Writing in the UK Guardian today, (page 31 – if you cannot buy the paper, you’ll find it among the related articles below assuming it is still available if you are reading this in a few weeks), Polly Toynbee accuses the Big Four of being “at the heart of almost every tax-avoiding scheme”. She proceeds to comment on their grip of the audit market and that, despite grave failures in auditing the banks they have not been disciplined by professional bodies.
Thank you, Ms Toynbee! We at Quoracy.com would just add that their immense lobbying power at the level of governments and regulatory institutions – their virtual control as a cartel of almost every regulatory insitution for audit in the EU – has made them almost impossible to punish. At the same time the middle tier audit Firms, with far fewer blemishes on their records, are bearing a proportionately greater brunt of the reforms that these Big Four governed or influenced “independent” bodies have enacted or are in the process of enacting.
No doubt they hope that they can pass their latest trick of raising the audit thresholds, in which the hidden agenda is to weaken the next tier down from the Big Four even more in the hope that some of the firms disappear (already appears to be happening to PKF from what was spoken about at their recent Cuba conference, and the merging into BDO of three already of their G20 firms) and that others will tone down or give up their audit offer. After which time, of course, they will no doubt be ready to lower the thresholds once again, in order to grab what they can from the reduced state of their mid-tier competition.
You heard it here first. Or maybe you know it already. If you’ve been running a mid-tier audit firm, you probably know it only too well…
- Tories at half-time: cruel and inept, with worse to come | Polly Toynbee | Comment is free | The Guardian (dralfoldman.com)
- Should tax-avoiding companies be named and shamed? – video (guardian.co.uk)
- Britain could end these tax scams by hitting the big four | Polly Toynbee (guardian.co.uk)
- Be bold, Labour, and expose Osborne’s skivers v strivers lie | Polly Toynbee (guardian.co.uk)
This week has seen the issue of corporation tax paid – or rather not paid – in the UK come to the boil, after simmering for several weeks with the articles of various MPs from various parties in various newspapers. It has now made the front page news and there has been an open harangue on three companies, Starbucks, Google and Amazon in the Public Accounts Committee by a group of British MPs headed up by Margaret Hodge.
The argument of the Committee is that these are companies who have made a good deal of turnover in the UK but they haven’t paid any tax. The way in which this has occurred is that they haven’t shown much by way of profits in the UK. They are now being told by Mrs Hodge that she doesn’t believe that they have not made profits in the UK given so much turnover, she thinks that profits are being salted away to other countries, like Luxembourg or Holland, using various techniques such as management charges, royalty fees, transfer prices, etc.
There are of course laws which are set up to determine whether profits in the UK are being assessed fairly – there is transfer pricing legislation and the Inland Revenue are able to investigate whether Transfer Pricing has been used. However, in the end what Mrs Hodge’s argument has boiled down to is the fallacious “argument from incredulity” – she cannot believe that the businesses have not made bigger profits (she seems to be oblivious to the fact that there is a recession going on out there and has been for some time, and that companies in all sectors and of all sized are bankrolling losses), and since she cannot believe it, it cannot be true.
In the case of Amazon a particular point was made – in addition to the insulting of Amazon’s spokesman Mr Andrew Cecil by accusing him of “gross ignorance” – namely when he pointed out that of course Amazon has paid taxes, only not corporation tax, they have paid VAT and employment taxes and created jobs – Hodge said that this argument was irrelevant because also the corner bookshops which would have sold those books would have created those jobs (fictional employment was always beloved by the left) and that Amazon, by making offshore structures involving Luxembourg, were making those little corner bookstores less competitive.
The fact is, however, that Amazon is not competing with little bookstores – it’s the Internet, new technology, which is competing with physical bookstores, but anyone with any kind of memory ought to be able to remember how a few large stores like WHSmiths and Waterstones already managed to put the corner shop bookstores out of business long before the Internet came along. Also if you look at markets like Poland or the Czech Republic, where they have online stores for books but not so much by way of the colossal physical bookstores the way the UK has, there the corner bookstore is alive and well. So Mrs Hodge has absolutely the wrong villain in her sights if she wishes to defend the corner store bookshop. But if she really was interested in championing them, then where was her voice railing against expansions by Waterstones and Smiths ten to fifteen years ago, which transformed that industry then just as much as the internet does now? Where is her voice against the Net Book Agreement, which makes it very hard in the UK for small businesses to deal in new books against larger companies? Tax is important, but it is only a thin layer of icing on that particular rather thick cake.
She admitted also that she wasn’t accusing Amazon of being illegal, only of being “immoral”. I am sorry, but is Luxembourg not another EU state in good standing? Is it now “immoral” to use the EU structures that were offered to us as the bait for getting us to sign up to the Single Market in the first place? Well, if there is any immorality in all of this, I can’t see it on the part of the private businesses. I see immorality and utter hypocrisy in the way these MPs, elected members of a government, blame business for their own failures. Failure in so many years of our being in the EU to sort out some kind of harmonisation in income taxes and corporate income taxes meaning that people are able to doing interesting kinds of arbitrage between EU legislations both in terms of their personal taxes and corporate profits taxes. They have had so many years and so many terms of office to sort this matter out.
In fact the answer in Amazon’s case is ridiculously simple – the UK has held a zero rate of VAT for books in order not to penalise reading, but bookselling companies paid the same profits taxes as any other kind of company. That means that book VAT in the UK isn’t even propely harmonised with the rest of the EU. VAT cannot easily be evaded, and even Margaret Hodge couldn’t deny that Amazon paid VAT, merely dismissed it as irrelevant. So what the government can do to produce a more level playing field is to put the general rate of VAT on books and reduce the profits tax for companies all of whose income comes from the sale of books. This would force booksellers who are in a lot of different businesses to be just in books in order to profit from the reduction, and it would mean that it would be of less worry who used corporate income tax reducing techniques, as they would be spending time and money reducing a smaller imposition anyway, and therefore would be less likely to do it.
Schools could be enabled to reclaim the input VAT, the students of university colleges also, therefore the impact on education would be minimised.
I wonder whether anyone in Government will consider this solution, or work towards the harmonisation of EU member state corporation taxes which we all believed back in 1993 was likely to happen before the turn of the Millennium, or whether they will continue, like Margaret Hodge, to blast other people in the private sector for doing their jobs properly while government continues to neglect its own job with impunity.
- Tax row: ‘pathetic’ Amazon man humiliated by MPs (theweek.co.uk)
- Amazon, Google and Starbucks accused of diverting UK profits (guardian.co.uk)
- Starbucks Boss Denies Making Money in Britain (sfluxe.com)
- MP Margaret Hodge calls for boycott of Starbucks, Amazon and Google over ‘tax avoidance’ (standard.co.uk)
The above link’s content should provide most people with food for thought.
Compare the minimum wage in Holland or Luxembourg, just shy of 20 thousand dollars a year, with Burundi at less than 100 dollars per year – I don’t know why they even bother with minimum wage legislation, but presumably they need it which is harrowing even to dwell on.
Can it be that an unskilled person in Holland is really worth over 200 unskilled people in Burundi? Regardless of where they are, they are both unskilled.
There’s no easy answer to this one – if you increase the minimum wage then the investment in labour intensive jobs for lowly-skilled people just goes to a more competitive country, and more people starve.
Also of course, one dollar in Burundi will buy you a lot more than a dollar in Holland (especially in terms of unskilled services, should you require them, but also in terms of food, clothing and shelter).
In and of itself it’s not the most useful index of human development, but it certainly makes you think.
- Lowering the Minimum Wage for Tipped Employees: Yes or No? (slog.thestranger.com)
- Raising The Minimum Wage: Who Does It Help? (npr.org)
I was recently reminded of something my old gardener told me about ivy. I had been surprised at how slow some lovely variegated ivy that had been planted by my fence was coming on, and his words were as follows:
With ivy, the first year it is put in, it does nothing, it just sulks at having been put in a new place. The second year is starts to spread out horizontally along the ground by the bottom of the fence, and in the third year it starts to grow upward, like a curtain.
Wise words, from someone who knew his onions. And his ivy. It seems to me that this is a great analogy for many new businesses. Entrepreneurs obviously look for a rapid return on capital employed. They want their profits and the cash back to invest in the next thing. But nature takes its course with some businesses just like it does with the ivy, and you cannot rush it.
The first year, you have set up costs, people are getting used to each other in a new team with a new product, new identity. This is like the ivy “sulking” – just establishing a new root system and adapting to the chemistry of the soil and the direction of the light.
The second year you start to see sales pick up but the prices are not that good yet and also the volumes don’t allow the contribution to cover fixed costs. You get growth but you don’t get the profit. It is like the ivy growing along the ground by the bottom of the fence. It is obviously going somewhere, but you aren’t getting the effect of it yet.
The third year you reach a certain critical mass, you break even you start to nudge into profit, your cash flows turn the corner and you start paying back your seed finance. This is like the ivy making its curtain up the fence.
If the ivy survives at all, it will certainly produce the coverage in time. The same with these new businesses. They simply need to be nurtured and for nature to be allowed to take its course. If the soil is right, the light is there, and the water, the plant healthy, then it will do what it is programmed to do in its own time. Micro-managing it will not help. Restructuring the team which is only starting to gel will not help. it will be like transplanting the ivy at the end of the second year for failing to raise – it will only go through its sulking and creeping years all over again in the new position.
- Poison ivy risks fade if you take precautions (seattletimes.nwsource.com)
- On Poison Ivy Patrol (webnerhouse.com)
- Frugal Ways to Prevent Poison Ivy (suddenlyfrugal.com)
- Can you lose a natural resistance to poison ivy as you get older? (zocdoc.com)
I wrote my views today to the head of Corporate Governance at the OECD relating to their Guidelines on Corporate Governance. A work which I believe under-represents to position of external audit in Governance.
The document can be downloaded as a pdf for free from the OECD website.
It has been used as the basis of the Corporate Governance code in numerous countries. Its paucity of regulations on what should be the rights and powers as well as duties of external auditors have assisted Governments to fail to accord a full range of powers – of the sort enjoyed in the UK for instance – to external statutory auditors in many countries.
At the same time the EU did not impose on Member States the obligation to enact that auditors should be entitled to attend AGMs - at the very least of quoted companies they audit and given the right to speak at them. That is because they saw it as a matter of Corporate Governance which should be covered by Corporate Governance Codes.
At the same time, even were the OECD code contains great recommendations such as the one on page 44 that barriers to international voting should be done away with, many nations are still asking for physical attendance at the AGM. The AGM ought to be attendable in this day and age by personal appearance OR videolink and the auditor should always be in attendance – if not the people have no guarantee that they are being given the real audit report, and there is no guarantee that serious findings that the auditor wanted to have commuicated to the owners will be portrayed with the necessary gravity, or just explained as if they were harmless and made a joke of by the embarrassed Board.
Anyway, here is the letter I wrote:
I was only able in this 66 page document which I downloaded from the OECD website to see less than half a page of the most basic information on the topic of external auditors.
External auditors are the most effective way to police good corporate governance, and yet the lack of any recommendations for our profession to be given teeth means that countries such as Poland who used the OECD guidelines to create their own codes and thought that they were getting the best protection available don’t have anything like the built in systemic safeguards that countries like the UK have.
One example – in the UK the auditor has the right to attend the AGM. They must be given notice of it and have the right to address it in matters concerning their report. In Poland there is no such right and the OECD code is where the authorities point to show that there is no need of it. They are using the brevity of the code as an excuse for poor practice, and the result is that stock listed companies are able to call AGMs where they talk around the findings of auditors, often dead-batting our recommendations and we are not even given the right to be present and put the record straight.
My reason for writing is to ask to have the views of the audit profession heard more forcefully in a – hopefully near future – reworking of the Code. I believe that IFAC would be able to place much more technically high-powered people than myself to your disposal when the time comes, but if not I’m happy to give time to this as a public service. The way things are now I deeply feel that the code develops very well some aspects of governance, such as Directors’ duties, but gives so small a role to the natural enforcers and advisors on governance in client firms, namely our profession, and impose on us duties without according us any powers – or recommending the according to us of powers whether by national law or by contract – as to constitute a missed opportunity for good.
Had someone asked me, before I had opened the pdf, to guess at how many of the 66 sides would be dealing with the question of external verification, I would have said 5 to 10. I add that just as a quantifier of how relatively important to the whole I believe the topic is, and therefore as well and indication of its degree of under-representation, in my opinion, in the document.
The above is my individual view, not necessarily the view of all my colleagues.
David J. James
- EFF Declines to Endorse OECD Communiqué on Principles for Internet Policy-Making (eff.org)
- The Harvard Law School Forum on Corporate Governance and Financial Regulation (bjconquest.com)
- OECD: See Greek Deficit In Line With IMF Target, But Risks (forexlive.com)
- Report: Poverty in households with children is rising in nearly all OECD countries (bespacific.com)
In the same spirit as the preceding post, we decided to give more publicity to this seminar too, this time by Explanator from Poznan, a course in Polish on where the legal red line in the sand is with regards to the control of employees.
More and more Companies are tightening their governance procedures by monitoring the phone calls or emails of employees, chipping them with RFiD chips, putting satellite trackers on their cars, following their activities with close circuit television, sending private detectives round their houses when they are on sick leave to check that they are not malingering, imposing junta-style curfews on company flats, and copyrighting and secretly cloning their DNA. I even heard of one firm which had a person sitting next to the ladies’ toilets taking note of times in and times out of the breaks taken their by different people.
Other firms have begun replacing their employees with robots in order to increase control over them. Sometimes drivers will be faced with a robot taking credit cards and dispensing petrol at petrol stations which previously had real people working on the forecourt, and the robot is unable to say where they have gone and what happened to them.
There seems to be no end to the ways in which companies can use the startling array of new technologies available today in the struggle against international employee idleness.
But which of these activities are justifiable governance activities permitted in law, and which can be seen as an abuse of human rights? The answer, as far as Poland is concerned (we don’t have total harmonisation in the area in the EU – the harmonisation is general because of the Human Rights laws in the Constitution, but their enactment and application in National laws in member states still varies greatly).
TGC is able to help with these questions, when it comes to a practical example. You can contact TGC via us on firstname.lastname@example.org . A real person will contact you back and not a robot. Guaranteed.
Otherwise, this training by Explanator may help, too. Again, I haven’t tried them before, but I’m giving the plug in case it’s of interest to those of you with workforces in Poland, whether you speak Polish yourselves or have a Polish speaking HR director.
You don’t want to get this one wrong, by the way. Too little observation and you could appear too soft to some workforces, and some will take advantage. Too much, and you could find yourself in front of an unsympathetic judge. Or robocop.
Find out what you need to do before you embark on monitoring and controlling your people.
Chroniąc majątek firmy przed nieuczciwością pracowników przedsiębiorcy stosują różnorodne metody kontroli i monitoringu. Ale czy na pewno są one dopuszczalne? Czy kontrolując, nie przekraczamy granic prawa?.
Granice prawne kontroli pracowników
Skuteczne i zgodne z prawem metody kontrolowania pracowników i procedury w przypadku stwierdzenia nadużyć
Czas i miejsce szkolenia: WARSZAWA, 8 czerwca 2011 (środa)
Szczególnie polecamy następujące zagadnienia omawiane w trakcie szkolenia:
- procedury związane z wykrywaniem nadużyć pracowniczych
- poszanowanie dóbr osobistych i ochrona danych osobowych
- przeszukanie, monitoring GPS, kontrola korespondencji w praktyce firm… >>> więcej
Termin przyjmowania zgłoszeń upływa 2 czerwca, a liczba miejsc jest ograniczona.
EXPLANATOR, Podchorążych 33, 60-143 Poznań
Tel. (61) 855 01 12, Fax. (61) 855 00 78
- Poznań, Poland: Goats in a Clock (stevensirski.wordpress.com)
- Euro 2012 arena not ready for Poland-France game (usatoday.com)
- Poland shuts two stadiums in hooligan crackdown (reuters.com)
Polish: WALKA Z PRANIEM PIENIĘDZY PO NOWEMU – CZYLI O PROBLEMACH IMPLEMENTACJI NOWYCH ROZWIĄZAŃ W PRAKTYCE
Centrum Promocji Informatyki sent us this invitation to their event on impementation of new counter money laundering solutions, in the Polish language. This is a growing topic in governance so we’re ready to publish this on, here. I have no previous experience of CPI’s courses, but one can but try…
Organizujemy warsztaty p.t.:
WALKA Z PRANIEM PIENIĘDZY PO NOWEMU – CZYLI O PROBLEMACH IMPLEMENTACJI NOWYCH ROZWIĄZAŃ W PRAKTYCE
Ze względu na miejsce pracy prawdopodobnie mogą być Państwo zainteresowani tematyką szkolenia. Zgodnie z wymogami art.4 i art.10 ust. 2 ustawy z 18.07.2002 o świadczeniu usług drogą elektroniczną, niniejszym wysyłamy zapytanie, czy chce Pan(i) otrzymać informacje o programie i warunkach zaproszenia.
Aby otrzymać informacje organizacyjne należy odpowiedzieć na email wpisując w odpowiedź słowo „TAK” – oznaczające zgodę na przesyłanie informacji drogą elektroniczną.
Poniższe dane adresowe Centrum Promocji Informatyki mają wyłącznie charakter, umożliwiający identyfikację organizatora.
Centrum Promocji Informatyki sp. z o. o.
ul. Międzyborska 50, 04 -041 Warszawa
tel. /22/ 870 69 78, /22/ 871 85 51
fax /22/ 870 69 95, /22/ 871 85 56
- Terrible translation on the Kent County Council website – was it really a good choice to have a contract with Kent Top Temps on all the translation and interpreting services? (acgtranslation.wordpress.com)
- More Chows invade Poland – Warszawa, Poland (travelpod.com)
- Microsoft Poland Sending Out Mango 5/24 Event Invites, Literally (pocketnow.com)
Dear Quoracy.com subscribers,We would like to draw your attention to the liability of members of the management board in Polish companies, as regulated by a number of legal acts. Management board members bear civil liability, criminal liability, liability for tax obligations, liability to the Social Insurance Office and liability resulting from specific provisions (e.g. resulting from the Accounting Act – Journal of Laws of 2009, no. 152, position 1223).According to the provisions of the Commercial Companies Code (Journal of Laws of 2000, no. 94, position 1037) members of the management board bear civil liability for actions taken on behalf of the company already at the stage of establishment of the company, i.e. from the date of signing of articles of incorporationof the company. This applies even before registration of the company with the State Court Register.It should be noted that members of the management board bear civil liability towards the company, among other things, for any damages inflicted upon the company in result of the management board members’ activities or omissions contrary to the articles of incorporation. Furthermore, they are jointly and severally liable for the company’s liabilities when enforcement proceedings against the company have proven ineffective.
Criminal liability of members of the management board arises as a result of a property damage caused to the company.
Apart from civil and criminal liability, members of the management board are jointly and severally liable for tax arrears, as well as for lack of (timely) payment of contributions to social insurance. It has to be noted that this type of liability lasts even after deletion of the company from the State Court Register.
In most cases members of the management board may protect themselves against responsibility for the company’s liabilities on condition that they undertake appropriate preventive activities in due time.
We will be happy to give you any detailed information with regard to the liability of the management board members, as well as circumstances of release of the liability.
For further information please contact our expert:
Director of Corporate Department
T: +48 22 653 3649
We are moving!From 1st May 2011our new Warsaw office address and phone numbers will be:Crown Tower
ul. Hrubieszowska 2, 01-209 WarsawTelephone: +48 22 295 3300
Fax: +48 22 295 3301
- Creative Commons Global Meeting 2011 (creativecommons.org)
- Death in Truth or Consequences: Woman Mauled To Death By Four Pit Bulls (jonathanturley.org)
- How to Dissolve a Corporation (brighthub.com)
- Guidance on UK Bribery Act Imminent (businessinsider.com)