The Money Value of Time


The National Audit Office building, built orig...
The National Audit Office building, built originally as the Imperial Airways Empire Terminal. The statue, “Speed Wings over the World” is by Eric Broadbent” (Photo credit: Wikipedia)

According to page 2 of today’s UK Financial Times, a UK National Audit Office report shows over 6.5m people waited more than 10 minutes to get their calls answered by HMRC, adding £33m to customer’s phone bills and wasting £103m of their time last year.

This snippet of information triggered a few things that I wanted to say to you this morning. The first of these is, that, despite the fact that it is obviously pretty dire that people need to wait so long to get their calls answered by the service they are paying taxes to fund in the first place, at least in the UK there is a body which is concerened at the loss of time and places a value, in monetary terms, on that loss of time by the customer.

Anyone who has spent any time either in government offices, or even banks or supermarkets in this part of the world will probably confirm that the idea that the customer’s time is valuable and should be respected is a rather alien concept. Not so long ago it was an utterly alien concept, but even today it is still a concept which they find rather hard to grasp.

Not as bad as China, though, from what I heard and also saw. People being expected to queue all day outside the Chinese consulate for their visa and then at the very moment that the scheduled closing time of the office came the shutters come down like with Kiosk Keith and that was that. The spare time of the employees was utterly sacrosanct, that of the customer not at all. This of course shows an elitist mentality, which can be found in almost all state sector offices to one or another degree anywhere in the world. Expect it and try somehow to deal with it.

Much less acceptable is the wasting of the customer’s time in business. If the customer is paying then they have a right to have their matters expedited and people who keep people waiting ought either to invest in more infrastructure to avoid it or to wonder if they are in the right business. Continue reading “The Money Value of Time”

What are the per diem and travel expense allowability rates in the Czech Republic?


CZK 1 coin.

Please find below information regarding the Czech per diem as well as other travel expenses, correct as at the close of 2012 going into 2013, courtesy of Baker Tilly Czech Republic’s Head of Tax Lucia Rablova.

Per diem

The new aspect is the obligation to reduce meal allowances when a free meal was provided.

The minimum statutory rates of meal allowances in case of domestic business trips are shown in the following table:

Period of domestic business trip in calendar day Meal allowances according to the decree Obligatory reduction for 1 free meal
5 – 12 hours min. CZK 64 (max. CZK 76) up to 70%
12 – 18 hours min. CZK 96 (max. CZK 116) up to 35%
more than 18 hours min. CZK 151 (max. CZK 181) up to 25%

The minimum statutory rates of meal allowances in case of business trips abroad are shown in the following table:

Period of domestic business trip in calendar day Meal allowances Obligatory reduction for 1 free meal
less than 1 hour ——— ——–
5 – 12 hours 1/3 of basic rate up to 70%
12 – 18 hours 2/3 of basic rate up to 35%
more than 18 hours the basic rate up to 25%

Naturally, an employer may provide meal allowances to a higher amount, i.e. may set a higher rate of meal allowances or may claim reduction in lower than the statutory rate. From the corporate income tax point of view, the full amount of meal allowances is tax deductible. However, any difference between actually paid meal allowances and statutory provided maximum limits for employees in the public budgets sphere (see column II in table 1 – max. amount) is subject to personal income tax from dependent activities and is counted also for social and health insurance computations.

 

Mileage

–          CZK 3.70 per km and petrol usage reimbursement (price according to the receipt or average price according to the annually issued decree may be used)

Accommodation

–          by receipt

Should you have any further questions in respect of the above please do not hesitate to contact Lucia via this portal, using czechtax@quoracy.com, or via the http://www.bakertilly.cz website.

Best Advice Letter Intercepted


I intercepted today one of the best letters an accountant could possibly write to a troubled client. The client, whom I’ve remained Bill, wanted to go for a court appointed liquidator in East Europe assuming that some equity would apply as it does, at least in theory, in UK law. The accountant, whom I’ve renamed Ben, gave the client the benefit of his experience and we both agreed that I could share this with the Quoracy.com subscribers. By the way, the part about the liquidator driving the best car comes from a real case and in that particular case the liquidator is still driving it four years later and delaying the closure of the liquidation simply to prolong his free ride! There are many such cases, but that one took the biscuit. One other time I’ll tell you about what happened to a certain German tourist’s car in Belarus. But that’s another day. For now, enjoy and take note from Ben’s letter to Bill:

Dear Bill,

 

The Receiver will recover for himself first, including making a reserve for all future costs. He will ensure that he has money to run the liquidation including the wages of the employees he keeps on, security people, light and heat etc. He will drive the best of your cars, at the expense of the receivership, and sell it last.

 

Yes, the chargeholder may wait for years and have nothing in the end because there are preference creditors before him. The Receiver will sell the best stock first to satisfy his appetite and the most important creditors such as employees and taxes. This means he does not sell systematically nor is he in a hurry to finish if there is cash about. If he gets good prices then there may be money to distribute to the secured creditors. If he does not get good prices the banks will end up with the worst stock that will be given to them to take away or it will be sold by the weight to someone that gives the best price per ton. The Receiver will not work hard if there is little money at the end of the rainbow.

 

You need to estimate what the receiver will take and the costs to liquidate. This means the redundancy costs and costs to dispose of the outlets and stock which includes retaining some warehouse staff, bookkeeper, security upkeep costs (light and heat)  etc.  need to be considered in your schedule.

 

The receiver will keep his direct and indirect paymasters happy, ie the court and tax office. As employees rank higher than the tax office he will satisfy these as well.

 

The receiver will only hand out any surpluses, after the above, first to the secured creditors. What do you think will be left to distribute?

 

Regards

Ben

 
That’s quite an eye opener, isn’t it? Don’t let it get that far – if your business is starting to go down, get proper advice on time, from a reputable, international accounting or law firm.

Opinion Piece – Amazon and Google and the prickly question of UK Corporation Tax


Luxembourg
Luxembourg (Photo credit: epha)

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.

 

 

 

 

 

 

 

Audit fees bouncing back in the USA. Will Europe follow?


European flag outside the Commission
European flag outside the Commission (Photo credit: Wikipedia)

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.

Contact managers and CRM systems are incredibly stupid | ZDNet


 

In the following article:

Contact managers and CRM systems are incredibly stupid | ZDNet.

David Gewirtz writes:

I’m having a crisis of faith. I can’t stand contact managers. Whether you call them CRM systems or contact managers, they all seem to be stuck in the land time forgot. They’re incredibly inefficient, and no matter how hard I try to force myself to use them, I find I get busy and never bother to update my contacts.

 

Find out why…

Why do Governments try to make competitive businesses follow the same kind of labour law that applies in their own offices?


Labour law concerns the inequality of bargaini...

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.