there's certain thresholds that a company has to meet. If they meet them, then they may not have to pay any type of clawback.

Streeter 

Thank you very much, Brian. Well, Amarjeet, I want to focus now with you on relationships with tax authorities. Just how crucial do you think it is that companies really do put their best foot forward when they're negotiating to achieve the best long-term incentives? And do you think that existing connections with government authorities are really important, and how do you think they can be best leveraged?

Singh 

I think the connections are important, you know, in most of these jurisdictions, there is already in place a robust evaluation process, padded with stringent governance processes as well. So, I think it is not just the connections alone that are going to cut it. It's really to have the knowhow, and all the intel of what is important to the different stakeholders, the applications are tailored to address the ask or the need of the stakeholders. Secondly, as Brian pointed out earlier, you know, in the way you draft the final agreement, I think it's important to then also know and have the intel, all the experience of you know, how these commitments are going to be drafted.

Streeter 

Kerstin, let me bring you in, because as we've been hearing, there are often plenty of hidden costs lurking. How do companies and how can companies see a way through to these costs? Do you think comprehensive cost modelling really can help with identifying them?

Haase 

While indeed crucial, comprehensive cost modelling or to do a detailed breakdown certainly is something that is advisable. However, what we see in the practice is that it's also important to bring in other disciplines within the company to get the right picture. Because, for example, if you take a classical investment project, Central and Eastern Europe, their grants are often awarded in the form of incentives, tax incentives. And of course, those sums might be quite impressive, but you need to know what the business model is of the entity to be erected in order to make sure and have a realistic scenario on what to expect and also to put in relation to cost for administration. Further, I'm a big fan of having a systematic and special strategic approach towards grants and incentives. Of course, there are projects where through incentives, you would like to reduce the costs of classical R&D tax incentives, but especially in Europe, when we talk about the cash grants, and if we go in those very high level, so two to three digits, that million euro sums, we often talk about adaptation of business models, targeting new markets, applying totally new technologies, and then of course, as about reducing the costs of the project. But on the other hand, it's often about ecosystem, with whom to collaborate, with whom to build strategic alliances. And for those activities, public funding can also be a catalyst.

Streeter 

Yeah, really interesting to look at this as an ecosystem. Thank you very much, Kerstin. Brian let's peer into the future. Do you think that companies will need to bear in mind that although authorities may administer incentives, they are not the matchmakers? And it's really not their role to find the perfect fit for a company's long-term outlook, do you think this will become even more crucial to understand in the future?

Smith 

I think it's crucial today and certainly in the future. So, for example, if you're having a large expansion project within the US, and I think this rule as a whole applies everywhere, is first, the economic development individuals, the government individuals, they have their first and foremost fiduciary duty to the taxpayer. So, with that being said, clearly, they want to make the investment attract a company to make certain investments or job creation. However, they want to do that by providing the most minimal incentives package that they can to attract the company to make an investment in their given state or country. So that's the first thing I think companies need to note. Part two of that is that I think thinking through as to how to administer. We're going to see increased incentives I think, across the board. We're seeing a lot of changes here domestically, because there is that fight for the talent, as well as investment. But I think it's important when we go through the negotiation process, we have two things to consider. The first is the economic development. So those are the folks that are going to give us those incentives to make that package much more attractive for a company. And I think that's all well and good. But then a company also has to be prepared for once the economic development officials move on, the project is commenced, and you start the filing in utilization period, you're now dealing typically with Department of Revenue officials. So, you're moving from a promotional and supporter advocacy position, with economic development to now a more adversarial type of consideration when we're dealing with Department of Revenue. They don't always typically work hand in hand. So those are other items that I think companies need to make note of as they proceed through their overall incentives.

Streeter 

Okay, well let me bring in Amarjeet. How do you see the incentives of a change in the future? Do you think it will become more or less complex over, say, the next five years?

Singh 

Susannah, I think it's going to be more and more complex, especially I think, if I just look at, you know, some of the developments with the OECD, BEPS, you know, if we go back, especially in ASEAN, the format of incentives amongst ASEAN countries, has predominantly mainly been in the form of fiscal incentives. Either you get a tax holiday or capital base tax allowance. But now with, you know, pillar two, on minimum tax, I think this is going to change the incentives landscape in a very big way, especially in ASEAN, I'm going to I'm expecting authorities, you know, needing to be more agile, to ensure that they understand the dynamics of the investor, what is the sweet spot in terms of the level of fiscal incentives that the investor is happy to take? And at the same time, how do you then balance the sort of the, you know, a discount on fiscal incentive, because of the minimum tax with alternatives, such as cash grants, subsidies on interest, you know, maybe even some kind of a subsidy on land and other things. So, you know, it's going to be a really, really, very different landscape in the next coming few years, I think, you know, because these things are going to become so complex that the negotiation process is also going to be an interesting one to watch.

Streeter 

Certainly is. And let me bring in Kerstin, we've heard Amarjeet and Brian's perspectives. What do you think is on the horizon, in terms of the evolution of tax incentives globally?

Haase 

Well my personal view is that of course, we see an increase of the R&D tax incentives, and certainly also most likely, investment grants, as we have heard as well a lot about the competition between regions and states today, but my personal view is that in two to three years’ time from today, we will see a steep incline in tax incentives targeted towards sustainability, decarbonization, because we will then enter a phase where we have technologies ready to be used, but we need to bring them into the market to make a real change.

Streeter 

Okay, well, thank you very much, Kerstin. And just before we go, I always like to offer a takeaway to our listeners to help with the management of tax incentives in this case. What do you think Amarjeet, if you could offer one takeaway? A number one piece of advice? What would you give listeners to this podcast?

Singh 

I think the one thing is now having a sort of a full-blown proper incentive engagement process, you know, right from the start in terms of identifying the location for investments, you know, applying the incentives. And then I think something that many investors sort of, I guess, forget to do is to track the commitment that they've made to enjoy the incentives. Now, you know, we started off the conversation earlier with the need for many jurisdictions to increase tax revenues. And I think there's going to be even more scrutiny through tax audits on companies with incentives. So, the need to put in place a process that tracks the commitments made by the initial project team, and have this taper down to the operational team which probably had no visibility of the of the negotiation process. And have, you know, some kind of institute, some kind of KPIs put in place with the operational team to ensure that the investments made are able to ensure that the commitments made are fulfilled, because the risk in not meeting the commitments is massive, right, it can actually lead to a full clawback of the incentives earlier granted.

Streeter 

Okay. Thank you. So, Kerstin, what is your number one piece of advice?

Haase 

I think the point I would like to make is, how about taking a different view? How about taking the transformation strategy because of course, that's the European perspective, having those massive transformation pressures ahead of us. So, taking the transformation roadmap towards decarbonization, and then splitting down very systematically, what are the investments into the business model – business model adaptations, M&A activities, what R&D activities I need to drive, what are investments at my existing sites? Why do I need to adapt my production sites? And once this roadmap has been drawn up to systematically go through and to map where which opportunities are there, how the duties, obligations fit to the benefits proposed, and also how they align with your strategy. And then to implement systematically, this funding strategy, the ecosystem created for that might be used as a catalyst to drive transformation.

Streeter 

Okay, Kerstin, thank you very much, wise words. And Brian, tell me what's at the top of your list?

Smith 

What I would leave today's podcast with is recommending that companies be very well prepared prior to going into any negotiation with the government. And when I say that it's really understanding up front, what are the overall needs of your project, in modelling out to the best of your ability, where are all the various costs gonna be associated with what you're contemplating. As I noted earlier, we have multiple segments of where we could secure incentives, whether it be operational, financial, tax, infrastructure, logistics, and understanding each of the costs that you're going to have within those frameworks is going to then allow you to be proactive when approaching the governments. First to align what available incentives are available to you, in terms of above or below the line. But then secondly, also educating the economic development folks where those costs live, and then also what your tax profile is. That's one item, I think it's important to note, a lot of times when we're having these discussions, the government doesn't necessarily know what your current tax footprint is, or that footprint going forward. So, they may offer up incentives that quite candidly, aren't very valuable today or even going forward.

Streeter 

Okay, Brian, thank you very much. And I'd also really like to thank Amarjeet and Kerstin for joining me as well and sharing so many valuable insights into the rapidly evolving tax incentives environment. It really has been fascinating to get your perspectives.

Haase 

Well, it was great being with you and having this conversation.

Smith 

Thanks, Susanna. I really appreciate my colleagues' time and spending time with you.

Singh 

Thank you. It was really great being on this session.

Streeter 

Thank you very much to all three of you. For more information you can visit EY.com. And a quick note from the legal team. The views of third parties set out on this podcast aren't necessarily the views of the global EY organization, nor its member firms. Moreover, they should be seen in the context of the time in which they were made. I'm Susannah Streeter and I hope you'll join me again for the next edition of Tax and Law in Focus, brought to you by EY, building a better working world.