editie 1 common consolidated corporate tax base

Common Consolidated Corporate Tax Base

15th VolumeNovember 2012issue #1

Column P. KavelaarsNecessity for the EU

Interview J. van de StreekAn expert about CCCTB

News updateNew swathe of difficulties as Dublin abstains from tax plan

p35p28 p50

Ondernemers helpen groeien

met jouw cijfermatig inzicht?

ACCOUNTANTS EN BELASTINGADVISEURSwww.werkenbijbakertillyberk.nl

Financieel talent Sta jij aan het begin van een carrière als

accountant of fiscalist? Dan is het goed om jezelf af te vragen waar

jouw financieel inzicht het best tot zijn recht komt. Bij Baker Tilly Berk

controleer je niet alleen het verleden, maar adviseer je ook over de

toekomst van een bedrijf. Baker Tilly Berk combineert een landelijke

aanwezigheid en een internationaal netwerk met kleinschalige kantoren

dichtbij onze klanten. Die jij al snel persoonlijk kunt adviseren. Je werkt

bijvoorbeeld mee aan de uitbreiding van een transportonderneming,

de fusie van twee bedrijven of een audit in de publieke sector.

Om ondernemers te helpen groeien zoeken we medewerkers die zelf ook

ondernemend zijn en zich continu willen ontwikkelen. Denk jij dat de rol

van adviseur bij jou past? Dan hebben we voor jou ook een goed advies:

werkenbijbakertillyberk.nl.

BERK-085-02-opmaak-210x297-v15.indd 1 17-02-11 11:31

ℜς ϓ℘ ΞΒ⇓ ∗ ∨ ⎥⎦W.we∼kΨn bij mΕzars. ⇔ ←.

Mazars is ontstaan uit een fusie tussen Mazars en Paardekooper&Hoffman

Ga verder met Mazars.

0475.00.596 WT Niets BS_210x297_FC.indd 1 21-08-2008 11:14:10

At NIBC, entrepreneurial bankers start at the deep endAs a trainee banker at NIBC, you also have a daily job. Your assignments and responsibilities start from day one. And you’ll

have the chance to specialise, in for example mergers and acquisitions. You and your fellow analysts will follow our in-

company training programme at the Amsterdam Institute of Finance, led by professors from international business schools.

A flying start at the bank that thinks and acts like entrepreneurs. For more information, visit www.careeratnibc.com.

0185.10.003 NIBC_Arbeidsmarkt_Adv.indd 4 22-11-11 15:06


Preface

Dear reader,

This is the first edition of the fifteenth year of the FSR Forum. The goal of the FSR Forum is to

connect the theory with the practice. You can find the theory in the scientific articles and the

columns provided by Prof. dr. P. Kavelaars and mister Groeneveld. You can find the practical

part in the company presentations and the columns of a former FSR board member and an FSR

member.

The theme of this edition is Common Consolidated Corporate Tax Base (CCCTB). CCCTB is a

single set of rules that companies operating within the EU could use to calculate their taxable

profits. A company or group of companies would not have different rules in each member state

in which they operate, rather they would have just one EU system for computing its taxable

income. In addition, groups using the CCCTB would be able to file a single consolidated tax

return for all of their activities in the EU. The consolidated taxable profits of the group would

be distributed to the individual companies by a simple formula so that each member state can

then tax the profits of the companies at the tax rate that each member state chooses.

This edition will contain three scientific articles. The first article of this edition is from Matthias

Petutschnig. This article will provide you an explanation about the apportionment factors and

the apportionment system. The second article is written by Tim Moolenaar and Ivonne van den

Berg. In this article the characteristics of the CCCTB and the European Union Corporate

Income Tax will be addressed. The last article is from one of the professors at the Erasmus

School of Economics: Rolph van Ovost. This paper answers the questions whether our depre-

ciation limitation fits within the rules of IFRS and whether the legislation will derive concerns

within European tax base.

In this edition we interviewed an expert in the field of CCCTB. Jan van de Streek is an assistant-

professor of corporation and income taxes at the UvA and he is also working at the Tax Knowledge

Office of Ernst & Young. Jan van de Streek has published multiple articles on CCCTB, in this

interview he gives information about CCCTB.

I am pleased to tell you that mister Groeneveld PhD RA RV has again decided to devote his time

five times this year on his column ‘K(r)anttekening’ in the FSR Forum. In this edition mister

Groeneveld discusses the trust in the field of accountancy.

Also this year a teacher will write a column for the FSR Forum. The first teacher to write a

column this year is Prof. dr. P. Kavelaars from the Erasmus School of Economics. The topic of

Prof. dr. P. Kavelaars’ column is about the advantages and disadvantages about the CCCTB and

why countries should not resist the CCCTB.

As in every edition of the FSR Forum a former FSR board member and an FSR member will talk

about their experiences in the working sector or in their internship. The FSR committees will

also introduce themselves and they will give a short description of the events they are going to

organize. There will be an activity report about the Kickoff Days, GMA and Ernst & Young

fsrforum • volume 15 • issue #1

2 • Preface

drink. For the first time the FSR organized the Erasmus Banking Congress. You will find a report

about this event in this edition. There will also be a report about the Big 4 Cycle.

Since last year the FSR Forum contains the News Update. With this item we will inform you

about the news and developments around the subject of the FSR Forum. In this edition we discuss

the fact that Ireland has rejected the CCCTB and the consequences of this decision.

After the News Update there is an Alumni letter from Ashmita Krishna. All former active FSR

members can become an Alumni member and can join several activities that the Alumni Association

organizes. This edition of the FSR Forum will end with the FSR Activity Agenda in which you

can find all the events that the FSR will organize this year.

Finally I would like to thank the editorial committee, Petra van den Akker and Roija, for helping

with this edition. I am confident that Petra and Roija will be of great value for the FSR Forum.

Furthermore I would like to thank Anne van Driesum for all her help and tips which helped us

to make the FSR Forum.

I hope you enjoy reading this FSR Forum!

Sincerely,

Maaike Lanphen

Editor in Chief FSR Forum

FSR board 2012-2013

Preface • 3

Table of contents

ColofonFSR FORUM appears five times a year and is an edition of the Financial Study Association RotterdamKvK Rotterdam no: V 40346422VAT no: NL 805159125 B01ISSN no: 1389-0913

15th volume, number 1, circulation 1700 copies

Editor in chiefMaaike Lanphen

Editorial department Petra van den AkkerRoija Rasuli

Editorial advisoryDr. M.B.J. SchautenDr. W.F.C. VerschoorDrs. R. Van der Wal RA

With the cooperation ofI. van den BergDrs. J.G. Groeneveld RA RVProf. Dr. P. KavelaarsT. MoolenaarR. van OvostM. Petutschnig

Editorial addressEditiorial office FSR Forum, Erasmus Universiteit Rotterdam Room H14-06Postbus 1738, 3000 DR RotterdamTel. 010 408 1830E-mail: [email protected]

Common Consolidated Corporate Tax Base: Effects of Formulary Apportionment on Corporate Group EntitiesMatthias Petutschnig (2010)One of the cornerstones of the CCCTB-Draft is the apportionment of the group’s overall taxable

income according to a predefined micro-economic factor based formula. This article discusses

the proposed definitions of the apportionment factors and shows that the apportionment system

might lead to over-taxation and under-taxation of any given group entity. 6

Introducing a European Union Corporate Income Tax on the basis of an Enhanced Cooperation AgreementTim Moolenaar, Ivonne van den Berg (2011)In this paper the characteristics of the CCCTB and the European Union Corporate Income Tax

(EUCIT) will be addressed. There will also be given a clear explanation of the distinctive charac-

teristics of an Enhanced Cooperation Agreement and an understanding of the existing studies

on the implementation of the CCCTB amongst all or a subgroup of MS and the implementation

of the EUCIT. 14

Depreciation of buildings viewed in the light of European tax baseRolph van Ovost (2012)Because in the EU context its examined whether it is possible to develop a common tax base for

corporate profits, namely CCCTB, which is often associated to IFRS rules, the question this

paper wants to answer is whether our depreciation limitation fits within the rules of IFRS and

whether the legislation derives concerns within European tax base. 20


4 • Table of contents


SubscriptionEUR Students through membership FSR; costs E 5,00.Others through subscription. To obtain information, contact the editorial department; costs E 27,50 (including VAT and postage).

Bank

ABN-AMRO 50.15.61.331

Address ChangesSend an e-mail to [email protected] or fill out the form on www.fsr.nl.

Graphic Design and printingHaveka the graphics partnerwww.haveka.nl

Photos and illustrationswww.istockphoto.com

Advertising acquisitionLaurent Schmidt

No portion of the information in this magazine may be reproduced in any form or by any means without the prior written consent of the editorial board. Although the information is with great care collected, the correct functioning is in no manner guaranteed.

AdvertisersBaker Tilly Berk

www.werkenbijbakertillyberk.nl

Ernst & Young

www.ey.nl/carriere

KPMG

www.gaaan.nu

Mazars

www.werkenbijmazars.nl

NIBC

www.careeratnibc.com

Optiver

www.optiver.com

Interview J. Van de Streek 28

Expert on CCCTB

Column Joost Groeneveld PhD 32

Vertrouwen of (on)macht

Column professor 35

P. Kavelaars

FSR News

Word of the Chairman 36

FSR former board member 38

FSR member 39

Introduction committees 40

Activity reports 45

News Update 50

FSR Alumni Association 51

FSR Activity Calendar 52

Company Presentations PwC 12www.werkenbijpwc.nlErnst & Young 18www.ey.nl/carriereKPMG 26www.gaaan.nu

Table of contents • 5

Common Consolidated Corporate Tax Base: Effects of Formulary Apportionment on Corporate Group Entities

Matthias Petutschnig

6 • Common Consolidated Corporate Tax Base: Effects of Formulary Apportionment on Corporate Group Entities


»

Abstract One of the cornerstones of the CCCTB-Draft is the apportionment

of the group’s overall taxable income according to a predefined

micro-economic factor based formula. This article discusses

the proposed definitions of the apportionment factors and shows

that the apportionment system might lead to over-taxation

and under-taxation of any given group entity.

1. Introduction In October 2001, the European Commission communicated

its plans for the coming years for company taxation in the

European Union (COM(2001) 582 of 23/10/2001). The document

identified several steps which should be taken to remove

individual tax obstacles to cross-border trade in the Internal

Market. Among others the Commission concluded that in

the longer term member states should agree to allow EU

companies to use a single consolidated base for computing

tax on their EU-wide profits.

In 2004, the European Commission established a Working

Party to examine from a technical perspective the definition

of a common consolidated tax base for companies operating

in the EU. The so called Working Party Common Consolidated

Corporate Tax Base (WP-CCCTB) was thus instructed to

develop and discuss recommendations and eventually draft a

legislative proposal for an EU-wide corporate tax base which

was eventually published in March 2001 .

The basic outline of the proposed EU-wide cross-border cor-

porate tax system contains of a three step determination of

the taxable income of any given group member. At first each

group entity separately calculates its income based on its

financial accounting by adjusting the financial accounting

income to the provisions of the CCCTB. This separately

accounted preliminary taxable income of the group entity

may then be corrected to eliminate the income derived from

intra-group trade to form a (semi-)separately accounted pre-

consolidation income of every member of the CCCTB-group.

These (semi-)separately accounted pre-consolidation profits

or losses of every group entity will then be consolidated to

form the Common Consolidated Corporate Tax Base of the

group which will in a last step be allocated to the group entities

using a predefined micro-economic factor based apportionment

formula. As it is currently not proposed that the consolidated

group is subject to a supranational corporate income tax

levied by the EU every group entity will consequently be

taxed separately by its situs state based on the apportioned

income at the situs state’s statutory tax rate.

While the proposed income determination aims at regarding

the corporate group as one single economic unit the income

allocation procedure and the subsequent taxation of the

group income takes the corporate structure of the group in

consideration and taxes the group income at the level of the

group entities not at the level of the group.

The proposed sharing mechanism “itself is not the purpose of

the comprehensive tax reform, but a necessary and unavoidable

consequence of the consolidation” (WG CCCTB, 2007a). The

sharing mechanism and the proposed apportionment formula

is aimed at being “as simple as possible to apply” and “difficult

to manipulate” by the taxpayers by shifting of the factors to

artificially relocate (parts of) the consolidated tax base and

subsequently to artificially shift taxable income to low tax

countries. Additionally the sharing mechanism aims “to dis-

tribute the tax base among the various entities concerned in

a way that can be considered fair and equitable” and there-

fore the sharing mechanism aims “not to lead to undesirable

effects in terms of tax competition” (WG CCCTB, 2007a). The

proposed apportionment formula is intended to achieve

these aims by using three factors, Sales (S), Labour (L) and

Assets (A). The factor Labour is divided into two “part-factors”:

the labour costs Payroll (P) and the Number of Employees

(NE). Hence the tax base of a particular group member (Π i)

would be calculated as follows:

The adoption of a Common Consolidated Corporate Tax Base

and a sharing mechanism using a predefined microeconomic

factor based formula would be a major change in corporate

income taxation for every EU member state as well as for

every corporate group. Formulary apportionment of corpo-

rate income for tax purposes between sovereign nation states

is currently nowhere in place (Weninger, 2009). Currently

each member state of the European Union uses Separate

Accounting with a dealing at arm’s length approach to deter-

mine the taxable income of corporations trading with affiliated

companies. However, formula apportionment is used by a

number of countries (e.g. Canada, Switzerland, Germany,

Common Consolidated Corporate Tax Base: Effects of Formulary Apportionment on Corporate Group Entities • 7

USA) to allocate corporate income between provinces, states and municipalities or townships

(Kobetzky, 2008; Martens-Weiner, 2005; Weninger, 2009). As the implementation of a consoli-

dation with subsequent Formulary Apportionment is a fundamental change in corporate

income taxation throughout Europe, this article aims to evaluate the possible impacts of this

change to the tax burden of any given group entity concerned.

2. Analysis of the Apportionment FactorsThe WP-CCCTB proposes an apportionment formula using three apportionment factors (Sales,

Labour and Assets) whereas the factor Labour is split into two “part-factors” Payroll and

Number of Employees. The aim of these apportionment factors is to represent all phases of the

profit-making process of the multinational group. The factor Sales therefore represents the

demand side of this process while the factors Labour and Assets represent the supply side.

These two phases are also represented in the pre-consolidation income determination of every

group entity in the form of revenues and expenditures of the respective group entity.

The following section analyses differences in the definitions of the proposed apportionment factors

compared to the respective income producing factors and show their effects on the outcome of

the apportionment procedure compared to the group entity’s pre-consolidation income.

2.1. SalesThe factor Sales represents the marketing phase of the profit making process and is basically

equal to the income determination factor revenues. As all profits or losses of the group entities

are consolidated and therefore the income from intra-group trade in goods and services are

excluded from the apportionment factor, Sales will only contain sales from trade in goods and

services to buyers not part of the consolidated group (external sales). But not all proceeds of

sales of goods and services to third-party buyers will be included in the apportionment factors

Sales. The WP-CCCTB suggests that extraordinary income should be excluded from the factor

as well as revenues from passive income such as interests, dividends, deemed dividends and

royalties should be excluded unless these revenues are accrued in the ordinary course of business

of the respective group entity. The WP-CCCTB further stresses that these exclusions should

only affect the apportionment factor and not the tax base with the effect that this extraordinary

and passive income will be taxable (WP-CCCTB, 2007a, point 50).

The location of the factor Sales is suggested as sales by destination. One rationale of this concept

is that the destination of goods or services especially the place of consumption of the goods by

the customer can hardly be influenced by the seller company. A second rationale of this concept

is that the marketing-state which enables supply and demand to meet is compensated with tax

revenues in exchange for the cost of providing markets and infrastructure to the seller and the

buyer (Oestreicher, 2000, p 155). Assuming that the sales will regularly exceed the costs of pro-

duction (represented by the factors Labour and Assets) the destination-based sales-factor will

regularly apportion a greater share of the taxable income to the marketing-state than to the

production-state.

The concept of sales by destination causes the need to determine that very destination. A pure

concept of sales by destination would lead to an allocation of a share of the group’s taxable

income to any member state in which the group has sold one product or in which the group

has provided one service. This would lead to an increase in the group’s compliance costs and in

certain situations to an increase in the group’s overall tax

burden. Therefore the WP-CCCTB suggests allocating taxable

income to any given member state only if the group of com-

panies has a qualitative economic relation (Nexus) to that

member state. To establish Nexus it is necessary according to

the WP-CCCTB to have a physical presence (WP-CCCTB,

2007a, point 61) in that very state which means that the tra-

ditional concept of permanent establishment and its short-

comings is prolonged by the CCCTB and the concept of sales

by destination is only implemented to a certain degree. Sales

to a buyer located in a state where Nexus is not established

will be allocated to all group entities according to the so

called spread throw-back rule (WP-CCCTB, 2007a, point 58)

which implicitly gives the other two apportionment factors a

higher weighting.

The WP-CCCTB aims at making the apportionment factor

Sales as less manipulable as possible. This aim is pursued by

excluding proceeds from passive income whose underlying

assets could easily be transferred to other group entities and

by proposing the sales by destination concept. However, the

proposed Nexus-requirements still allow the group of com-

panies to manipulate its overall tax liability by choosing to

establish Nexus or not. Not-establishing Nexus in a high tax

country will lead to an apportionment of all proceeds from

this country to the whole group and to a taxation of those

proceeds at the effective (average) group tax rate.

2.2. Labour The factor Labour representing the supply side of the profit

making process is suggested to be split into two “part-factors”

Payroll and Number of Employees. The split is justified by

the WP-CCCTB with the different wage levels throughout the

European Union especially between the western European

member states (EU-15) and the central and eastern European

member states (EU-12) (WP-CCCTB, 2007c, point 16). The

higher wage levels and the higher ancillary labour costs in

the EU-15 would lead to an allocation of a greater part of the

group’s tax base to the EU-15 which may not always correspond

with the value created in these member states. Thus it is seen

necessary to relativise the Payroll costs by the Number of

Employees producing these costs.

2.2.1. Payroll The factor Payroll is relatively straightforward defined as it is

Three apportionment factors (Sales, Labour and Assets).



»

suggested that the apportionment factor Payroll should be

equal to the remuneration that is taken into account as a

deductible expense for the purpose of calculating the tax

base, including fringe benefits, social contributions, etc (WP-

CCCTB, 2007a, point 25), which should make the calculation

of this apportionment factor relatively easy. However regarding

the definition of the factor Payroll two issues arise: The loca-

tion of the factor Payroll and the definition of ‘employee’ are

critical. Usually the employee will render services at the

same place where the group entity that registered this

employee on its payroll is located. So therefore the corporation

paying the wage will also be the corporation that benefits

from the work of the employee and therefore it is reasonable

to allocate taxable income to that corporation. However it is

possible that a corporation has an employee on its payroll but

the employee provides services to a different group entity.

The group could for example use a special purpose corporation

in a low tax country that registers all employees of the group

on its payroll to artificially shift portions of the tax base to

this low tax country by shifting the Payroll-factor to this low

tax country. To hinder such artificial factor shifting it is sug-

gested that the factor Payroll contains only the wages paid to

employees that actually perform services for or to the respective

group entity regardless which group entity actually registered

the employee on its payroll.

The second issue is the definition of ‘employee’. The WP-

CCCTB does not provide one harmonised definition of employee

but instead proposes that the definition of employee should

be based on the domestic legislation of the member state in

which the employee performs its services (WP-CCCTB,

2007a, point 22). The WP-CCCTB further suggests a system

of mutual recognition of the various employee definitions by

the other member states involved. The definition of a ’typical’

employee will regularly not differ heavily from one member

state to the other but on the edges of this definition where

directors or (in)dependent contractors are concerned these

definitions may vary from member state to member state. In

the U.S., on the contrary, the harmonised definition of employee

for tax purposes is seen as a major advantage (Hellerstein and

McLure, 2004).

2.2.2. Number of Employees With the part-factor Number of Employees the WP-CCCTB

proposes an apportionment factor that has no direct influence

in the calculation of the consolidated group. The implementation

of this part-factor Number of Employees seems at a first

glance reasonable and justifiable as it should help to even the

influences of the different wage levels in the various member

states on the apportionment results. By drawing this direct

relation between Payroll and Number of Employees it is

assumed that a high amount of payroll combined with a rela-

tively small number of employees shows a lower degree of

productivity whereas a small amount of payroll combined

with a relatively high number of employees shows a higher

degree of productivity. The lower degree of productivity

therefore justifies allocating a smaller amount of tax base to

the situs state whereas a higher degree of productivity justi-

fies the opposite. But a higher amount of Payroll combined

with a small Number of Employees could also mean that the

services the employees perform demand a higher degree of

education and knowledge and therefore higher wages are

justifiable. Therefore the part-factor Number of Employees

seems to result in reasonable allocations only if any one unit

of labour has the same effect on the value of the corporate

group which may not always be the case.

2.3. Assets The WP-CCCTB proposes that for practicability, simplicity and

manipulability reasons only fixed tangible assets (Property,

Plant and Equipment – PPE) should be taken into account

for calculating the apportionment factor Assets (WP-CCCTB,

2007a, point 30). Financial assets and current assets are

excluded because of their mobility which could easily be used

by the group to manipulate its tax liability by factor shifting.

The exclusion of intangible assets (patents, trademarks, etc)

is primarily justified with the difficult valuation of intangible

assets especially of self-generated intangible assets. This

argumentation does only hold true with respect to self-gen-

erated intangible assets while acquired intangible assets can

easily be valued with their historical cost or their historical

cost less amortisation (book value) as it is proposed for PPE.

Additionally the WP-CCCTB mentions that self-generated

intangible assets are already included indirectly in the appor-

tionment formula by the other factors (WP-CCCTB, 2007a,

point 34); in the factors Payroll and Number of Employees

through the employees (researchers and developers) producing

the intangible assets and in the factor Sales through the

goods sold that were produced with the intangible assets.

This argument is basically correct but it is not an argument for

the exclusion of only intangible assets as also self-generated


fixed tangible assets and self-generated current assets are represented in the apportionment

formula by the other two factors. Based on this argument it would be justifiable to exclude all

self-generated assets regardless whether they are fixed or current, tangible or intangible but

not only self-generated intangible fixed assets.

Apart from the question which categories of assets may be included the WP-CCCTB suggests as

regards to valuation using the “tax written down value” (historical cost less amortisation) of

the assets (WP-CCCTB, 2007a, point 36). To hinder arbitrary factor shifting shortly before the

balance sheet date the WP-CCCTB suggests the use of an average of the tax written down value

at the actual balance sheet date and the previous balance sheet date.

The respective asset is suggested to be located for purposes of the apportionment factor not at

the legal owner but at the group entity which effectively uses the asset. Intra-group rented/

leased assets will therefore be located at the lessee. For rented or leased assets from a lessor or

to a lessee outside the group it is suggested to include the asset in both the lessor’s and the lessee’s

apportionment factor as both use the asset to generate taxable income. At the level of the lessor

it should be included with the tax written down value. And at the level of the lessee the asset is

suggested to be included at eight times the annual lease. Using eight times the annual lease as

a value for leased assets is justified by the WP-CCCTB by the current practise in the U.S. This

seems rather unsubstantiated especially as this method is highly criticised in U.S. tax literature

(McLure 2002; Hellerstein and McLure, 2004).

As intra-group transfers of assets will be consolidated transferring written-down assets into low

tax countries prior to the disposal of the assets can be used to shift the Asset-factor and conse-

quently the taxation of the capital gains into that country. To hinder such arbitrary factor-shifting

it is suggested to either include the asset sold in the factor of the group-entity that has used it

primarily over the asset’s useful life or to impose a holding-period of two years before the asset

is included at the apportionment factor assets of the selling group entity (WP-CCCTB, 2007a,

point 41).

2.4. Concluding Remarks The proposed definitions of the apportionment factors are obviously influenced by the WP-

CCCTB’s aim of making the result of the apportionment as little manipulable as possible by the

corporate group. Therefore certain components of the underlying income producing factors

are excluded from the definition of the respective apportionment factor.

The apportionment factor Sales consists only of ordinary sales and active sales. However the

taxable income consists also of sales derived from extraordinary business and also of passive

income. Therefore the group entity earning the passive or extraordinary income and benefitting

from its positive cash flow is not taxed with the full amount of this passive or extraordinary

income but the passive or extraordinary income is allocated for tax purposes to every group

entity. With the passive income closely connected are the assets generating these revenues;

basically financial assets and fixed intangible assets. These components of an Assets factor are

also excluded from the apportionment factor Assets. Therefore the income producing financial

assets and/or intangible assets will not be included in the apportionment factor Assets of the

group entity owning these assets that also earns the passive income and benefits from the positive

cash flow. Not only that the passive income is not part of the apportionment factor Sales the

assets producing the passive income are also not part of the apportionment factor Assets. A

group entity that has passive income from these types of

assets will only be taxable with this income in the relation of

its Payroll and Number of Employees relative to the corporate

group’s Payroll and Number of Employees. Other income

producing factors used to determine a group entity’s pre-

consolidation income and the Common Consolidated Corporate

Tax Base of the group such as depreciation, consumption of

raw materials, inventory and stock are also excluded from

the apportionment formula.

The exclusion of certain components of the factor Sales as

well as of the factor Assets leads to an allocation of the taxable

income derived from those sales and produced with those

assets to all members of the corporate group regardless

whether the actual cash-flow from this revenues is allocated

to the whole group or not. Thus one group entity probably

pays taxes for income it did not realise while another group

entity realises income without being taxed.

2.5. Simulation To demonstrate the differences between the pre-consolidation

income of a given group entity and the allocated share of the

group’s tax base resulting from the formulary apportionment

a brief simulation using a corporate group established by two

corporations is conducted. It is assumed that all revenues

and expenditures from intra-group trade in goods and services

have already been considered and eliminated at the level of

each group entity. Thus only revenues and expenditures from

trade with external partners remain. It is further assumed

that both the parent and the subsidiary produce a positive

pre-consolidation income so that the results are not influ-

enced by an intra-group loss offset:

Income Producing Factors

Parent Subsidiary Group

Assets

Fixed tangible (useful life: 15 Y) 1.500 1.500 3.000

Fixed intangible (useful life: 25 Y) 3.500 0 3.500

Financial Assets 450 0 450

Sales

Sales (active) 300 600 900

Sales (passiv) 300 0 300

Labour

Payroll 100 200 300

Number of Employees 5 12 17

Miscellaneous

Leasing Cost 0 8 8

Consumption of comodity 100 200 300



The conscientious manager of any given group entity however might not choose to enter into the CCCTB-System.

These income producing factors are used to calculate the fol-

lowing pre-consolidation earnings of the two group entities:

Pre-consolidation income


Revenues


Sales (passiv) 300 0 300

∑ Revenues 600 600 1.200

Expenditures

Amortisation (fixed tangible) 100 100 200

Amortisation (fixed intangible) 140 0 140

Amortisation (Financial) 0 0 0

Leasing Cost 0 8 8

Consumption of comodity 100 200 300

Payroll 100 200 300

∑ Expenditures 440 508 948

pre-consolidation income (absolute) 160 92 252

pre-consolidation income (in %) 63,49% 36,51% 100%

These pre-consolidation earnings are then consolidated to

form the CCCTB (also presented in the table) which is then

apportioned by using the proposed components of the

income producing factors:

Formulary Apportionment


Apportionment Factors

Sales


Labour

Payroll 100 200 300

Number of Employees 5 12 17

Assets

Fixed tangible assets 1.450 1.450 2.900

Leasing (8 x annual lease) 0 64 64

Apportionment Relation 37,88% 62,12% 100%

Tax Base (absolute) 95,45 156,55 252

If these income factors are used to allocate the group income

by using the proposed apportionment procedure and factors

the group income will be allocated to each group entity in a

different relation. As the proposed apportionment factors

exclude certain types and specifics of the income producing

factors the income derived from these factors is allocated for

tax purposes to every group member according to the relations

of the included factors. In the example a smaller share of the

group income than the pre-consolidation income is appor-

tioned to the parent company for tax purposes while the sub-

sidiary’s taxable share of the group income is higher than its

pre-consolidation income.

3. Summary The article shows the effects of the proposed income allocation

system and of the proposed definitions of the apportionment

factors. In an attempt of making the income allocation as

little exposed to artificial manipulations by the corporate

group as possible certain components of the income producing

factors are not represented in the definitions of the related

apportionment factors. This volitional incompleteness of the

apportionment factors leads to an allocation of the income

derived from the excluded components according to the

included components of the income producing factor. The

group entities concerned will regularly get a share of the

group’s consolidated tax base allocated that does not equal

the pre-consolidation income it has calculated (semi-)sepa-

rately before. The amount of this allocated share of the

group’s tax base can regardless of the group entity’s profita-

bility be higher or lower than the entity’s pre-consolidation

income which could lead to an over or an under taxation of

that particular group entity. The Apportionment Formula

will thus also allocate a share of the taxable group income to

a group entity even if the (semi-)separately calculated pre-

consolidation income is negative which may cause a substantial

decrease in liquidity of the group entity. Considering that

each group entity will remain a separate legal entity with all

the associated legal rights and duties the CCCTB apportionment

system potentially to unremunerated transfers of liquidity

and assets from one group entity to another. Therefore the

principle of capital maintenance and the diligence of a con-

scientious manager might render an accompanying system

of intra-group compensation payments from under-taxed to

over-taxed group members necessary especially if the

CCCTB-System will be optional. This optionality necessitates

every group entity to deliberate about whether to remain in

the current system or to transfer to the CCCTB-System. The

conscientious manager of any given group entity however

might not choose to enter into the CCCTB-System if the

CCCTB-System is disadvantageous to the particular group

entity with respect to its overall economic development

(Petutschnig, 2012).


© 2012 PricewaterhouseCoopers B.V. (KvK 3412089) Alle rechten voorbehouden.

www.werkenbijpwc.nl

Soms hou je alle opties openSoms weet je direct waar je aan de slag wilt

Kom verder op werkenbijpwc.nl

Tijdens je studie heb je een schat aan kennis opgedaan, je bent slim, sociaal en ambitieus en nu wil je aan de slag. Bij ons kun je al je kwaliteiten volop ontwikkelen.

Je ideeën zijn meer dan welkom

Ook wij zijn ambitieus. We willen de beste en meest innovatieve oplossingen bedenken voor de vraagstukken van onze klanten. Dat kan alleen als onze mensen vanuit allerlei oogpunten naar die vragen kijken. Dus maakt het minder uit wat je precies gestudeerd hebt. Het gaat om je ideeën.

Blijf je ontwikkelen

De lat ligt hoog, maar je staat er niet alleen voor. Je krijgt op dag één een coach die je begeleidt en ondersteunt bij je werk en bij het uitstippelen van je carrière. Je werkt samen in teams met inspirerende collega’s en volgt opleidingen om je vaktechnisch en persoonlijk te blijven ontwikkelen. Zo ontdek je al doende waar je kracht ligt. Je kunt switchen tussen sectoren. Begin je bijvoorbeeld bij beursgenoteerde ondernemingen, dan kun je altijd overstappen naar de overheid. En andersom. Je kunt ook van PwC-vestiging veranderen, binnen Nederland of over de grens.

Pak de ruimte die je krijgt

Je gaat bij ons aan de slag in een open kennisorganisatie. We werken met passie en een gezonde dosis lef; zijn open, integer en eerlijk; zeggen geen ja als het nee moet zijn. Het gaat er bij ons informeel aan toe. Je krijgt echt de ruimte. We staan open voor je initiatieven. Je start je carrière vliegend, ontwikkelt je volop en haalt het beste in jezelf naar boven. Want daar worden onze klanten, wij én jij beter van.

We werken in Nederland met 4.600 mensen in twaalf vestigingen vanuit vier verschillende invalshoeken: Audit & Assurance, Tax & Human Resource Services, Advisory en Compliance Services. We houden ons bezig met alle mogelijke vraag-stukken op financieel, economisch en maatschappelijk vlak. Voor verschillende sectoren bedenken we specifieke diensten; klanten hebben we in veel soorten en maten: grote en kleine, nationale en internationale ondernemingen, overheden en maatschappelijke organisaties.

Introducing a European Union Corporate Income Tax on the basis of an Enhanced Cooperation Agreement

By Tim Moolenaar & Ivonne van den Berg

14 • Introducing a European Union Corporate Income Tax on the basis of an Enhanced Cooperation Agreement


1. IntroductionTo this date, the European Union (EU) has not been successful

in implementing any serious cooperation or harmonization

in corporate taxation. The European Commission (EC)

already called for a harmonization of corporate tax systems

in the 1960’s. Subsequently the European Parliament (EP)

has produced several Working Papers on the subject of tax

coordination.

Research indicates that full tax harmonization would yield

the biggest welfare gain. However, the burden on national

sovereignty would suggest it unlikely to be implemented in

the EU as a whole. An Enhanced Cooperation Agreement

(ECA) enables the most ambitious Member States (MS) to

deepen cooperation between themselves. This might be the

only way to achieve full harmonization amongst the more

willing MS. Therefore, our research addresses the following:

will the introduction of a European Union Corporate Income

Tax, based on an Enhanced Cooperation Agreement, lead to

an increase in welfare within the participating MS and

thereby create incentives for other MS to join at a later time?

In section 2 we will shortly address the characteristics of the

Common Consolidated Corporate Tax Base (CCCTB) and the

European Union Corporate Income Tax (EUCIT). Then, in

section 3 we will give a clear explanation of the distinctive

characteristics of an ECA. Section 4 will give an understanding

of the existing studies on the implementation of the CCCTB

amongst all or a subgroup of MS and the implementation of

the EUCIT. It also addresses the possible Enhanced Cooperation

Union for Corporate Taxation (ECUCT). Section 5 concludes.

2. Possible reformsCorporate taxation in Europe has been the focus of the EC for

several years. In the 2001 EC Report on Company Taxation in

the Internal Market, the Commission indicated various company

tax obstacles prevailing in the EU, such as: high compliance

and administrative costs and the distortion of the international

allocation of capital. To a large extent, these shortcomings of

the current system originate from the co-existence of 27 dif-

ferent tax systems, which requires separate tax accounting

for every MS where a company operates. To reduce these

obstacles, the EC has been researching the possibility of har-

monizing the corporate tax systems in the EU.

The most developed concept of harmonization is referred to

as the CCCTB. Under this system, the EU-wide consolidated

profits of each multinational company (MNC) will be allo-

cated to MS by an apportionment formula. Companies that

are eligible and opt in, would then be taxed on their consoli-

dated taxable profits earned across the different MS. Each

state will subsequently tax the allocated profit at its own cor-

porate tax rate. Under the CCCTB, the compliance and

administrative costs of MNC are reduced, it leads to an alle-

viation of double taxation and it opens up the possibility of

cross border loss compensation. However, the precise impact

on welfare and revenues of a MS strongly depends on the

choice of the apportionment formula. It will certainly be dif-

ficult to agree upon the CCCTB amongst the 27 MS, especially

in view of the unanimous voting requirement on direct tax

matters.

Another possibility is implementing the EUCIT. This system

replaces all the corporate income taxes within the EU and

thus leads to base and rate harmonization. This necessitates

that countries lose their sovereign rights on corporate tax

matters altogether. It will, however, lead to a truly “single

level playing field”.

3. Enhanced Cooperation AgreementTo reduce tax competition there is an ongoing plea for estab-

lishing a single corporate tax zone. As direct taxation is still

subject to unanimous voting in the European Council, not

much progress has been made. The EU has reacted to these

developments by introducing a so-called Enhanced Coopera-

tion Agreement (ECA). An ECA is a procedure wherein a

minimum of nine EU MS are allowed to establish advanced

integration or cooperation in an area within EU structures,

but without the other EU members actually being involved.

Hence, an ECA enables the most ambitious MS to deepen

cooperation between themselves. The option of an ECA

amongst a subgroup could facilitate progress in integration,

as not all MS might be willing or able to participate in it yet.

A successful performance of such a subgroup may motivate

other MS to participate in the ECA at a later stage.

4. Conclusions and coordination effect of the CCCTB and the EUCIT

Looking at the research done, it is shown that corporate tax

base harmonization yields a welfare gain for Europe, though

The precise impact on welfare and revenues of a MS strongly depends on the choice of the apportionment formula.

»Introducing a European Union Corporate Income Tax on the basis of an Enhanced Cooperation Agreement • 15

small. Amongst the individual MS it gives very different

results, some will benefit while others will not. The simulations

ignore the reduction of compliance costs, which are expected

to increase welfare gains even more.

The CCCTB proposal consists of an optional common tax

code, besides the existing national tax codes. As it would be

optional, differences in treatment would remain. Under full

consolidation of the tax base, profit shifting within the EU is

no longer feasible. However, multinationals can still respond

to tax rate differentials that might create incentives to real-

locate. This implies that tax competition does not disappear

under consolidation, but will take a different form and it may

even cause further competition in tax rates in the EU. This

offers a rationale for rate harmonization, in addition to base

harmonization. Also profit shifting to low-tax countries that

are not part of the EU will still be possible, which means that

the individual EU MS will have to maintain separate account-

ing for profits earned outside the EU. Therefore the amount

of cost reduction under the CCCTB may be overestimated.

By implementing the EUCIT system, which is mandatory and

includes rate harmonization, some of the distortions caused

by the CCCTB are eliminated. The welfare gain under the

EUCIT is much larger in comparison to the welfare gain

under the CCCTB system.

CCCTB and EUCIT have the same problems of arriving at a

common tax code. A whole new tax system would have to be

devised. Furthermore, as the EUCIT is compulsory, this

necessitates that countries lose their sovereign rights on cor-

porate tax matters altogether.

Although it seems unlikely that harmonization will be imple-

mented in all 27 EU MS simultaneously, a small group of MS

may find it in their interest to do so under an ECA. A coalition

of winning countries reduces the welfare gain and may

induce a process of adverse selection, which destroys the pos-

sibility of cooperation. Furthermore, a coalition of similar

countries (in terms of the size of their multinational sector)

is more feasible in achieving agreement and is actually pre-

ferred by those countries over a EU-wide reform. Countries

with similar policies are more likely to form a coalition, as

the costs of cooperation are relatively minimal. Another

example of a coalition is one between larger countries. This

yields larger common gains from cooperation compared to a

coalition between small countries, since the spillovers inter-

nalized by a coalition of small countries are much smaller

than spillovers internalized by larger countries. Moreover,

small MS may prefer to remain sovereign as they benefit

more from tax-rate cuts.

These simulations are based on the compulsory CCCTB

regime. Although the consequences for individual MS under

full harmonization most likely will not correspond to the

CCCTB simulations, it remains clear that for Europe as a

whole, the EUCIT is more beneficial. Therefore it seems

probable that under the EUCIT a group of countries will ben-

efit from an ECA without having a significant effect for the

opt-outs. Although it is possible that this group would be

similar to the ones examined in the studies, this cannot be

said with the utmost certainty. Further research is necessary.

Following the ECA an Enhanced Cooperation Union for Cor-

porate Taxation (ECUCT) can be formed. Such an ECUCT

could have possible positive or negative pulling-effects on

the opt-outs.

The opt-outs can benefit from the experimentation and learn

the pros and cons of cooperative tax harmonization by the

ECUCT members. The possibility that enhanced cooperation

in one field, by one group of countries, will extend to other

areas and will thus benefit other countries, has already been

put forward by a number of authors. Cross-border economic

activities within the ECUCT are expected to increase with

harmonization. If cross-country differences in effective tax

rates would be removed this will lead to a more efficient allo-

cation of capital across the ECUCT, creating an incentive for

countries to be a part of the ECUCT. In case lower compliance

costs yield additional welfare gains, this also increases the

likelihood that countries opt in the system.

One of the fears is that enhanced cooperation may lead to a

permanent divide between insiders and outsiders. Furthermore

outsiders can choose explicitly to remain outside the ECUCT

for reasons of tax competition or national tax preferences.

5. ConclusionIn our paper we explored the possibility of a European Union

Corporate Income Tax. We started by shortly addressing the


16 • Introducing a European Union Corporate Income Tax on the basis of an Enhanced Cooperation Agreement

characteristics of the CCCTB and the EUCIT. Secondly, we

explained the possibility of Enhanced Cooperation as it does

not seem feasible that all EU members would agree to one

corporate tax system in the near future. After this, we shortly

addressed a few studies of interest to our research and applied

this in our argumentation on the European Union Corporate

Income tax, more specifically the Enhanced Cooperation

Union for Corporate Taxation.

All studies addressed conclude that harmonization, whether

by CCCTB or EUCIT, is likely to produce a welfare gain for

Europe, although probably modest. It is acknowledged that

not all countries may benefit. If some countries are worse off,

it will be difficult to agree upon harmonization among the

EU MS. The biggest gain is expected from a reduction in

compliance costs, which no studies were able to incorporate

in their research.

A potential way out is enhanced cooperation whereby a sub-

group of EU MS coordinates their policies. However, a question

which remains is whether or not opted out countries could

gradually be enticed to participate in closer cooperation at a

later stage. This cannot be determined due to the different

results stemming from different factors which should be

taken into account such as which group of countries and the

choice of the rates and bases, amongst other factors. It seems

most probable that MS of similar size or with a similar mul-

tinational sector will deepen cooperation, since they will

have similar tax systems. We expect that MNC will prefer to

be allocated within the ECA due to the reduction in compliance

costs and other benefits mentioned in our paper, which will

create an incentive for the opt outs to join the ECA.

As a final remark it is relevant to inform the reader that as of

the 16th of March 2011 the European Commission has pub-

lished its long awaited draft directive of the optional CCCTB.

Although the reader knows our standing point on this proposal,

it could be a stalking horse for closer tax cooperation in Europe.

One of the fears is that enhanced cooperation may lead to a permanent divide between insiders and outsiders.

Introducing a European Union Corporate Income Tax on the basis of an Enhanced Cooperation Agreement • 17

importantly I became more familiar with the assurance department and got to know my colleagues. After working for a real audit during my internship, I was really convinced that I wanted to become an auditor. The work of an auditor is very varying: each week you will work for different clients together with different teams. This September I started working for Ernst & Young in Amsterdam and so far I do not regret my choice at all and I am looking forward to all the experiences that will come along during my career at Ernst & Young.

So are you also up for the challenge? Come and meet us at one of our events and experience what it is like to work for Ernst & Young.

Sandhya Poeran

About two years ago I was faced with the same choice you are being faced with now: where am I going to work after graduating. During my board year at the Financial Study Association Rotterdam I got in touch with Ernst & Young. The professionalism and technical expertise combined with intensive coaching attracted me the most of Ernst & Young. I wanted to address the challenge Ernst & Young is offering to students and joined the Masterclass 2011 to New York. In four days I experienced very intensively what it is like to work for Ernst & Young. What surprised me the most is the fact that when you start working on the audit, you are quickly able to perform the job with the knowledge you have together with your team.

After the Masterclass I got the opportunity to follow an internship at Ernst & Young. During this internship I did not only fi nish my thesis, but most

Sandhya Poeran Staff AssuranceErnst & Young Accountants

Almost two years ago, during the year I did my master in Financial Economics, while simultaneously being an active committee member at the Financial Study Association Rotterdam, I fi rst heard about Ernst & Young Transaction Advisory Services. Already having a strong interest in corporate fi nance, I quickly became curious to know more about Ernst & Young TAS.

During an informal meeting with someone from the Valuation & Business Modelling team, I learned more about the possibilities within TAS. The way the team works closely together on intense and challenging corporate fi nance projects really appealed to me. After getting to know more persons from the team during interviews, I really felt I wanted to be a part of this team.

I started off as an intern, which is a great way to get a good feeling about

2058609221 Advertorial 420x297-V4.indd 1 27-09-12 11:39

Ellis Heijboer Staff AssuranceErnst & Young Accountants

Joost Alberts Consultant Valuation & Business ModellingErnst & Young Transaction Advisory Services

what working at Ernst & Young TAS is all about. I can highly recommend doing an internship, as it really gives you a valuable opportunity to learn more about the team, its work and its dynamics. After fi nishing my period as an intern, I got offered a full-time contract which I gladly signed.

Currently, I’ve been working for Ernst & Young TAS for more than a year already. I really like the challenging projects I’m working on, the team and its amazing dynamics and the opportunities you get at Ernst & Young to grow and develop both in a professional and personal way.

I can highly recommend starting your career at Ernst & Young, and I would be happy to help you learn more about the possibilities within Ernst & Young!

Joost Alberts

Could Ernst & Young be your future

employer?More information? Visit www.ey.nl/carriere or contact Stefanie Wigny (06-21252893)

Have you almost completed your studies? Are you exploring the market in hope of fi nding your ideal future job? Then take the time to pay a visit to Ernst & Young. Chat with staff in different departments and get a taste of the atmosphere during a shadow day or at an informal talk complete with a glass of wine. Ernst & Young also offers the possibility of taking part in an Inhouseday or writing your thesis at our company. Discover if Ernst & Young is the right employer for you!

Let’s go back to the start… September, 2009. My fi rst meeting with Ernst & Young was during the Big 4 Cycle, organized by the FSR. During this event I got the opportunity to discover the differences and similarities between the four largest audit fi rms. Ernst & Young stood out for me by the way they represented themselves: quality in everything they do.

September, 2010 – August, 2011. During my board year at the FSR, I had many opportunities to really get to know Ernst & Young. Not only formal, but also informal events (like social drinks) contributed to the fact that my impression of Ernst & Young was really positive, as I experienced the people of Ernst & Youngas professional and friendly.

The story continues… November, 2011. One of my highlights so far: I joined the masterclass of Ernst & Young to New York! March, 2012 – June, 2012. I found the

perfect combination: writing my master thesis at Ernst & Young, while getting paid! It really helped me to fi nish my thesis on time, as they offered me the facilities and a motivating environment.

September, 2012. Mission accomplished, I got the job as staff at Ernst & Young! While writing this, I just fi nished my fi rst week at a client.

And what is your story at Ernst & Young?

Ellis Heijboer

2058609221 Advertorial 420x297-V4.indd 2 27-09-12 11:51

Depreciation of buildings viewed in the light of a European tax base

Mr. Rolph van Ovost

20 • Depreciation of buildings viewed in the light of a European tax base


1. IntroductionThe revision of the Law on Corporation Tax 1969 with effect

from 1 January 2007, the legislature, where the buildings are

concerned, intervened on the principle of “good business

practice” by limiting the depreciation. The reason that the

legislature has given for this limitation is that there is a

much higher load (a higher depreciation rate) taken than the

actual value of the building. This difference is reflected in the

sale of the building but this gain cannot be taxed because the

entrepreneur in the sale of the building often uses the rein-

vestment reserve .

There were two options available to the legislature in order

to highlight the levy, namely to make an exception for prop-

erty for the purposes of the reinvestment reserve, or directly

introducing a depreciation limitation in the law.

The legislature has chosen for reasons of his own for a depre-

ciation limitation and not a limitation in the ability to form a

reinvestment reserve.

This base broadening that results from it, yields the Treasury

a structural benefit of approximately E 1.7 billion per year.

This gain is the main source of funding for the rate reduction

in the Corporation tax (corporation tax) to 25.5%, and for the

SME profit exemption for the benefit of IB-entrepreneurs.

Because in the EU context its examined whether it is possible

to develop a common tax base for corporate profits, namely

Common Consolidated Corporate Tax Base (CCCTB), which

is often associated to IFRS rules, the question arises whether

our depreciation limitation fits within the rules of IFRS and

whether the legislation derives concerns within European

tax base.

In this paper I intend to answer this question.

2. Depreciation limitation on buildings

2.1 General“Good business practice” implies that the income and

expenses should be allocated to the years to which they

relate. When an asset wears, then the good business practice

obliges to an annual depreciation, within the art. 3.25

Income Tax Act 2001 (IB) limits and according to a fixed

system where arbitrariness is excluded.

Art. 3.30, paragraph 1 IB, expects the amortization of assets

from the acquisition or production costs, so the historical

cost, subject of course to the residual value.

Depreciation is fiscal-judiciary cost distribution, which is

expressed in the text of Art. 3.30, paragraph 1 IB. Depreciation

is based on the matching principle: the cost of an asset should

be allocated to the years in which revenues are recognized.

The purpose of depreciation is derived from the jurisprudence.

Depreciation is not aimed at a lower market value of an asset

to come true, but to indicate a reduction in the utility value.

Even if the selling value increases, depreciation is possible

because even then the utility value of the asset will fall.

An asset's value decreases due to technical wear and / or economic

obsolescence. If there is no decline due to the use, for example

in the use of land, then it is not permitted to depreciate.

In art. 3.30 paragraph 2 IB under "Working on earnings" at 1

January 2007 a time limitation is applied to depreciation of

assets.

2.2 Depreciation of buildingsFrom art. 3.30a, paragraph 1 IB follows that buildings can

only be amortized up to the base value. This base value is

according to art. 3.30a, paragraph 3 IB, for buildings that are

held for investment equals the property (WOZ) value and for

buildings in use at 50% of the property value.

Art. 3.30a, paragraph 4 IB provides rules for determining the

property value. Art. 3.30a IB applies not only to natural per-

sons who enjoy profits from business, but this also accounts

through the linking provision of Art. 3.95 IB for taxpayers on

the basis of Art. 3.90 IB and further taxable income from

other activities.

Also the corporate tax bodies are faced on the basis of Art. 8,

paragraph 1, corporate income tax. with the depreciation

limitation of Art. 3.30a IB. There is a difference, Art. 8, para-

graph 6a, corporate income tax, gives for corporate tax its

own definitions of the terms 'joint entity' and 'joint person'.

Determining the residual value of a building as a result of

this amendment is of limited significance, because the base

value in the rule will be higher than the residual value.

However, the first depreciation area should be established

Even then the utility value of the asset will fall

»Depreciation of buildings viewed in the light of a European tax base • 21

9 and paragraph 10 IB. Art. 3.30a, paragraph 11 IB, defines

what should be understood with a connected body. There is a

difference between the IB and the corporate tax, Art. 8, para-

graph 6a, corporate income tax provides for corporation tax

its own definitions of the terms 'related entity' and 'con-

nected person'.The group approach is being considered here.

This means that if a building within an enterprise is rented to

another subsidiary, this building is considered a building in

use, allowing the amortization can occur up to 50% of the

property value of the building.

3. IFRSIFRS set by the International Accounting Standards Board

(IASB), prescribed to be the external commercial reporting.

The IASB is the regulatory body within the International

Accounting Standards Committee Foundation. These IFRS

rules are mandated, by the EU, for commercial financial

statements of listed companies.

The guidelines for annual reporting as published by the

Council for Annual Reporting (CAR) for firms in the Nether-

lands, are partly adjusted to the IFRS rules.

It is intended that the IFRS rules will become the global

standard for external reporting. Currently, in the US accountants

are mostly applying U.S. GAAP for unlisted companies. In the

meantime, an agreement has been made between the IFRS

and the SEC (Securities and Exchange Commission) that

European companies with a U.S. listing can suffice with

financial statements prepared according to IFRS rules. The

IFRS organisation is self-regulated that is separate from the

EU. In response, the EU has no direct influence. Because the

EU is afraid that the IFRS rules can develop in a direction

that is not desirable to the EU, the European Commission

(hereafter EC) has stipulated the right of approval.

The EU has therefore created two organs, the European

Financial Reporting Advisory Group (EFRAG) and the

Accounting Regulatory Committee (ARC).

3.1 Real estate and IFRSThe IFRS rules make a clear distinction between property

held as tangible fixed asset are not on investment (IAS 16)

and property held for investment (IAS 40).

art. 3.30 IB offers, prior to the depreciation limits of art.

3.30a IB can be accrued to.

According to the jurisdiction a fixed rule states that land and

buildings which collectively are in use in the fiscal sense

together constitute an asset. Moreover, on 1 January 2007,

this is expressly stipulated in art. 3.30a, paragraph 2 IB.

With the depreciation of the assets comprising of land and

building, the continuing value will be determined by the

residual value of the building, together with the residual

value of the land.

At constant value of the land only the building is depreciated.

When the value of the land increases, then, in principle, the

residue value of the whole is to be increased, so that the

write-space is reduced.

Art. 3.30a IB ensures that there can no longer be amortized

when the book value is reduced to the base value, or the base

value has risen to the book value.

2.3.2 Buildings for investment:In art.3.30a paragraph 3 IB for determining the base value

distinguishes between buildings that are held for investment

and buildings in own use.

Especially in buildings that are held for investment, it is the

view of the legislature an undesirable development that in

practice there is a significant discrepancy between the tax

depreciation and actual depreciation of buildings. These

buildings are mainly purchased because of the rental income

and potential appreciation. Buildings in use within one’s own

enterprise, said the legislator, are purchased because of the

added value that these buildings have for the company activities.

Pursuant to art. 3.30a, paragraph 3, subparagraph a IB, the

base value of a building that the investment is held equal to

the property value of the building. A building for investment

is defined as "a building that is intended to directly or indirectly

principally to have at one’s disposal to a different party other

than a person related to the taxpayer or body'.

2.3.3 Connected person or related entityThere is no question of a building for investment as the

building is made available from an associated person or body.

The term associated person is defined in art. 3.30a, paragraph

It was the EU’s goal to be the world’s most competitive economy by 2010.



The valuation of investment property is to be made on the

historical cost or current (fair) value. Empirical research

shows that most listed companies opt for measuring fair

value. A definition of fair value is, the amount for which an

asset could be exchanged between knowledgeable willing

parties who are acting independently of each other. The fair

value of investment property is determined as the most probable

price in the market is available on the date of the balance

This in itself is a logical trade method. On the commercial

balance, in particular used in the capital market, it is attractive

to show gains, the question is whether in a time of economic

crisis and falling real estate prices, it still happens.

If an investment property is carried at fair value it is not com-

mercially depreciated. So gains and losses on the fair value

that occur in one year should also be included in the profit

and loss of that financial year.

If an investment property is valuated at historical cost, the rules

for material tangible fixed assets are to be used. This means

that there must be depreciation and any impairment losses

should be taken into account. It is also permissible for investment

property, the balance sheet valuation is at historical cost while

the depreciation is calculated on the basis of current value.

4. Common Consolidated Corporate Tax Base (CCCTB)Over the past forty years multiple attempts have been made

to harmonize corporate taxation legislations in the European

Union (EU). These attempts have been made to prevent

unfair competition and to enhance Europe’s profile as one

economic region. It was the EU’s goal to be the world’s most

competitive economy by 2010. Plans to achieve this goal

have been set to 2020, based on the Lisbon treaty. It is the

European commission’s belief a common tax base will help

the EU reach this goal.

4.1 Tax base differences within the EUEvery EU member state has its own corporate tax, with each

its own tax base, tax rate, and exceptions. According to the

European Commission, the situation of little synchronization

between tax systems, and the differences between tax base

and tax rate lead to two (joint) problems:

• Corporations, which operate in more than one EU member

state, are confronted with fiscal hurdles and considerable

costs. This leads to problems with the internal market not

functioning optimally.

3.1.1 Property not for investmentIn order to for an asset to be considered as a tangible fixed

asset, it has to be used for more than one reporting period

and generate services to the operations of the entity. The

main rule of the IFRS, to set the assets in the most realistic

value. The main idea is that real estate valuation is at cost.

Valuation according to IFRS may also be done at fair value,

provided that they can be determined reliably.

It is obvious that the fair value at the time of the purchase is

equal to its purchase price, including the transaction costs

associated with the sale. IFRS also states that the reduction

because of usage should be charged through depreciation

annually, to the profit of the company. In addition, IFRS

points to a component approach. This means that at any part

of a building allocated to the cost price, this value or pur-

chase price can have a significant impact in the course of

trade so these must depreciated separately.

3.1.2 Investment PropertyFor property that is held for investment IFRS16 has a special

arrangement. The difference between property in own use

and real estate for investment is that investment flows generate

income, which are independent from other assets of the entity.

This definition can cause problems if a building is partly used

for own production and the rest meant for rental. In that

case, it is checked whether both parts can be sold separately.

If this is the case then the processes are treated separately.

However, when the building cannot be sold separately when

an insignificant portion of the building is used for own use,

then we may consider it to be of an investment property.

Within the context of IFRS, it qualifies for example keeping a

hotel as an investment property, even if the majority of the

property (briefly) made available to others.

3.1.3 Related entitiesA property that is leased within a group of consolidated or

merged companies is not regarded as an investment property

in the consolidated financial statements, because that property,

as seen from the group's own use. For the company that

owns the property the building, should in the financial state-

ments of the group classify it as an investment property. In

the financial statements of the group the real estate should

therefore be recognised and treated as an investment property. »Depreciation of buildings viewed in the light of a European tax base • 23

The European Commission has decided to make a distinction

between long term assets and miscellaneous assets, when it

comes to depreciation methods. The long term assets,

including real estate, are valued on a case-by-case basis and

are written off on a case-by-case basis. This is why it is impor-

tant to determine what the difference is between long term

assets and miscellaneous assets. Eventually the European

Commission went for a period of 15 years, where assets with

a useful of over 15 years are defined as long term assets and

assets with a useful life of less than 15 years are defined as

miscellaneous assets.

This leads to the conclusion that buildings are determined as

assets which are subject to impairment. Write-offs are man-

datory (art. 34 lit 4 draft directive) and are performed by the

beneficial owner. If the beneficial owner is lost, the legal

owner is allowed to perform the write-off. (art. 34 lit 1 and lit

3 draft directive, these rules apply to e.g. leasing contracts.)

The depreciation base comprises all costs directly related to

the acquisition, bringing in working order, or improvement

of a fixed asset. (art. 33 lit 1 draft directive) These costs

exclude deductible VAT.

Particularly remarkable is that scrap value is set to zero in all

cases.

The following rules apply to the acquisition of an existing

building: a second hand building will be written off over a

period of 40 years unless the legal tax payer can prove that

the estimated remaining useful life of the building is less

than 40 years, in which case it will be written off over a

shorter period of time; (art. 36 lit 2 draft directive). Hence,

there exists a rebuttal claim on the period of 40 years for the

acquisition of a previously existing building.

Per building a depreciation rate of 2.5% applies. The

‘’method’’ applied to compute the amount of depreciation is

simple. It entails that, in the year of acquisition, the asset is

subject to write offs the entire year, but in the year the asset

is disposed no write offs are possible. Real estate, which can

be regarded as provision, is valued by the European commis-

sion at acquisition price or, if lower, value in use.

The directive draft does not contain any information about

real estate for investments. I presuppose these assets should

• The widely differing tax rates and tax bases of corporate

taxation lead to unwanted tax competition and distort the

allocation of capital within the EU.

On the basis of aforementioned considerations and on the

agreements settled in the Lisbon treaty, the European com-

mission has decided to come up with a guideline to come to

a common fiscal base of taxation. This Common Consolidated

Corporate Tax Base (CCCTB) would determine on the basis of

which rules, profits should be determined. This arrangement

should lead to: cost savings, and it should make filling taxes

easier for corporations which are active in more than one

member state. As of today, the European Commission has

come up with a draft directive including a proposal for a

CCCTB.

4.3 CCCTB and real estateEven though the CCCTB draft directive initially thought it

could base rules for accounting for profits on the IFRS rules,

it is now necessary for the CCCTB to invent their own

accounting for profits rules. This is due to the fact that no

less than Business Europe and several academia have pres-

sured the CCCTB not to use the IFRS rules

De European Commission has not chosen for a principle

based system with general definitions of profit, but went

instead for well-defined measures of profit (rule based). The

determination of profit rules in the CCCTB are very short en

crude. Many questions that could arise are still left unan-

swered. Also not all terms are defined. A typical example is

the definition of a building in art. 4, which does not have a

definition thus far. Theoretically the question could arise

whether the tax payer has to pay taxes over a building or over

a tangible long term asset. The difference, now, is in the

depreciation period (40 years or 15 years).

4.3.1 DepreciationThe European Commission gives 3 possibilities for the writ-

ing off of fixed assets:

A) No depreciation possible ( art. 40 draft directive)

B) Impairment (e.g. buildings, art. 36 draft directive)

C) Depreciation within an asset pool (applies to other fixed

assets with a useful life less than 15 years. Art. 39 draft

directive)



the corporation and of the capital providers. Apart from that,

the prudent approach to jumps in value, either up or down,

in determining profit is a major advantage tax wise. Since, a

jump in value upwards would not lead to more cash or cash

equivalents for the entrepreneur. If only, such an improve-

ment in equity value could, in case it would fall under taxable

profit, lead to substantial financial distress.

Moreover, under the CCCTB real estate property is written

off as a standalone item, hence the building separate from

the land it stands on. While art. 3.30a IB writes that the

building and the land that carries the building should be

regarded as one. Then, under art. 3.30a IB it is possible that

depreciation will decrease of will cease as the market value of

land increases. While, at the same time, under the CCCTB

the change in market value of the land will have no effect

whatsoever on the depreciation of the building.

Art. 3.30a IB might prove to conflict with European jurisdiction,

which would give rise to the necessity of procedures con-

cerning equality and discrimination. In addition, it is ques-

tionable whether entrepreneurs will buy the story that some

real estate can be written off to 0 while other real estate can

only be written off to 50 % of the value of immovable property.

Apart from that, the CCCTB will only hold for legal bodies

liable to corporate taxation and not for sole proprietors. This

will only increase the feeling of inequality and unjustness,

either that or their will be a massive flight from sole proprietor-

ships to corporations.

Another relevant question is whether businesses with real

estate should massively choose for CCCTB. In particular, this

would happen because of the contested depreciation frame-

work of the CCCTB. This in turn could lead to problems for

the public treasury in the Netherlands, which would miss out

on structural cash inflows if the current depreciation limitation

were to (partially) cease to exist.

The final conclusion is that the CCCTB provides business

with real estate an apparent windfall compared to the current

corporate taxation system in place. An effect could be that

entrepreneurs choose for the CCCTB with large conviction.

The conditions of CCCTB, however, are not fully set out yet.

Hence, the possibilities are still endless. May them be posi-

tive or negative.

be valued at the acquisition price, after which depreciation

will take place just as with assets to a scrap value of 0.

It is not possible to write off land (art. 40 draft directive). It

seems land and the building that is on it should be regarded

as two separate assets. (hence not as such an asset as in art.

3.30a IB) In case it would be interpreted in such way, (as one

asset, which I do not suppose, but which is not clear) then it

is possible to write off real estate including land to 0. In addi-

tion, it is possible to reduce the value of land in case the legal

tax payer is able to prove the value of the land has reduced

definitely. (art. 41 draft directive). This could happen, for

instance, for mineral land of for land which is permanently

polluted.

4.3.2 CCCTB and corporate real estate There is no information in the draft directive about how real

estate, which is maintained within the business and is let to

another corporation, should be treated. I presuppose it

should be regarded as a stand-alone depreciable asset, which

shall be depreciated based on the method described in para-

graph 4.3.1, by the business regarded as the beneficial owner

(which is usually also the legal owner). When a corporation

has chosen for CCCTB and a consolidated balance is made up

with all shareholdings in the other European member states,

little is left of real estate and internal renting and letting,

which marks the minor importance of CCCTB and corporate

real estate.

5. Summary and conclusionFirstly, it is difficult to compare the IFRS rules, which are

solely important for determining balance sheets of corpora-

tions, with the accounting for profit rules mentioned under

art. 3.30a IB and under the CCCTB.

IFRS is written for a different target group, namely the capital

providers on the capital market. This target group, within

the corporation, has a different interest. Their interest is to

present the corporation and its capital as beneficial as possi-

ble within the allowed framework. As well as art. 3.30a IB as

for the CCCTB the main concept is to to value at historical

cost on which yearly depreciation is applied. This fits the

yearly profit determination of a company, which logically

wants to report its profit for tax purposes as low as possible.

It is near impossible to align the two conflicting interests of

Under the CCCTB real estate property is written off as a standalone item, hence the building separate from the land it stands on.

Depreciation of buildings viewed in the light of a European tax base • 25

© 2011 KPMG N.V., alle rechten voorbehouden. W W W.GA A AN.NU

Kijk voor meer tips op facebook.com/kpmgscriptiecoach.Of beter nog: schrijf je scriptie bij KPMG.

Scriptietip # 2:

“Niets werkt zo frusterend als het onderbreken van schrijfwerk voor extra onderzoek.”

EERST GRAVEN,DAN SCHRIJVEN

-04445_210x297mm_adv_Scriptanten_alle.indd 2 16-11-2011 13:09:44

Kun je jezelf kort introduceren?Mijn naam is Jeroen van Engelen, 25 jaar, woon in Utrecht en

ik heb 6 jaar gestudeerd aan de Erasmus Universiteit. In die

6 jaar heb ik het mr.drs.-programma gevolgd en daarmee heb

ik dus zowel (Bedrijfs-)Economie als Nederlands Recht gestu-

deerd. Uiteindelijk heb ik hierbij gekozen voor een master in

Financial Economics en in Ondernemingsrecht. Sommige

studenten zullen mij mogelijk nog herinneren van mijn tijd

als student-assistent voor Finance 1, wat ik drie jaar heb

gedaan.

Hoe ben je gekomen op de keuze voor KPMG?Ik ben naar de inhousedag van KPMG geweest begin 2011.

Naast de leuke opdracht die ik heb gedaan tijdens de

inhousedag, was er ook meer dan genoeg mogelijkheid om

contact te leggen met de mensen van de Corporate Finance

en dat klikte. Dit gevoel was blijkbaar wederzijds, want nog

geen week later werd ik gebeld om eens op gesprek te komen

en daarmee ging het balletje rollen.

De belangrijkste reden voor de keuze voor KPMG is heel

cliché, maar dat zijn echt de mensen. Binnen Corporate

Finance is iedereen bereid hard te werken maar tegelijkertijd

is er ook een grote waarde voor een leuk sociaal leven, inclusief

de feestjes, uitjes, sport, etc. die daarbij komen kijken. Daar-

naast sprak mij al direct aan dat KPMG de meeste deals doet

in Nederland. Hierdoor werk je meestal aan meerdere

opdrachten tegelijk in plaats van een lange tijd aan één grote

opdracht. Hierdoor kom je dus met veel verschillende bedrijven

en processen in aanraking in een korte tijd, wat het werk heel

veelzijdig maakt.

Hoe was je start bij KPMG?Vrijwel direct nadat ik begonnen was, werd ik aan een

waarderingsopdracht gezet welke uiteindelijk uitliep tot een

mooi verkoopmandaat. Zo kwam ik dus al snel in een volledig

verkoopproces terecht, wat achteraf een ideale manier is

geweest om snel in te werken. Daarnaast werd ik ook binnen

het team snel goed opgenomen. Je wordt hier niet beschouwd

als ‘een nieuweling’ maar meteen als volwaardig teamlid en

naarmate je meer verantwoordelijkheid aan kan, krijg je die

ook. Met andere woorden: ik mag niet klagen als ik terug kijk

op mijn start bij KPMG.

Wat waren je verwachtingen van KPMG en voldeed KPMG aan je verwachtingen?Zoals uit bovenstaande al blijkt, ben ik erg blij met mijn

keuze voor KPMG. Het werk bevalt me erg goed, maar met

name de mensen hier en de gezellige en tegelijk hele profes-

sionele werkomgeving maakt het een mooi bedrijf om bij te

werken. Vooraf verwachtte ik met name veel achter de com-

puter te zitten en weinig buiten de deur te komen bij de

klant, ook dat viel heel erg mee, met name doordat ik meteen

in een opdracht terecht kwam. Ook het harde werken en

tegelijk tijd voor een sociaal leven is geen probleem. Natuurlijk

moet je hard werken en zijn er weken bij dat het niet lukt om

te sporten of te stappen maar over het algemeen is dat prima

te combineren.

Welke tips kun je tenslotte geven aan Accountancy / Finance studenten?Als je kijkt naar het werk binnen M&A zal dat vrijwel hetzelfde

werk zijn, bij welk Corporate Finance kantoor je dat ook gaat

doen. Ben je bereid 100+ uur in de week te werken en dus een

paar jaar van je werk en collega’s je sociale leven te maken?

Ga dan naar bijvoorbeeld Londen. Ben je wel bereid hard te

werken maar is het werk niet alles, kijk dan eens bij een

aantal van de Nederlandse spelers. Ga naar inhousedagen of

spreek gewoon eens af om te lunchen met een aantal van de

collega’s daar. Uiteindelijk gaat het dan namelijk om de

mensen waarmee je werkt, want het werk zelf zal niet heel

veel verschillen tussen de verschillende bedrijven.

Companypresentation • 27

© 2011 KPMG N.V., alle rechten voorbehouden. W W W.GA A AN.NU

Kijk voor meer tips op facebook.com/kpmgscriptiecoach.Of beter nog: schrijf je scriptie bij KPMG.

Scriptietip # 2:

“Niets werkt zo frusterend als het onderbreken van schrijfwerk voor extra onderzoek.”

EERST GRAVEN,DAN SCHRIJVEN

-04445_210x297mm_adv_Scriptanten_alle.indd 2 16-11-2011 13:09:44

Interview with Jan van de StreekAssistant-professor of corporate income taxes

Petra van den Akker, Maaike Lanphen en Roija Rasuli

Jan van de Streek (1976) studied fiscal economics and business economics at the Erasmus University Rotterdam and he also studied fiscal law on the Uni-versity of Leiden. He works currently at the Tax Knowledge Office of Ernst & Young. Besides this he is also an assistant-professor of corporate income taxes at the UvA. For the former, his research also reaches beyond borders, focusing on the interna-tional aspects of corporate taxation.


28 • Interview

»

What is common consolidated corporate tax base?It is a harmonized tax base for companies in Europe. Cur-

rently, we are faced with 27 different tax systems, so for a

company wanting to do business within Europe it has to con-

sider and comply with maximum 27 different taxes. This

causes a variety of problems, the European Commission has

now launched the CCCTB. Fully stated: the Common Corporate

Consolidated Tax Base. The word explains what the CCCTB

contains: it is ‘common’ as it is applicable to the profits of the

companies, ‘corporate’ again for the to be taxed (large) firms

and the ‘tax base’ indicating the nature of the mechanism, so

the added element is the ‘consolidated’ part to the whole tax

base. Within the current system, a loss incurred by a company

established in the EU and which is part of a European group

of companies, cannot be offset against profits made by its

parent, sister or other group companies established in other

EU member states. The loss is locked in. However, within the

CCCTB the loss can be relieved cross border due to the con-

solidation mechanism. Every EU country is entitled to

charge their own tax rate to the companies but the rules of

determining the taxable base and compliance with these

rules will be harmonized. The consolidated tax bases is shared

among the member states by a formula apportionment.

What are the advantages?There are four advantages attached to the CCCTB:

1) Less administrative procedures as we will be dealing with

only one tax base. In effect, tax issues relating to determine

the at arm’s-length transfer price of intra-group transactions

will disappear. Within the CCCTB the internal transactions

are not recognized anymore in the consolidated tax base.

2) Cross border loss relief is possible. Due to the consolidated

nature of the CCCTB companies recognizing a loss can net

this out with the profits they have made in other countries.

However, this may be of big concern for small countries

such as the Netherlands or Belgium as they cannot tax

international firms on the profits they have made in their

countries, as the loss from different countries may be

netted out with the profits.

3) Tax free reorganizations are possible. Currently, reorgani-

zations within companies would in general be taxed but

this will change with the introduction of the CCCTB.

4) Another major advantage of the CCCTB is that it will make

the European Union more transparent. This can be seen as

a remedy required to solve the problems caused by the

crisis. Due to the crisis the member states are facing budg-

etary deficits, so they are unable to meet their budgets set

by the EU. As a consequence they try to lobby and get more

business to their countries by offering tax exemptions or

attractive tax offers (lower effective tax rate). This so-

called tax competition between member states leads to a

rat race to the bottom. At the end of the day the member

states are faced with even more budgetary problems. How-

ever, during the crisis the members signed a petition

agreeing to support each other, so we have on one side

countries competing for more business and on the other

side support for each other. The introduction of the

CCCTB would make the system more transparent.

What are the disadvantages?Under the current proposal companies can choose whether

or not to apply the CCCTB system. This optionality feature is

important or even crucial to support the CCCTB project of the

business community. As soon as companies are obliged to

apply the CCCTB, a series of consequences could be attached

to it, which has its disadvantages. There is a serious risk

turning the CCCTB project into a mandatory system. The

European Parliament is campaigning to apply the CCCTB on

a mandatory basis for multinationals. Only SME’s are carved

out.

Member states are exposed to a disadvantage of a budgetary

nature. I will illustrate this effect with an example: If we

assume the consolidated profit of a multinational is the pie

which is subsequently apportioned to all member states in

which it is active, the question here becomes which piece

should be given to each member state to tax at its own rates?

The answer of the European Commission is apportionment

by a simple formula. This formula contains three economic

factors: labour, fixed assets and sales.

The weight of these three together determines which subsid-

iary gets the largest piece of pie. For the Netherlands this

would mean that, since it is a smart economy thus its ratio of

assets would be small, the pie piece would be relatively small.

The assets factor does not consider the intangible assets such

as goodwill. Most Dutch internationals, for instance Philips,

Unilever and Heineken have situated many factories in Eastern-

Europe. The labour factor and asset factor will allocate most

of the consolidated profit to this part of Europe. The sales

factor will probably not be able to compensate this effect by

pushing back the power of taxation to the Netherlands. The

The consolidated tax bases is shared among the member states by a formula apportionment.

Interview • 29

Dutch market is only a small home market for Dutch multi-

nationals to sell their products. Applying the CCCTB would

mean that the Netherlands would tax a relative small share of

the pie compared to the Eastern countries. Basically, the

CCCTB system - and the sharing mechanism in particular -

implies a major shift in the allocation of taxing rights between

member states.

What are the consequences on the macro economical level for the Netherlands?If the CCCTB would be applied as proposed by the European

Commission, the Dutch treasury will incur a loss of tax revenue

of approximately E 5 billion. As said, the cause is the shift in

the allocation of taxing rights between member states. This

budgetary effect is the main reason why the official Dutch

policy is that the CCCTB is a bad idea and should not be

implemented in Europe. I can understand this. However, in

my opinion it would be impossible for the Netherlands not to

participate in the CCCTB project if others do, because this

will have a negative impact on the Dutch climate to attract or

to keep international companies. I think most policy makers

would agree with this. The only way to (partial) compensate

for the loss of E 5 billion is in theory to increase the Dutch

corporate income tax rate. Currently this rate is 25%. But

increasing this rate would also have a negative effect on the

Dutch investing climate.

How is this budgetary loss of e 5 billion calculated? It of course is a rough estimation. The simplified calculation

is as follows:

1. The European Commission has calculated that the Nether-

lands currently taxes 6.4% of all profits of companies estab-

lished in the EU.

2. Introduction of the CCCTB would mean according to the

European Commission that the Netherlands would only

get to tax 4.2% of the total European tax base. This is a

decrease of 2.2 percentage points.

3. The reduction of 2.2 percentage points represents a relative

reduction of up to 34.38%.

4. The current Dutch corporation tax yield is approximately

E 14 billion.

5. A straight forward calculation leads to the tentative conclu-

sion that the Dutch corporate income tax revenue under

the CCCTB system decreases by more than a third, namely

a decrease of approximately E 5 billion.

In your article “Headlines of the CCCTB” (Hoofdli-jnen van CCCTB) you mentioned that the Dutch tax base is principle based and the CCCTB is rule based. What is the difference?In the Netherlands the rules on tax profit calculation are

not stated in the corporate income tax act or any other act.

The taxable profit is determined through the principle of

‘sound business practice’ which sets a few guidelines on the

basis, of which profits can be determined. These guidelines

include the matching principle, realization and prudence.

However, there is no weight attached to each one of these so

within a dispute the Dutch Supreme Court has to decide

whether and how these three guidelines are complied to for

each individual dispute. This system would be impossible

for European countries and that’s why the CCCTB is rule

based. It can be compared to a fiscal IFRS where many

details are recorded.

Would you recommend introducing CCCTB globally?Yes, it would be very good in fact, in the US they already apply

a somewhat similar CCCTB mechanism through their federal

tax system.

Is it possible that the CCCTB can be misused? Since one country can end up with more profit than the other.As within every classical corporate income tax system, there

are within the CCCTB two major weak points. First, groups

of companies can put passive income, for instance income

earned from investments in bonds and shares, outside the

CCCTB in a tax haven company. As a consequence, income

from these mobile assets cannot be taxed by member states.

The European Commission has developed a set of measures

to prevent this. Second, since dividend is not tax deductible

and interest is, groups of companies can transform equity

easily into debt. So, to sum up a potential tax evasion sce-

nario within CCCTB: a company established in Europe could

place a huge sum of cash on the Cayman Islands as equity

and take a debt on this amount back to Europe enabling the

company to deduct interest from the common tax base. The

Council of the European Union and the European Commis-

sion are still working on the design of anti-abuse rules to

combat such tax planning. An import weapon is the so-called

GAAR (General Anti-Abuse Rule). Under this rule a wholly

artificial construction set up for tax purposes is simply being


30 • Interview

It is hard to say whether the member states can reach consensus on this ambitious and controversial proposal.

ignored. I would not be surprised if the final CCCTB Directive would contain some additional

interest deduction limitations.

Are you afraid that if nine member states apply the CCCTB and the rest will not, the EU will be divided?It would be good for the nine countries to try the CCCTB, when this goes well the rest will probably

follow. The countries that are most certain to be participating are Germany and France as these

two are quite in favor of the CCCTB. Besides that I assume that the southern member states

may take part as well because they are facing a somewhat weak tax system. The CCCTB would

mean a boost to their tax revenue as these countries hold large part of the fixed assets, offer

labour and can be huge markets for sales.

How do you see the future of CCCTB? Will it ever be reality?It is hard to say whether the member states can reach consensus on this ambitious and contro-

versial proposal. At the end of the day it is a political question. In 1990 the EU adopted already

two Directives on corporate income tax tackling some specific problems. They were adopted

quite suddenly without it being part of a planned process. I presume we need such a ‘political

momentum’ like the one in 1990 to make the CCCTB proposal ready for a compromise between

at least nine member states. Currently, the CCCTB Directive proposed by the European Com-

mission is on the agenda of the European Council and incrementally plans have been drawn up

to improve the proposal. However, under the current financial crisis it can go either way. I am

convinced, however, that the CCCTB will be introduced sooner or later in whichever form.

Interview • 31

Ik vrees dat hier geen ethiek-cursus zal helpen. En van een

gesprek over de “Toon aan de top” verwacht ik ook niet veel.

Zeker niet als een kwart van de managers zonder enige dwang

of noodzaak bekent waartoe het bereid is. Een vermanend

woord zal dan niet veel helpen. En zouden die resterende 75

procent die nu niet heeft bekend, zich wel goed gedragen?

Nog steeds in datzelfde NRC Weekend schreef Marike Stel-

linga haar column. Marike schreef daarin niet over corruptie,

maar over de kredietcrisis waarbij “die honderden miljarden

euro’s aan niet genomen verliezen als een zwaard van

Damocles boven Europa hangen”. Zij zoekt ons aller heil bij

“chagrijnige accountants”. Nu ken ik die beroepsgroep als

buitengewoon opgewekt, om niet te zeggen vrolijk. En ook

Marike Stellinga ziet daar een ‘bottle neck’: “De chagrijnige

accountant is moeilijk te vinden, uiteraard”. Dat laatste

woordje is dodelijk. Uit welke aard? Volgens Marike is het zo

dat “deze beroepsgroep zich te vaak laat kneden”. Maar zij

heeft vertrouwen: “Ze zijn er. Het enige wat we moeten doen

is ze vinden en ze vervolgens op pad sturen met een zo slecht

mogelijk humeur”.

Misschien is dat ochtendhumeur iets waaraan ze bij Nijenrode

voor de vernieuwde opleiding van Robuuste Accountants nog

niet hebben gedacht. Daar leren ze juist te communiceren.

En als ik Marike Stellinga goed begrijp is dat het laatste wat

ze moeten doen. Zij zoekt iemand die “als die topman klaar

is met zijn ik-ga-de-wereld-veroveren-praatjes, zegt: “Ja,

laat me eerst maar even de boeken zien”. Daarbij denk ik aan

het type Sacco van der Made. Dus niet zoals bij Marike,

iemand die op spekzolen loopt, hoewel dat wel mooi kan zijn

meegenomen.

Maar het kan ook niet allemaal van de accountant komen. In

het discussierapport van de NBA staat dat accountants de

integriteit van leidinggevenden en sleutelfunctionarissen

moeten gaan beoordelen. En desnoods moeten ze hun

opdracht beëindigen. In wezen zou dat in 25% van het MKB

dus daadwerkelijk de conclusie moeten zijn. Ik denk dat de

externe accountant hier wordt overvraagd.

De accountant (auditor) heeft als wettelijk taak om bij financiële

jaarrekeningen op grond van onderzoek een verklaring te

geven. Die jaarrekening moet getrouw, duidelijk en stelselmatig

zijn. Ik sluit niet uit dat ondanks corruptie de jaar rekening

Accountants zijn van oudsher vertrouwensmannen en –

vrouwen in het maatschappelijk verkeer. Th. Limperg althans

zag in zijn vertrouwenstheorie de grondslag voor het accoun-

tantsberoep. En Jan van de Poel noemde de accountant een

handelaar in risico. Agency-theorie gaat uit van de gedachte

dat de agent niet altijd zal handelen in het belang van zijn

principaal. Eigenlijk komt het er op neer dat we als principaal

betrouwbaar zijn, maar als agent toch ook worden geacht

ons eigen belang in het oog te houden. In het bedrijfsleven

zijn bonussen en winstdelingen, Stock Appreciation Rights

(SAR) en opties bedoeld om de belangen van de agent parallel

te schakelen met die van de principaal. En zijn we niet alle-

maal iemands agent? Als dat zo is, is niemand voor iedereen

helemaal betrouwbaar.

Natuurlijk weten we van onszelf dat we heel erg betrouwbaar

zijn. Als al die anderen dat nu ook zouden weten, zou de

wereld er heel anders uitzien. Sommigen laten zich overtuigen.

Soms tot hun schade. Maar het is evenmin in je voordeel om

niemand te vertrouwen. Dus worden mechanismen ontworpen

om dat toch te kunnen doen. Een van die mechanismen heet

toezicht en controle. Accountants worden geacht daar goed

in te zijn. Maar wie controleert de accountant en ziet op hem

toe? Welke flitspaal houdt die flitspaal in het oog?

Is controle nodig? NRC Weekend (29-30 september 2012)

geeft cijfers over enkele misstanden. Ernst & Young heeft

onderzoek gedaan naar “integriteit van ondernemers in het

Midden- en Kleinbedrijf. Wat blijkt? Een op de vier managers

zegt corrupte praktijken te accepteren als dat het bedrijfs-

rendement ten goede komt. Het staat er echt: 25 procent van

de managers heeft geen moeite met omkoping! En 14 procent

van diezelfde managers zegt te geloven dat binnen hun eigen

bedrijf sprake is van omkoping. Jazeker, 14 procent!”.

Drs. Joost G. Groeneveld

RA RV is directeur van

Wingman Business

Valuators B.V. te Breda en

voorzitter van de Stichting

WBO (register van

business valuators).

Hij was hoofddocent aan

de Economische Faculteit

van de Erasmus

Universiteit te Rotterdam.

Vertrouwen of (on)macht

K(r)anttekening | Drs. Joost Groeneveld RA RV1

Ik vrees dat hier geen ethiek-cursus zal helpen.

32 • Vertrouwen of (on)macht


aan deze vereisten voldoet. De accountant is – vrees ik - geen betere zedenmeester dan wij zelf

zouden zijn.

Omkoping is niet alles. Nog alsmaar in datzelfde nummer van NRC staat een verhaal over ver-

valste contracten bij Eurocommerce, en financiële instellingen die daar geen onderzoek naar

hebben gedaan. Arno Visser, wethouder Almere: “Je wint informatie in om te kijken met wat

voor een partij je te maken hebt. Dat hebben de banken nagelaten. Het is verbijsterend dat

grote professionele financiële instellingen dat bij zulke grote leningen niet hebben gedaan”. Ik

denk wel dat Arno Visser daarin gelijk heeft.

En dan, na weer een bladzijde te hebben omgeslagen, tref ik een stukje aan van Philip de Witt

Wijnen: “Gevaarlijk vak, dat topmanschap in Nederland”. Ja, als je met de accountant over je

integriteit moet gaan praten … . PdWW verwijst naar een onderzoek van Booz & Company. Dat

advieskantoor “bracht het verloop van CEO’s in kaart en concludeerde dat de duiventil aan het

Damrak het wijdst open staat”. Nu is het Damrak het MKB niet, maar zou het ene iets te maken

hebben met het andere? Zijn de agentschapsverhoudingen zo slecht? Of werken de bonussen

en vertrekregelingen juist averechts? Zijn de agencykosten misschien al te hoog?

28 september 2012 werd in de krant door Bernard Hulsman - met verwijzing naar de Plantagenets

- het koningschap “een bloedlinke job” genoemd. Sinds de middeleeuwen is er in overdrachtelijke

zin dus niet veel veranderd. Dat komt ook naar voren in het beeld dat David Priestland in zijn

boek (Merchant, Soldier, Sage; a new history of power) gebruikt om in zijn kastenstelsel 3

kasten te onderscheiden, al zijn die niet identiek aan de indeling in de 3 standen zoals we die

vanouds kennen: de geestelijkheid, de adel en de rest. Met verwijzing naar de huidige financiële

crisis is hij van mening “dat de kaste van de handelaren hoognodig moet worden beteugeld”.

Uitgaande van Priestland is het geen kwestie van gedrag (corruptie), controle en toezicht maar

van macht. Als dat waar is, helpt zelfs geen chagrijnige accountant meer. Want in dat geval verliezen

vertrouwen en controle hun betekenis. Dan zijn we gewoon een illusie armer.

Uitgaande van Priestland is het geen kwestie van gedrag (corruptie), controle en toezicht maar van macht.

Vertrouwen of (on)macht • 33

START YOUR CAREER IN TRADING APPLY AT WWW.OPTIVER.COMWE ARE SCOUTING FOR BRILLIANT MINDS ONLY

TRADINGBRILLIANTBRILLIANTBRILLIANT

IF YOU CAN ANSWER YES TO ALL 6, YOU’RE READY TO TAKE THE REAL TEST.

I HAVE UNLIMITEDAMBITION

I WORK HARDAND PLAY HARD

I DON’T CRACKUNDER PRESSUREI HAVE EXCELLENT

NUMERICAL SKILLSI DON’T LIKE TO

WASTE TIMEI THINK FASTER

THAN MOST PEOPLE

YES NO

IF YOU CAN ANSWER YES TO ALL 6,YOU’RE READY TO TAKE THE REAL TEST.IF YOU CAN ANSWER YES TO ALL 6,YOU’RE READY TO TAKE THE REAL T

CCCTB: high priority for the EU

Prof. dr. P. Kavelaars

For years, if not decades, the European Committee (EC) has

put effort in pulling tax revenues towards itself. Despite the

principle of subsidiary (art. 5 VEU) the European Committee

apparently does not deem the individual member states of

the European Union capable of forming their own taxation.

The question is why the EC puts so much effort in pulling the

control of fiscal policy towards itself, as it seems much more

economically ‘’healthy’’ if member states can go their own

way in organizing their fiscal system. On the one hand,

because the system can be adapted to national needs and on

the other hand because it allows for a healthy competition

between member states. Although a harmful competition

between member states should be avoided. This would not be

beneficial for the member states as well as the EU. The long

standing Code of Conduct serves a valuable purpose in this

respect, because it empowers the EC to force member states

to answer for their actions in case they take fiscal measures

that are harmful to fiscal competition. Over a decade ago,

this Code was put to the test and its enactment ensured that

fiscal policies undermining competition have more or less

disappeared. Since then, the sole existence of the Conduct has

proven enough to stop new measures undermining competition

in fiscal policies from taking place. On top of this there is the

act of state aid, art. 107VwEU, that prevents competitive laws

from being implemented. Finally, the last few decades the Court

of Justice has adequately applied its jurisdiction to prevent

disruptions between fiscal policies of member states. Altogether,

there seems no reason for the EC to mingle in fiscal policies.

However, this was only one side of the coin. A side that is of

great importance because the principle of subsidiary is given

way too little content: ‘’Brussels’’ organizes a lot more than

necessary. But still. If we look at the global position of the

EU, I argue that it is losing an economic battle with the rest

of the world. Although the U.S. are forced to pass off some of

their historically leading position, the country is still a

superpower in economic and financial perspective en will

unquestionably remain to be so. On the other hand, we see

developing economies –China, India, Latin-America- and at

some distance Africa, where China is strongly investing and

developing. These areas are surpassing the EU in economic

perspective. The most important reason that the EU is losing

this battle, is the disunity between member states of the EU

that restrict it from forming a strong power block. The way

we have been dealing with the financial crisis in southern

member states for the last few years has been characterizing:

keeping the holes plugged and not doing anything to change

the situation. It puts the EU in a huge backlog compared to

the rest of the world. From this perspective, it is necessary

for the member states to not fight each other but bundle

powers to –as was meant by the Lissabonagenda in 2000-

become the most competitive economy in the world. This did

not happen at all. Developed areas of the EU are dangling on

the bottom as for economical perspective. And this is only

getting worse.

From this perspective of competitiveness, there is much to

say in favor of a fiscal arrangement that does not operate on

the member-states level, but rather on a European level,

where the EU will operate as a unity. With tax on goods and

services this has basically already happened a long time ago,

with the introduction of customs duties and of course the

more or less harmonized VAT rates. This is and has been nec-

essary because transportation of goods and services is often

transnational and without harmonization the system would

easily disrupt. Another area that is highly transgressing con-

cerns the activities of large cooperations that increasingly

trade and invest transnationally. When these cooperations

are faced with a diversity of fiscal policies for profit distribu-

tion, this obviously is highly disruptive. On the one hand

because of the elaborate administrative burdens; on the

other hand because company results cannot be pooled

between countries in case the operations in one country are

profitable and operations in the other country are not: for

such companies it is all about the total result. Besides, there

is the competition in fiscal policies between countries which

causes companies to shift –solely based on fiscal considera-

tions- with investments, goods- and service-transactions and

streams of financing. When such activities occur only

because of fiscal reasons, this is not a good development.

From this perspective it is a good thing that the EC proposed

a CCCTB; rightfully, by the way, on an optional basis instead

of a compulsory one. Keeping in mind what I argued earlier

about the importance to strengthen Europe as an economic

power, it is a bad thing that many member states –including

the Netherlands- are resisting the implementation of CCCTB:

a situation that will hopefully turn around soon. A side-note

to this being that the proceeds- as is now also documented in

the proposal for a CCCTB- will keep benefiting the member

states and not –as a proposal for a Financial Transaction Tax

by the EC suggests- the EC. For the EC autonomously to

receive tax revenues is in my view highly undesirable.


CCCTB: high priority for the EU • 35

START YOUR CAREER IN TRADING APPLY AT WWW.OPTIVER.COMWE ARE SCOUTING FOR BRILLIANT MINDS ONLY

TRADINGBRILLIANTBRILLIANTBRILLIANT

IF YOU CAN ANSWER YES TO ALL 6, YOU’RE READY TO TAKE THE REAL TEST.

I HAVE UNLIMITEDAMBITION

I WORK HARDAND PLAY HARD

I DON’T CRACKUNDER PRESSUREI HAVE EXCELLENT

NUMERICAL SKILLSI DON’T LIKE TO

WASTE TIMEI THINK FASTER

THAN MOST PEOPLE

YES NO

IF YOU CAN ANSWER YES TO ALL 6,YOU’RE READY TO TAKE THE REAL TEST.IF YOU CAN ANSWER YES TO ALL 6,YOU’RE READY TO TAKE THE REAL T

Dear reader,

This is the first edition of the FSR Forum of the academic year 2012-2013. This is also the first

edition coming out of the hands of the XVth FSR board. The new board finally took official con-

trol since the first week of September. We are very confident that we will upgrade the FSR again

this year in many ways. As the chairman of the board I have the great pleasure to try to describe

the wonderful events that will take place this year. I would like to give my compliments to

Maaike Lanphen who is the responsible editor of the FSR Forum this year. She and the editorial

committee will take the coming five editions of the fifteenth volume to the next level, including

the most recent developments in Finance, Accountancy and Controlling.

At the start of the summer the XVth board was elected. After an extraordinary informative

weekend in the first week of July, it was our turn to staff the FSR-room: H14-06. With the daily

help of the XIVth board we quickly learned almost all the ins and outs of all events that will

occur. Therefore I would like to thank the XIVth board for their effort and trust in the past few

months. Then, I would like to welcome all the new active members of the FSR. We had the

chance to compose a wonderful group of dedicated students who wanted to take the extra step.

I am looking forward to working with them and make the ‘Actievenweekend’ one to remember.

The academic year started with the Master Kick-Off Day on September 3rd. Next to the masters

‘Financial Economics’ and ‘Accounting, Auditing and Control’ on the ESE faculty, for the first

time we were given the opportunity to introduce ourselves at the masters ‘Finance & Invest-

ments’ on the RSM faculty and ‘Quantitative Finance’ on the ESE resulting in a record break-

ing number of new members. Later on in the magazine you can find a detailed report of this

event together with the Minor Kick-Off Day on September 6th. Recently, the prestigious Inter-

national Banking Cycle has been taking place in Rotterdam and Amsterdam. During this event

ten of the world’s best investment banks came to both universities to give workshops, presenta-

tions and take interviews for summer-internships and fulltime positions. This event offers the

perfect opportunity for finance students to get acquainted with the dynamic world of invest-

ment banking.

But there is more happening at the moment, especially for the accounting students as the Big

4 Cycle is taking place simultaneously. During four in-house days, the largest accountancy

firms open their doors to welcome the selected members. The days usually start with a case

study and always ends with an informal diner to get to know the employees and employers per-

sonally. You can imagine this is a busy period for both the new board and our committee mem-

bers. Not to forget, that after a hard day’s work nothing is more rewarding than looking back

on a successful day and seeing the product of all the time spend on preparation.

As with the International Banking Cycle companies come to the Netherlands to meet our mem-

bers, we also go abroad to widen our horizon. Firstly, we will travel to the ‘Northern Capital’ of

China (Beijing) after a series of in-house days with the International Research Project. This

year the project will be in cooperation with a charity for the first time: Right to Play. Together

with this charity we will investigate the opportunities for Right to Play to increase their cover-

age in Asia, especially in and near Beijing. In this way they will be able to create more places for

children to play and get education about ‘fair play’ and diseases. Secondly, this year’s edition of

Word of the chairman

Sep Vermeulen


36 • FSR news

FSR News

40

41

48

49

Column Anna Nijdam

Column Jan-Matthijs de Berg

Erasmus Banking Congress

Big 4 Cycle

the European Finance Tour will depart to Zurich, the financial capital of Switzerland. Zurich

suits the European Finance Tour as it is the largest city of Switzerland and the capital of gold

trading. Here the participants will enjoy many company visits and will discover the city in an

informal way.

Also when you stay in the Netherlands, the FSR offers many events in the upcoming year. For

instance the first round of the Traders Trophy is already taking place on 22 November at the

Erasmus Campus. Only five days later we come back to you with the first in-house day of the

Financial Business Cycle. In 2013 we will continue with the Multinational Battle, Corporate

Finance Competition and many other events and activities.

I would like to invite you once again to participate in our events, as a participant or a partner.

The XVth board is most dedicated to get the FSR to the next level. I am looking forward to have

the honor to welcome you at one of our events, battles, cycles, master classes and social drinks.

Kind regards,

Sep Vermeulen

Chairman

FSR Board 2012-2013

FSR news • 37

FSR Former board member

Anna Nijdam

Although a number of years have passed, I vividly remember

the moment I got welcomed with champagne in the FSR

Office on the 15th floor of the H-building at the Erasmus

University. A little bit nervous and excited, I just heard that I

had been selected as the new FSR Commissioner for External

Relations! I met the other new board members, with whom I

would form the VIIIth FSR board. Although we knew nothing

about each other, we soon would. I couldn’t yet imagine that

this was the start of a journey, a journey which had such a

positive impact on my further life.

Seven different people, all very motivated and enthusiastic,

with the same goal: ,,To bring the FSR to a higher level”. As

the Commissioner for External Relations I spend my sum-

mertime by visiting the relations of the FSR. During these

acquisition meetings we made new appointments for the

year. This was a great opportunity to get to know more about

these companies, to see their offices, to meet the employees

and to develop myself in a commercial aspect. Additionally,

and I hadn’t really realized this before starting my year on

the board: ,,I noticed that it was pretty important for companies

that students are active besides their study (a board, committee,

study abroad).The most challenging part of my job was to get

connected with new companies and to extend the contacts

with existing relations. In the end, the important thing was

that FSR members would get a good and clear overview of

which companies they could work for after their study, and

what their most important characteristics were. In order to

achieve this, we organized a number of great events: both

recurring ones (which we developed more) and new events

like the Controlling Competition. And for an association with

such great events, it is important to publicize them. That’s

why we started with extensive promotion activities, such as

renting billboards at the Erasmus Campus. (That was also

right when Cubord, initial the bill board rental company, lost

their rental contact at the Erasmus University... sorry for

that Cubord!) Towards the end of our board year, we rented

the billboards from the Erasmus University for a quarter of

the initial price… Besides the billboards, the achievement of

the first mention of FSR in Dutch media, ‘pimped’ cars at the

campus, we really introduced FSR and our activities at the

RSM Faculty. This is how many RSM students got acquainted

with FSR, and we were able to assist, besides economics stu-

dents, RSM students in their post-university careers as well.

We also presided over several committee for the organization

of our events. As I was the only accountancy student, it was

PassPort

Name

Anna Nijdam

age

30 years

residence

Rotterdam Centrum

Employed at

Ernst & Young

Current position

Senior Staff Audit

Which Fsr Board

VIIIth Board

Board function

Commissaris Externe

Betrekkingen

study

Economics – Account-

ing, Auditing and

Control

Year of graduation

2009

Which car do you

drive

Volkswagen Polo

What do you drink

on a Friday night

White wine, Vodka Lime

Life Motto

Carpe diem

logical that I was the person who organized the accountancy

events. I thus got a really good impression of all accountancy

firms. I really liked the internal atmosphere at Ernst & Young,

the international opportunities, the technical knowledge, as

well as the (many) employees I met. I started working at

Ernst & Young in Rotterdam more than four years ago, after

an internship period at Ernst & Young Auckland (NZ). And I

still work at Ernst & Young in Rotterdam, as a senior staff

auditor. The clients that I serve are pretty diverse, from oil and

gas companies, to traders, to large media and entertainment

companies. I am busy with finalizing my RA (Register

Accountant) post master’s degree, of which I finished the

theoretical part already. I am also a member of the recruit-

ment team. As such, I help and advice students with writing

their thesis. As well, I help organizing the recruitment events

at Ernst & Young. So it is not unlikely that we meet at one of

our upcoming recruitment events! Which is even better,

since I still can tell you a lot about my job and about working

at Ernst & Young.

Besides the fact that you learn a lot from a board year , and

the fact that you get a good impression about the opportunities

for your further career, I started to build up a great network

and made a lot of friends. As earlier said, I didn’t know the

other board members at the start of our board year, but we

became good friends. And not just friends, but friends for life.

We still have dinner and drinks once a month, and have our

yearly city trip. At the moment of writing, I am organizing ‘a

mystery trip’ in cooperation with Geert and Tycho from the

VIIIth board. Marijn, Robert and Willemijn still don’t know,

but we are going to Rome next weekend, to celebrate ‘their

30 birthdays’. Additionally, Willemijn and I, aka ‘the pink

ladies’, became really close friends in our board year when we

went skiing together in our Pink FSR Board jackets on the

white slopes of Valtho. We are still going skiing every year

but now we also invite our field hockey team, as we both

started playing field hockey after our board year.

I just can conclude that my board year was fabulous, one of

the best years of my life. As you can read, I got and took the

opportunity to develop myself, to build up a network, to

make real good friends, and last but not least to get con-

nected with my present employer Ernst & Young. Therefore

I can strongly advise you, to take the opportunity and to

become active at the FSR!


38 • FSR news

FSR Member

Jan-Matthijs de Berg

How did you come in contact with the FSR?When you study Financial Economics it is hard not to get

into contact with the FSR! The first contact was through the

Financial business cycle in my Bachelor.

In which FSR event did you participate?The European Finance Tour to Milan

How have you arranged your internship?I became interested in Shell because of a research project in

which I participated. After that I started talking to the people

I knew there, to get more information and tips for the appli-

cation process. The first step in the process is the online

application. If you are selected for an interview, the next step

is a telephone interview of an hour. This actually was a

strange experience, because you cannot see someone’s reaction

to your answers. If you are selected, the recruiter looks for a

suitable project. Then you are invited to discuss the project

with a manager, to see if it meets your wishes and skills. I had

the luck to get a project in a brand new department (it existed

only six months), and really liked the project itself!

Please describe your experiences at the internship in general (corporate culture, assignments, col-leagues, etc.)Overall I would say that the culture is very professional and

open-minded. There is a lot of diversity and I work with

people from all sorts of backgrounds and nationalities. You

also get a true international experience. Right from the start

I had conference calls with people in Houston, Beijing and

Vancouver! What I like about the internships at Shell in general

is that you get your own project with a so-called “deliverable”.

You get access to the resources you need, but apart from that

it is up to you to take the lead and do what is necessary for a

good end result. In short, you get a lot of freedom and

responsibility.

What do you consider to be your best performance during the internship?Hopefully at the final presentation of the project, but this is

yet to come!

Which moment of your internship will you never forget?The moment, after about a week, that you suddenly realize

how quickly you become integrated in the way the company

works. You start using all the abbreviations, and start talking

about “what the business needs” etc. It is amazing how fast

this process works.

Have you been offered a job?Since I am still doing the internship, I don’t know yet!

PassPort

Name

Jan-Matthijs de Berg

age

25 years

residence

Rotterdam

study

Financial Economics

Fsr event

European Finance Tour

Internship

at/job at

Shell

Department of

Internship

Shell Technology

Ventures (Venture

Capital fund of Shell)


FSR news • 39

Introduction committees

Accountancy CommitteeThe first accountancy event, the Big 4 Cycle, took place in

the beginning of the year. During this cycle, students had the

chance to meet KPMG, Deloitte, PwC and Ernst & Young.

With the case during the inhousedays the students got a

sneek preview into the life of an accountant. The informal

dinner at the end of the day gave the students the chance to

get to know the company and their employees from a total

different angle. The other event of this committee, The

Accountancy Firms Day, is more focused on the smaller com-

panies and during this day you will meet four different com-

panies.

These events together will give students a better picture of

the accountancy world.

CleanTech ChallengeThe CleanTech Challenge Committee will work closely

together with Yes!Delft Students and the Energy Club in

organizing one of the biggest entrepreneurship events in the

Netherlands. These three study associations will bring

together financial and technological students that like to

develop and value innovative ideas, with a focus on clean

technology. In several rounds they will present their ideas

and develop them further with the help of companies that

operate or advise in the industry. The winner will travel to

London to compete with other countries. Our committee

will support them and guide them in winning the worldwide

finals of the CleanTech Challenge, just like last year!

Samantha Kompanje, Maaike Lanphen, Margriet van der

Lubbe, Nick Tanis

Gijs Romer, Taco Smit, Tim Geuns


40 • FSR news

»

Corporate Finance Competition CommitteeDuring the Corporate Finance Competition you will meet a

variety of companies from the financial sector. Each of these

companies will challenge the students with a case during the

day which they have to solve in teams. The final winner will

be announced afterwards. With these cases you will meet dif-

ferent facets of the financial world, with a main focus on

Mergers & Acquisitions. After these cases you will have a

diner with the companies where you can get to know them in

an informal setting and make a lasting impression. The com-

mittee will work closely together with these companies to

make this three day event an unforgettable experience!

Editorial CommitteeOur drive for this year is to set a milestone for the FSR

Forum by providing our readers with the depth of knowledge

and inspiration. There will be five forums published this year,

with five different themes, each enriched with articles, col-

umns and interviews from industry professionals. The com-

bination of financial and accounting together will enhance

the content so that our reader gets a complete package.

Moreover, the FSR Forum will provide information on all

FSR activities.

On behalf of the FSR we wish you a pleasant time reading our

FSR Forum.

Tijmen van Paasen, Gemma van der Hoeven, Joost Vlot,

Jean-Paul Gobel

Roija Rasuli, Petra van den Akker, (not on this picture

Maaike Lanphen)

FSR news • 41


European Finance Tour CommitteeAs a committee with an international character, the Euro-

pean Finance Tour Committee will organize a week full of

financial and cultural activities in the Netherlands and a

European city. This year we will visit Zurich, a prominent

city and financial hotspot. During this week (6-10 May) the

students will get to know leading companies through inhouse

days and presentations. Of course there will be informal activities

as well to get to know the city and culture. Before the start of

this week the students will visit several outstanding companies

in the Netherlands, each operating in the field of finance.

The committee will organize this whole trip from begin till

end, doing their utmost to give you an amazing week!

FAN CommitteeThe FAN Committee will organize events together with the

study associations of other universities that are members of

the Financial Study Association Netherlands (FAN). The

Traders Trophy will give students a glimpse of the trading

world, whereas the Multinational Battle will focus on the

leading multinationals. Through different rounds you will

compete with other teams from universities, guided by lead-

ing companies in the industry.

Jan-Willem Boer, Joost Vlot, Justin Toet, Britt Mulder Berre Simonse, Sep Vermeulen, Gonda de Graaff


42 • FSR news

Female Business Tour CommitteeAs the name suggests, this committee is for women only. The

ladies of this committee will organize a two day event where

the female participants will meet three different companies.

Last year they had the chance to meet ING, BCG and Deloitte.

Each company had a challenging case where the ladies

showed their skills and the company showed its career

opportunities. At the end of the first day there will be a

dinner with all three companies and afterwards the night will

be spent in a hotel in Amsterdam. The next day, participants

gain insights in the life of a successful business woman,

teaching the next generation of women how to find their way

to the top.

Finance CommitteeThe biggest event of this committee is the Financial Business

Cycle. This year two multinationals, two bankers, two con-

sultants and two traders will be visited through inhouse days

for Erasmus students. These inhouse days are a great oppor-

tunity to explore the variety of the financial sector. The

Finance Committee will also organize the Investment Banking

Masterclass (IBM), a two-day event for 40 students with a

course on corporate valuation. Beside these two events they

organize different company dinners as well.

Abeda Hasanzadah, Margriet van der Lubbe, Patroesjka

Zuurhout

Jules de Vrijer, Joost Vlot, Joanne Berntsen

FSR news • 43


International Banking Cycle CommitteeThe International Banking Cycle serves to give students a

clear view on the operational practices and the career oppor-

tunities at ten of the most prestigious international invest-

ment banks. Taking into account the number of applicants,

participating banks and the number of participants that are

offered an internship or fulltime position, the International

Banking Cycle is by far the largest recruitment event for

international banks in the Netherlands.

This year, ten prominent investment banks gave workshops

with a real life case focusing on Mergers & Acquisitions and

in some cases also Sales & Trading. Following their work-

shop, each bank gave a presentation and an informal drink

reception in the Faculty Club, providing students the oppor-

tunity to get familiar with the corporate culture, meet

employees and learn about the career possibilities at the larg-

est financial institutions in the world. The International

Banking Cycle committee acquainted students with this

challenging and rapidly changing investment world and

ensured that every participant got the opportunity to meet

their company of interest, either by participating in the

workshop, visiting company presentations or joining to the

drinks reception afterwards.

International Research Project CommitteeEach year, the International Research Project provides students

the opportunity to use their theoretical knowledge in academic

research and travel to an international location. This year we

will visit the growing metropolis Beijing! For the first time

this year, the IRP will cooperate with the charity Right To

Play, which aims to provide children in developing countries

with the opportunity to learn while playing.

The 20 selected Finance and Accountancy students will have

several inhouse days in the Netherlands starting in January

and lasting until April. After these inhouse days the students

will go on a two-week visit to Beijing (at the end of April 2013)

to do field research including company visits and consults.

Afterwards, students have the possibility to continue trave-

ling for an additional two weeks. The committee will set up a

balance between formal and informal activities to give you an

unforgettable experience!

Sydney Cranen, Sep Vermeulen, Taco Smit, Floris Bos, Hugo

van der Wal

Monique Berlee, Edwin van Vliet, Margriet van der Lubbe,

Bas Molenkamp, Anne Duindam


44 • FSR news

FSR Activity report

Master Kick-Off DayAfter a few weeks of preparation, the first event of the aca-

demic year 2012-2013 was planned on September 3rd. The

Master Kick-Off Day used to take place in cooperation with

the Erasmus School of Economics. This year we have

extended the cooperation and joined the kick-off of Finance

& Investments (RSM) and Quantitative Finance (ESE) as

well. For all Masters, we have organized this day to give them

a clear view on the possibilities they have at the FSR.

The day started with some general information about the

program during the Master’s program. Furthermore, there

was an introduction from the lecturers and they gave a pres-

entation about their own courses and possible seminars.

Afterwards, on behalf of the FSR Sep Vermeulen (chairman)

informed the students about the possibilities. After a stunning

presentation, students were interested in becoming member

of the FSR. We have recommended the students to participate

in the events and have shown them the profits of being an

active member.

After all, the Faculty Club was available for a drink, so students,

lecturers and the FSR Board could meet each other. With

some quiet jazz music on the background, the day has come

to a successful end. At the end we could welcome a marvelous

number of new FSR members.

Minor Kick-Off DayThe next day, the Minor Kick-Off took place for third year

Bachelor students to make them known with the FSR and

the possibilities to join a committee or maybe in the future

as a board member.

After the lecture of the minor “Ondernemen en Belastingen”

and Behavioral Finance, our chairman gave a presentation

about the FSR and afterwards there was a social drink in the

L-building.

General Member AssemblyOn September 6th the XVth FSR Board was announced to be

officially in charge. After a few months, the period of orientation

was over and the entire board was ready for the challenge.

After a long discussion about the minutes of the last GMA,

the moment of fame for the fifteenth board was there and the

institution was successful.

Ernst & Young DrinkOn September 20th the Ernst & Young drink was planned.

About 35 student interested in accounting, tax or advisory

were invited and after a first drink Marcel de Kimpe, currently

partner at E&Y, introduced himself and gave a short intro-

duction about working at E&Y and his track from starter to

partner. He told about working at E&Y, the corporate culture

and an average working day as a partner. After a short break

we had a special workshop called: “Fit for studying”. For

studying and working as well, he had some eye-openers

about concentration and the influence of sleeping on our

concentration. For instance, our concentration depends for

80 percent on a good night’s sleep. For an hour we were

informed about the best way of living during studying and

work. At the end there were drinks and snacks available while

meeting Ernst & Young employees.


FSR news • 45

Erasmus Banking Congress

On Wednesday 12 September 2012 the first congress organized by the FSR was a fact. This congress,

held in the Forum-room in the M-building, was an interactive afternoon with 200 participating

students and lecturers. During this congress the banking sector with its numerous drawbacks

in the recent years was discussed. The opening of the congress was by Prof.Dr. I.J.M. Arnold. As

the vice dean of the Erasmus School of Economics he was well suited for introducing the subject

in this high-potential environment.

After this introduction the moderator of the congress, Arjen Mulder of the RSM faculty, took

over the stage. He presented Dr. H.O.Ch.R. Ruding: the former minister of Finance and former

vice-chairman of Citicorp. His main subject was the present monetary policy. With the current

crisis many things in the financial environment have changed and new quantitative easings are

the subjects of many meetings. Also the size of the by ECB created fund to defuse the European

crisis was one of the subjects Dr. Ruding spoke of.

The second speaker was former director of ‘De Nederlandsche Bank’, Dr. L.H. Hoogduin. His

topic was supervision on financials, which has increased rapidly, with banks abiding to the

rules of the Basel III Accord and the insurance companies adhering to the Solvency II Accord.

Also the possible separation of retail banking activities from the commercial banking activities

was one of his topics, which lead to heated discussions in the second round of debates.

During the first two presentations the participants sent in their questions via the SMS service.

The best questions were selected by the moderator so that they could be asked in the collective

debate session of Dr. Ruding and Dr. Hoogduin.

After a short break we continued the congress with professor in Finance of the Tilburg Univer-

sity, Harald Benink. He told us about the current situation of the banking sector and how to

ensure the stability of banks. A big subject here was the capital/asset ratio differences between

the banking sector and for example the multinationals. Also, the lower capital/asset ratios of

banks and the perception of guarantees and bail outs increasing the risks that banks took were

discussed.


46 • FSR news

Next, Head of Commercial Banking at ING, Annerie Vreugdenhil presented to us in an interactive

way. First she quickly clarified the expected extra regulations and the direct adjustments on

political interventions. Then she gave us four multiple-choice questions to see what the overall

consensus was of European regulation, size of future banks, splitting universal banks and the

degree of lending. The opinions were split, so she concluded mainly with her own view that

universal banks should stay.

Last but not least, founder of ‘Alex Beleggersbank’, Peter Verhaar covered the story of the present

risks within banking. One of these risks is the possibility that because of the numerous scandals

that took place, the trust in banks will be completely diminished for a long time. Another risk

is that the banking sector in the Netherlands is too small with only three and a half bank. That

is why he specifically pleads for more and smaller banks.

These conflicting opinions gave a perfect basis for the second debate sessions with prof. Benink,

ms. Vreugdenhil and mr. Verhaar. With Peter Verhaar as an entrepreneur of a small bank,

Annerie Vreugdenhil as a high ranked worker of one of the biggest Dutch banks and Harald

Benink with his profound academic knowledge this led to a great discussion that could have

lasted for hours.

Unfortunately we had only limited time, so a few minutes over time everyone was asked to join

us for a drinks reception, where the participants had the chance to talk personally to the speakers

while enjoying some drinks and snacks.

FSR news • 47

Big 4 Cycle

In recent years, more and more students have become interested in the world of accountancy,

a world full of numbers and intriguing companies. For those that have the ambition to work for

one of the four biggest accounting firms, the Big 4 Cycle is a great opportunity to get familiar:

with there companies. These four accountancy firms offer students inhouse days to experience

the challenging and rapidly changing world of accountancy. During the Big 4 Cycle, in Septem-

ber and October 2012, students get the chance to find out more about the opportunities at the four

leading accountancy firms and get to know the company cultures better.

For each inhouse day, a group of students was selected with a background in Business Economics

or Business Administration at the Erasmus University Rotterdam. Together they visited the

headquarters in Rotterdam of KPMG, Deloitte, PwC and Ernst & Young. These four leading

companies opened their doors for the students to give a glimpse into the working life of an

accountant.

These inhouse days started with an exclusive lunch, where the students had the first chance to

meet some employees (including all levels of management) and ask their questions. After the

lunch, the companies presented themselves and their specific career opportunities for graduated

students. Students worked on different cases in small groups where they could bring their

theoretical knowledge in practice and work out the different problems presented to them.

Topics that were discussed during these cases were innovation, business & accounting risks

and several other accounting issues of fictive firms. Students discussed these problems and

gave short presentations about what they found out and how they could solve this. By doing

these cases, students could get an idea about what accountants do in their working hours.


48 • FSR news

After the presentations, it was time to have dinner. One of the firms organized a cooking work-

shop, where the students and the accountants had to show their cooking skills to make their

own meal. The other firms organized a dinner at various locations in the heart of Rotterdam.

For the students this was a great setting to get to know the employees of the firm in an informal

way and to get a feeling of the firm’s culture. The company culture is a decisive factor for many

students and is therefore one of the most important experiences during the day.

The accountancy committee, hopes that we succeeded in helping students to get to know the

Big 4 better, so that they are closer in making their choice for a future employer. Finally, we are

proud that the Big 4 Cycle has once again been a successful event, not only for the accounting

firms but also for the accountancy students!

FSR news • 49

News UpdateNew swathe of difficulties as Dublin abstains from tax plan

A total of nine European countries have joined Germany and

France in the push for a common European tax on financial

transactions.

Dublin will not be participating, but the initiative heralds

more discomfort for the Government in its relations with its

EU partners. The development could yet have major implica-

tions for the defence of Ireland’s corporate tax regime.

The idea behind the tax is simple. With taxpayers throughout

Europe supporting stricken banks to the tune of hundreds of

billions of euro, the objective is to ensure that a volatile

financial system makes a greater contribution to society at

large.

Irish banks are the beneficiaries of some e64 billion in capi-

tal from the increasingly indebted, cash-strapped State, so

many observers might see many good moral and financial

reasons for Ireland to take part. That’s not how the Govern-

ment sees it, however.

Britain is abstaining from the tax. Therefore, Minister for

Finance Michael Noonan fears financial institutions would

move their business to the City of London from the Irish

Financial Services Centre if Ireland joined while Britain

stayed out.

Noonan’s overriding concern is to avoid doing anything that

would threaten the employment of 33,000 people in the Irish

financials sector. Amid soaring unemployment, this is a

forceful argument.

The Minister also says Ireland already charges a 1 per cent

stamp duty on all share deals, a charge smaller in scope than

the proposed European tax because it is levied on transac-

tions in derivatives.

But the plan agreed yesterday still presents a new swathe of

complications to the Government. For one thing, it puts Ire-

land in the opposite camp to most euro zone countries at a

time when Noonan is facing acute difficulty in his long cam-

paign for bank debt relief.

To say this is politically inconvenient for Noonan is to put it mildly, although it is noteworthy

that “core” euro zone countries such as the Netherlands and Luxembourg are not joining. It is

no coincidence that they too operate big-league financial centres.

There is more. The participants will deploy new measures in the Lisbon Treaty which allow a

coalition of at least nine countries to proceed with a European legislative initiative even if

unanimous support among the 27 EU member states cannot be achieved.

The big issue for Dublin is that the transaction tax via enhanced co-operation may create a

precedent for adopting a common business tax system by a group of member states.

Although the Government is pledged to engage constructively in talks on an EU-wide common

consolidated corporate tax base (CCCTB), no less a man than Taoiseach Enda Kenny once dis-

missed the initiative as a “back door” route to tax harmonisation. In a fundamental sense, this

is a no-go area for the Government.

The drawback for Ireland if a group of countries push ahead with their own CCCTB is clear. In

short, this would dim the lustre of the storied 12.5 per cent corporate tax rate by making it

more difficult for global companies to maximise the profit they book in Ireland for tax reasons.

Numerous technical questions also arise.

A part of this text was written by Arthur Beesley and published in

the Irish Times on October 10th 2012


FSR Alumni AssociationThe multiplier which leads you to synergy!

Dear FSR Alumni or Future Alumni,

The new academic year has begun and after almost a decennium

the FSR Alumni Association finally has a female chairman.

According to the Finns female leadership will lead to higher

profits, according to McKinsey & Company female leadership

could create that competitive edge to tackle global challenges

and according to the Dalai Lama there is less danger of violence

under more matured female leadership.

If we all survive 21 December 2012 this could become a great

year.

Together with my fellow board members Anne, Maaike and

Taco we will organize new activities for our alumni members

this year to keep you involved and engaged within the FSR

network. This last decennium more and more FSR alumni

have started to work and live in Amsterdam. Therefore, we

thought it would only be just to claim Amsterdam as our city

as well. Our first activity was the FSR Alumni Amsterdam

drink on 19 October. The conciseness of the Rotterdam culture

has colored this evening.

Currently we are also in the process of organizing a Friday

afternoon drink in Rotterdam. Most probably this will be a

look-a-like of the successful Ketel 1 drink of last year. Defi-

nitely an event you do not want to miss. Furthermore, also

this year the tradition of the FSR Golf Tournament will be a

highlight for most of our alumni members.

With this first issue of the FSR Forum I would especially like

to encourage all our former active members of the FSR, as

well as Pecunia and Pacioli which are not a member yet, to

subscribe for the FSR Alumni Association. Not only because

you will get our magazine ‘Kroonrede’ with all kinds of nos-

talgic stories, or a great network which has already many

times led to new career opportunities; but because the

common factor ‘FSR’ that binds us will make us relive the

joyful moments of the past again and create new ones for the

future. All it takes is sending one e-mail to [email protected].

Concluding, my fellow board members and I look very much

forward to meet with you and discuss topics varying from

building the best cash flow model to my recent experiences

with the Lukashenka regime in Belarus. You are cordially

invited!

On behalf of the IXth FSR Alumni Board,

Ashmita Krishna

Chairman FSR Alumni Association

Connect with us on LinkedIn on

‘Financial Study Association Rotterdam Alumni’


FSR news • 51

FSR Activity Agenda 2012-2013

September/October/November Erasmus Banking CongressThe official kickoff of the International Banking Cycle

BIG 4 CycleGet to know the 4 leading accounting firms

International Banking CycleThe investment in your career

November Accountant Firms DayGet familiar with the world of accounting at a top class

location in Rotterdam!

Traders TrophyCan you handle the pressure?

Finance DayWant to know what finance is all about…

November/December Financial Business CycleExplore the financial opportunities

January Multinational DinnerGet in touch with the multinationals

Finance DinnerGet acquainted with the world of banking

January-April CleanTech ChallengeGrow your green ideas!

February Investment Banking MasterclassLearn to valuate, like an investment banker

March Multinational BattleFour multinationals, five battling cities, are you part of it?

Corporate Finance CompetitionFive star event: hotel, companies and participants!

April Female Business TourIt might be a men’s world but it would be nothing without women

April/May International Research ProjectUsing your intellect for a charity!

May Bachelor Accountancy DayWill you choose for a career in accounting?

European Finance TourExploring European financial world


52 • FSR news

ℜς ϓ℘ ΞΒ⇓ ∗ ∨ ⎥⎦W.we∼kΨn bij mΕzars. ⇔ ←.

Mazars is ontstaan uit een fusie tussen Mazars en Paardekooper&Hoffman

Ga verder met Mazars.

0475.00.596 WT Niets BS_210x297_FC.indd 1 21-08-2008 11:14:10

Blijkt de universiteitineens een vooropleiding.

Een succesvolle carrièrestart is meer dan een goede cijferlijst. Het begint met karakter en inzicht in jezelf. Ontdekken wie je bent, weten waar je naartoe wilt groeien én hoe je dat voor elkaar krijgt staat altijd aan de basis. Ernst & Young coacht jou actief op weg naar jouw succes. We bieden je volop kansen in de wereld van assurance, tax, transaction en advisory. Ontdek ze op ey.nl/carriere

Diederik van de ScheurConsultant TAS

Piet-Hein TouwStaff FSO

E&Y_210x297mm_potentials.indd 2 23-09-10 14:50

editie 1 common consolidated corporate tax base

Documents

the companies

the theme

the goal

the fsr forum

the first edition

the amsterdam institute

the fifteenth year

you can find the theory