We communicate with you to inform you about the latest developments of the ECB/EU/IMF troika financial assistance to Cyprus. Last Saturday the Eurogroup decided in favour of a financial assistance to be provided to Cyprus with a package of measures which include:
• an one off solidarity levy on bank deposits and credit balances of 6,75% for amounts of up to €100.000 and of 9,99% for amounts exceeding €100.000. This levy will apply to all bank accounts (current, deposit, notice etc.) with banks operating in Cyprus (local and international) and bank branches. Depositors will be compensated with the equivalent amount in shares in Cyprus banks, and a plan is being contemplated for those who will keep their deposits in Cypriot banks for the next two years to be given bonds linked to revenues from natural gas; and
• an increase of corporate tax rate from 10% to 12,5%.
The upside of Saturday’s Eurogroup decision is that the uncertainty over the Cyprus economy and the future of its major banks will disappear with the financial assistance agreement. The EU and the IMF have also confirmed that these measures will ensure that the Cyprus economy will be sustainable without any further support or measures.
As a firm, we believe that:
• the increase of the corporate tax rate by 2,5% will not negatively affect international business in any significant way as corporation tax affects mainly trading income. Most international companies in Cyprus are set up as investment holding companies or group financing companies. Cyprus companies will still benefit from full participation exemption on capital gains, full participation exemption on dividend income, no Cypriot withholding tax on dividends, interest and royalties, no thin cap rules, no CFC rules, no exit charges, effective tax on royalty income of 2,5% (from 2%), interest income being taxed on thin margin only and all the other current positives of the Cyprus tax regime. In addition, even with this corporation tax increase, Cyprus remains one of the lowest corporation tax jurisdictions in the EU.
• the imposition of the one off solidarity levy on bank deposits and credit balances in the Cypriot banking system is unacceptable as such a measure is unprecedented and undermines the European banking system. Shares in banks on major international stock exchanges took a pummelling on Monday (yesterday) as a result of the dangerous precedent that has been set.
The Eurogroup decision needs to be ratified by the Cyprus House of Representatives to be effective. The decision with respect to the levy on deposits has sparked huge public anger in Cyprus and beyond and it is currently questionable if the House of Parliament will ratify it – the Parliament is expected to hold a special session for this today at 6pm Cyprus time.
We shall keep you informed of developments on this important issue. Please feel free to contact us for further information, assistance or clarifications.
- Cyprus Wins Exemption for Small Savers from Bank Levy (marketcurator.com)
- Bailout terms ‘death knell’ for Cypriot finance sector (ekathimerini.com)
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- Eurogroup agrees to allow Cyprus to tweak deposit tax as long as agreed target is met (ekathimerini.com)
- Cyprus depositors face up to 10% haircut as part of bailout deal agreed at Eurogroup (ekathimerini.com)
- Cyprus seeks to alleviate pain from deposit raid (cbc.ca)
- Complete Eurogroup Statement On Cyprus (zerohedge.com)
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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)
Machine translation of that article:
According to new EU rules on which work is currently underway, the world’s four largest audit firms will be divided, and their names will change. The aim is to eliminate the risk of conflict of interest and shortcomings, which highlighted the recent financial crisis.
Investor confidence has been severely undermined the audit by the crisis, and I think the industry needs a change – said on Wednesday the Internal Market Commissioner Michel Barnier.
Policymakers can not understand why the auditors accept without reservation the condition of many banks, and shortly later, shortly after the outbreak of financial crisis, they need help from the taxpayers.
Barnier believes that the recent and obvious errors in the case of auditors, banks and Lehman Brothers AngloIrish and companies BAE Systems and Olympus’ show that audits do not take place in a proper manner. “
In his opinion, more oversight is needed and “more diversity in a very concentrated market, especially among the largest companies.”
Book of the largest companies in the world are generally checked by one of four companies: Ernst & Young, Deloitte, KPMG and PwC. In the eyes of the commissioner that situation is “in its essence oligopoly.”
According to the plan developed by Barnier large audit firms, in practice, the four largest, will have to separate from the rest of the audit activity, including tax consulting and other advisory services. This will help “avoid any risk of conflict of interest”.
Claire Bury, one of the closest współpracowniczek Barnier, said that if plans are approved by the Member States and the European Parliament, it will have an impact on the current business model of the Big Four.
In large audit firms, meaning companies with network revenues revenues in excess of the EU € 1.5 billion, operations in the area of auditing and beyond would be moved to a separate legal entity.
“They will have to change names and I suppose it is the issue of branding that will be the biggest bone of contention” Bury said during a press briefing.
The project also envisages the imposition of all listed companies the obligation to the organization of public tenders for audit services, and perhaps also the introduction of a two-stage audit.
European Commission officials are aware that new legislation would reform the entire market at a structural level and their implementation would require time. They expressed hope that the incarnation of the new rules into force would take about 3-5 years.
“This is not something that can be in a hurry” a spokeswoman said to Barnier.
The last word on the fate of the project will include Barnier to the Member States and the European Parliament. In this process, certainly there are many doubts, elbowing and all kinds of changes.
Under pressure from the other Commissioners Barnier, resigned at the last minute of a key element in their plans – the introduction in the case of listed companies ‘joint audits’, which would improve their quality and to help smaller auditors gain experience in controlling the books of large companies.
Instead, however, the Commissioner would like to encourage companies to conduct “joint audits” by the need to change or rotation of auditors.
The auditor would have the right to audit the same company for up to 8 years in a row, but in the case of joint audits wydłużałby period to 12 years.
Audit firm could not provide audited company unrelated to audit services, including consulting in other areas, including taxes.
The EU plan also prohibits the practice in which banks make loans to companies, provided that they were audited by one of the Big Four firms.
Representatives of the big audit firms have warned that audits may increase costs and decrease their quality. But much more favorably on a plan of their smaller rivals look, which would gain completely new opportunities for development.
Auditing industry is interested in the longer British Competition Authority, and the possibility of rotating the audit oversight is being mooted also in the United States.
- Audit firms face being broken up (bbc.co.uk)
- Big four auditors face break-up to restore trust..now we are getting somewhere (seeker401.wordpress.com)
- Michel Barnier’s new audit rules see angry revolt (telegraph.co.uk)
- Michel Barnier moves forward to break up Big Four audit firms (telegraph.co.uk)
The EGIAN Position Paper in full (republished by permission) Quoracy.com fully endorses the views expressed in this document
AN EGIAN POSITION PAPER
EGIAN SUPPORTS ROBUST REFORM PROGRAMME FOR THE EUROPEAN UNION AUDIT PROFESSION
PRINCIPLES AND ACTIONS
1 THE URGENT NEED FOR CHANGE
The creation of a more open vibrant market in the audit of large listed companies is urgently needed to protect and advance the public interest. If no action is taken, the currently excessive levels of concentration in this segment of the audit market in nearly all Member States of the European Union will very likely continue to rise even further, not least as a result of non-Big 4 firms being taken over by their dominant Big 4 competitors in key markets. An example of how to define large listed companies is set out at the end of this paper. Read more…
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
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Poland’s production of household appliances is expected to grow some 5% this year. The country is expected to produce and export 15.5 million washing machines, dishwashers, refrigerators and cookers. Poland has already beaten Germany and is about to get ahead of Italy “Dziennik Gazeta Prawna” reports.
The so called large household appliances made this year in Poland will be worth the record amount of PLN 3 billion, the newspaper underlines. A lot of it is owing to Samsung Electronics who purchased a washing machine and refrigerators manufacturing plant in Wronki from Amica and announced that it would invest nearly USD 170 million in the development of this plant. Samsung Electronics is also to transfer its production from other European plants to Wronki. The investments are underway.
“Dziennik Gazeta Prawna” found out that Samsung Electronics says it is possible that production in Poland will be expanded with manufacturing heating equipment like ovens, stoves and plates. There is a large demand for this kind of appliances in the EU. According to analysts, demand for heating equipment will remain at around 30% of total annual production, “Dziennik Gazeta Prawna” notes. (Source: gazeta.pl)
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I’m happy to give some publicity to this event, and if you book please credit us with the link-up.
Dear Quoracy.com subscribers,
Building on the success of our January event (attendee list attached below), we have developed a unique and targeted format for October, focusing on attracting more banking sector and municipal representatives.
The event will attract up to 50 municipalities and 100 leading international specialists to discuss and promote Municipal Projects in Poland and CEE.
CEE continues to offer investment opportunities and Municipal Projects are integral to sustained growth, with various mechanisms promoting development.
PPPs are an increasingly important financing mechanism, this event will highlight their potential bankability and compare PPPs against alternative public financing methods.
Key topics addressed include Public Debt, Public Fundraising and Financing mechanisms, and projects in Waste Management, Transport Infrastructure, Telecoms Infrastructure, Parking, Civic Buildings and Municipal Accommodation.
The event will have 2 core purposes:
- 1-day PPP capacity building workshop for Polish Municipal governments. Municipalities lack the effective capacity to plan, prepare and carry out PPP projects (this lack of capacity is also shown in standard public sector projects) this workshop aims to deal with this issue.
- 2 –day international investment conference to promote Poland’s (& CEE) municipal project pipeline (not just potential PPPs but all municipal projects).
So, where do you come in?
You can of course attend to hear about the latest developments in the market and take advantage of the excellent networking opportunities (options on the brochure), however there are a number of unique and specialist sponsorship opportunities available which may be of interest to your organisation.
If you would like to find out more or have any questions please contact firstname.lastname@example.org direct.
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