31 Jan 2013
Baker Tilly International today reported annual revenues of US$3.3bn for the financial year ending 30 June 2012, a year-on-year increase of 3%.
“This is a strong performance in what remains an uncertain trading environment in many markets, and continues our impressive track record of growth over our 25 years of operations,” said Geoff Barnes, CEO and President of Baker Tilly International. “The results were affected by a number of factors including improvement in some mature markets, as well as in a range of developing economies.
“Despite on-going uncertainty and volatility in some markets, especially within the Eurozone, Europe performed well in 2012 with growth across a spread of countries. This contributed to a combined increase of 8% for EMEA.
“In 2012 – as in 2011 – emerging markets were the story. Asia Pacific led the way, reporting a 30% rise in revenues,” said Barnes. “Baker Tilly China was the stand-out performer, in part due to a large increase in the provision of audit-related services in response to the expansion of the Chinese capital markets.
“In Latin America, revenues rose 14% as our member firms responded to a surge in demand for a range of services from both ambitious domestic businesses and international companies looking for opportunities across the region.
“However, we are also excited by the potential in Africa, and continued development in the Middle East. We have welcomed five new members firms to the network last year from these areas. Increased investment – particularly in Africa – is very much on our agenda. We are continually assessing the changes that are occurring in the marketplace to ensure that we have the necessary resources and capabilities in locations that are of strategic importance to the future of our clients.
“We have an ambitious strategy to continue to grow and strengthen our operations across the continent, which is seeing increased activity by multinational businesses looking to capitalise on its enormous potential especially in sectors including the extractive industries, telecommunications and consumer products. They are looking for first class advice and help on the ground, and we are keen to meet that need.”
- Asia Pacific US$0.64bn (+30%)
- Latin America US$0.07bn (+14%)
- Europe, Middle East & Africa US$1.22bn (+8%)
- North America US$1.39bn (-10%)
Service line breakdown:
- Audit US$1.24bn (+8%)
- Accountancy US$0.53bn (+4%)
- Taxation US$0.87bn (+2%)
- Consultancy US$0.68bn (-4%)
- Drescher: Baker Tilly retracts key finding in UNC report (newsobserver.com)
- Baker Tilly names managing partner for Milwaukee (jsonline.com)
- Martin, Baker Tilly release new UNC documents (newsobserver.com)
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)
Baker Tilly Poland’s consulting division, teamed up with specialist lawyers in the IP area is now offering a service of outsourced administration of your IP rights – it’s based on a meeting at which they analyse all the possible identifiable rights that have value in your organisation or enterprise and ensure that the protection of them is properly organised – from registering trademarks and preparing patent registrations in a range of international jurisdictions though to ensuring that you get a good deal on pursuing those who infringe your rights. For more details write to Tomasz Ataman on firstname.lastname@example.org
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)
CPA Trendlines have recently run a few articles highlighting a rather brisk upturn in the fees taken by audit firms in the States, and together with that an increase in salaries as well as movement in the market for hires in audit in that country.
Europe may or may not follow the trend in the USA – on the one hand we all went down together in 2007, so hopefully we will start to rise together also, but on the other hand Europe is author of some of its own problems. The Euro crisis is far from over, credit is still not flowing in the way people had become accustomed to in those halcyon pre 2007 days, and even where there is talk about green shoots of grass out on the Eastern European green fields, it seems to be a case of “two steppes forward, one steppe back”.
Europe has been discussing the Barnier proposals for audit reform which would have given more teeth to the profession as well as reduced the oligopolistic effect of the Big Four, who seem to be using their oligopoly so as to sour the market for the middle tier and thus cement their place as fairly unthreatened by competition from the mid-tier audit firms. In this, the smaller firms with low audit quality are their natural allies, and in places like Poland where the Big Four took effective control of the local audit chambers, the previous initiatives to force the small pensioner firms to either level up or get out of the market have been unravelled and tiny micro firms of auditors manned by geriatric owners still get to pronounce on the financial statements of even listed companies in exchange for fees which simply guarantee that they cannot possibly have done the work required to be able to make such pronouncements and back them up. Should they ever land in court they will probably not need to worry as they will be too old to get into trouble or endure sanctions for long. Even though this status quo means that governance is largely bogus, the Oversight boards don’t seem to care and the Companies themselves are not complaining, as they save money and also don’t need to put themselves to the trouble of a proper audit, where they might actually need to answer questions and furnish documents to an auditor following a proper audit plan. And behind all this is the Big Four, knowing that this state of affairs squeezes hardest on the mid tier, as the largest companies simply must use the Big Four, and they are fighting the mid-tier for the medium sized business since the recession started and every euro counts.
Before 2007, they tended to bother less with mid-tier clients as they themselves are aware that they are not really geared up to give them what they want, and that is what the mid-tier audit firms are designed for.
The Barnier proposals initially struck hard at the Big Four, and they responded by sending armies of lobbyists to Brussels and to national governments. As a reesult of this, the European Commission is already arguing over a watered-down version of Barnier, and there is the opposing threat that has appeared from nowhere of upping the audit thresholds again.
Now it seems crazy that exactly at a time when many European governments are going to be increasing tax burdens in order to fund their return to lower sovereign debts, and therefore the motivation for taxpaying companies to cheat will be intensified, governments at the same time are talking about reducing seriously the percentage of the economies which are subjected to proper audit.
It makes no sense, but it seems that they don’t appreciate at all the value of the audit system. They are aware of the failures when they occur and concern themselves with the 1% of audits that have gone astray and ignore and legislate in an adverse way for the 99% of audits that have not gone astray. As a result the markets for audit firms have been skewed and more pressure on our prices occured and more and more pressure on time available for audits, which in turn doesn’t do much to improve auditors’ chances to spot abuses and irregularities.
So we hope that the situation will be on the mend in Europe as well, but the politicians need to wise up in order for this to happen. They need to understand that an audit profession that is choking to death in this continent is not in anybody’s interests, and least of all in their own.
- Video: Why Does the IRS Audit People? (turbotax.intuit.com)
- Top 10 Reasons to be an IT Auditor (itauditsecurity.wordpress.com)
- Auditor General probing “most controversial” projects (kaieteurnewsonline.com)
Why do Governments try to make competitive businesses follow the same kind of labour law that applies in their own offices?
I was reading on Linked In today a post by someone blaming Labour Law, and the risks associated with having employees, as one reason why Europe is having more difficulties getting out of the Crisis than maybe some other places.
I think his comments were quite true. There are now, in situations where employers even have any choice, serious reasons not to employ anyone whatsoever and just go for self-employed subcontractors. Reasons include:
1. What you said, the inability to sack anyone, and the huge potential claims if you bungle the sacking of an employee
2. Employees cost more because the social insurance regime in most EU countries is expensive on employment and the onus falls on the employer
3. Self-employed people are likely to be more entrpreneurial anyhow. They already showed themselves to be less supine than the chronic employee by dint of actually going on the self-employed subcontractor route.
The problem is, where does this leave people who cannot deal with the challenge of saying, “to hell with my social shield in employment law, I will put my self out as self employed and stand and fall on my daily performance, and not on the basis that I have accrued rights that make me unassailable even if I become useless”? Even those who genuinely intend to be conscientious and profitable parts of a boss’s team often can’t get their heads around the transition to self -employment, and simply remain unemployed. And where does this leave bosses in businesses in places or sectors where the tax office doesn’t smile on people being self-employed and calls it “crypto employment”?
The reform of labour law to be a little bit more business-friendly is long overdue in most of Europe. And it’s not just the EU. I did some work in the Ukraine a few years back and what I heard about the claims wrongly sacked people can bring about there I found simply astounding. I learned that if the employee who sacks a person – even in a disciplinary way which is fully justified, and fails to pay them all they owe by accident – if it is found even 5 or so years later that they did not pay them everything, even if they were under by a miniscule amount, they now owe that ex-employee their whole final monthly salary for each month of the intervening period as if they had been working!
Have people in Government who write these laws got some kind of grudge against business or what? Certainly they are welcome to have such luxurious laws to protect Government workers if they want to, but why do they insist on forcing them on private businesses? They don’t seem to understand, these Governments, that even though the government of the Czech Republic is not in competition with the government of China for the role of running this Central European country, the same is not true of Novak s.r.o., competing against China or anywhere else in the world with lower social leveraging, in order to make money which, if it is succesful, pays for the taxes that pay for the salaries of these Czech Government people. They certainly don’t create any wealth themselves – excpet for those politicians who have real business interests also, that is. And often the less there is said about that, the soonest mended.
- Does Germany really have a less regulated labour market than Britain? | Alan Manning (guardian.co.uk)
- Trade unions reject PM’s appeal to call off strike (thehindu.com)
- Davidov on Labour Law’s Goals (lawprofessors.typepad.com)
- Child Labour in North America (businessethicsblog.com)
This is obviously old news, although it’s in today’s headlines, but history does have a way of repeating itself.
I was particularly intrigued to see how the Jewish prisoners at Sachsenhausen tried to tip off people about which notes were forged by making a tiny pinhole in the Britannia figures. Presumably they could have been severely punished had this been found out. They were willing to risk a lot in order to sabotage the Nazi war effort and help Britain in what little way they could.
This morning’s Rzeczpospolita newspaper led with the figures showing Polish exports up 15% on the prior year. This is a zloty measurement, which is aided by the low value of the zloty to the EUR in the second half of last year. As this situation is now reversed then that element of it may well reverse also if the current rate of exchange continues but this does not by any means account for the whole. The map shows that certain countries receiving higher exports are not Eurozone, and some such as the Czech Republic, even had currencies which decreased in value against PLN so an underlying volume increase is also highly probable and on this exporters can hope to build in the current year also.