hanging in there - agn internationalfinancial affairs, taxation and customs, on announcing the list:...

january 2018w w w. i n t e r n at i o n a l a c c o u n t i n g b u l l e t i n . c o mIssue 581

HANGING IN THERE

NEWS INSIGHT RANKINGSIFAC struggle

Mid-tier financial resultsTax avoidance a kids game

comapred to total anonymityUK

Eurozone

(DIS)UNITED KINGDOM

IAB 581 CLv2.indd 1 18/12/2017 13:11:57

NEWS

04 / BDO FY RESULTS04 / IFAC’S REFORM IDEAS05 / GENDER PAY GAP05 / LUXLEAK TRIAL

05 / FTSE AUDIT RANKING05 / NEXIA AP RESULTSs to talk about cracking China, disrupting SWIFT, and leveraging WeChaFEATURE

09 / TAX AVOIDANCE Paul Beckett, senior counsel at MannBenham Advocates, talks to Carlos Martin Tornero about tax avoidance and human rights, and how orphan structures, marketed by accountants, make the super-rich anonymous and unaccountable for their actions

10 / ARGENTINA SURVEY Despite some diffcult times both economically and politically, Argentina mainntains a steady course, and hopes to join the OECD to confirm its position on the international stage. Stephanie Wix reports

RANKING

12 / EUROZONE 16 / UK

04

Contents

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2 | January 2018 | International Accounting Bulletin

IAB 581 CLv2.indd 2 18/12/2017 13:12:19

January 2018Barking dog lacks the bite needed

The EU Commission just barked but failed to bite ...It has just published its blacklist of tax havens and

there are no surprises. It is disappointing and, worst of all, is of no significance and raises serious questions over the commission’s ability to tackle the issue.

The final list shows 17 countries and is the result of backroom trade-offs and lobbying. The biggest dent to the credibility of the list is that the EU Commission decided from the start not too include EU member states, allowing Ireland, Luxembourg, the Netherlands and Malta off the hook.

The 17 countries on the list will probably laugh off comments made by Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs, on announcing the list: “The adoption of the first ever EU blacklist of tax havens marks a key victory for transparency and fairness.”

No doubt it is an achievement to demand from others what the EU Commission is not prepared to ask of its own members and it is certainly a key victory for transparency to point the fingers at others rather than look at the mirror!

Understandably, the list met a clamour of criticism and, beyond ridiculing the commission for not looking at his own members, observers raised an eyebrow at the omission of the USA, which doesn’t comply with the international standards on information exchange, one of the EU Commission criteria for its blacklisting. Similarly, the commission didn’t screen Russia – a convenient omission?

UK based charity Oxfam published its own blacklist and said it used the EU Commission criteria. Oxfam’s list is made of 35 non-EU countries and four EU countries. Moscovici commented

on this in a press conference before the EU’s list was published. He said that there were no tax havens in the EU, although there were some issues around tax optimisation, and no EU countries could be compared to those on the EU blacklist.

Notwithstanding all the above, and taking a glass half full approach, what does the blacklist mean for the 17 listed? Well the glass is half empty on this one as well. I’m afraid. Here are the EU Commission’s next steps – with comments.

“As a first step, a letter will be sent to all jurisdictions on the EU list, explaining the decision and what they can do to be de-listed.” That will make for a great BBQ starter for whoever receives it.

“The Commission and Member States (in the Code of Conduct Group) will continue to monitor all jurisdictions closely, to ensure that commitments are fulfilled and to determine whether any other countries should be listed in the future.” Scary stuff!

“A first interim progress report should be published by mid-2018. The EU list will be updated at least once a year.” More BBQ starters and excitement ahead.

A commission official told this magazine: “Stronger countermeasures would have been preferable, but we hope that work will continue in 2018 to deliver defensive measures with teeth. On our side, we will work to ensure that the measures already included in key legislation at EU level are applied. Work must continue to ensure that all countries on the commitment list abide by the promises that have been made. We look forward to work on this in the New Year and to the publication of an interim report by the summer 2018.”

Vincent Huck, Editor

The EU blacklist: American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, The Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia, United Arab Emirates

Oxfam’s blacklist: Albania, Anguilla, Antigua and Barbuda, Aruba, Bahamas, Bahrain, Bermuda, Bosnia and Herzegovina, British Virgin Islands, Cook Islands, Cayman Islands, Curaçao, Faroe Islands, Former Yugoslav Republic of Macedonia, Gibraltar, Greenland, Guam, Hong Kong, Jersey, Marshall Islands, Mauritius, Montenegro, Nauru, New Caledonia, Niue, Oman, Palau, Serbia, Singapore, Switzerland, Taiwan, Trinidad and Tobago, United Arab Emirates, US Virgin Islands, Vanuatu, Ireland, Luxembourg, the Netherlands and Malta

www.internationalaccountingbulletin.com | 3

IAB 581 CLv2.indd 3 18/12/2017 13:12:23

accounting news bites

IFAC offers alternative reforms to international audit and ethics standard-setting process

BDO GLOBAL SAYS 7% GROWTH RISE IS DOWN TO TECHNOLOGY

BDO Global has achieved revenues of $8.1bn, including its exclusive alliances, for the year ended 30 September 2017, up 7% from the previous year.The network attributed its revenue growth to its transformation strategy into digital innovation and technology, such as big data and automation. BDO also said growth had resulted from its merger and consolidation programmes across all regions – it has seen 70 mergers globally in three years. The network is now present in 162 countries against 152 last year. According to the BDO, the increased revenues will allow investment into client engagement platforms.The network’s total headcount increased by 9% to 73,854, compared with 67,731 last year.Global CEO Keith Farlinger said: “Globally, BDO continues its ongoing consolidation journey with its expansion to acquiring business-critical players such as cybersecurity companies. “Drawing on these global knowledge resources, our firms are now taking the next step, becoming efficiency enablers and accelerating the digital transformation of our clients.”Farlinger added that BDO would continue to invest in technology and in the future he expected to see improvements to their services approach and operating models.

The International Federation of Accountants (IFAC) has responded to the Monitoring Group’s suggested changes to the international audit and ethics standard-setting process.The Monitoring Group consists of international financial institutions and regulatory bodies committed to advancing the public interest in areas related to international audit standard setting and audit quality. In November, it published a consultation paper proposing to change the current standards-setting model because standards were not being developed fully in the public interest. IFAC said it agreed with some aspects of the paper, including the introduction of a multi-stakeholder model, broad geographical representation and sufficient checks and balances, as well as a review of the nominations process.However, it raised concerns over other areas, saying the consultation paper offered no evidence to support such a drastic change and that fundamental key issues had been omitted or deferred, including funding, oversight and governance, transition process, and an impact and risk assessment.In its position paper, IFAC listed seven possible reforms to strengthen the standards-setting model as an alternative to the those advocated by

the Monitoring Group. These included:• The introduction of nomination

arrangements that include other stakeholder groups;

• That the role and operating processes of the Public Interest Oversight Board is clarified and followed;

• A more explicit multi-stakeholder standard-setting board composition;

• Funding arrangements to which all stakeholder groups contribute, with transparent and independent oversight;

• Reconsider the optimum size of the standard setting boards, suggesting that it could be smaller;

• Retain separate standard-setting boards for auditing and assurance and for ethics for the entire accountancy profession;

• Examine the scope to redesign the processes and operations of the standard-setting boards to make them more efficient and effective.

The Monitoring Group welcomes all feedback from stakeholders, which has to be submitted by 9 February 2018. Download the consultation paper from https://www.iosco.org/library/pubdocs/pdf/IOSCOPD586.pdf

News | Digest


IAB 581 CLv2.indd 4 18/12/2017 13:12:32

INCOME AT NEXIA INTERNATIONAL RISES IN WAKE OF CHINESE GROWTHNexia International has reported a 17% increase in fee income in Asia Pacific in FY17, up to $502.1m. Nexia International CEO Kevin Arnold said: “This result is the consequence of focused recruiting in China, where we have achieved 32% growth. “It is great news and shows that Nexia’s impact in the region continues to go from strength to strength.”

The Luxembourg Leaks trial before the country’s Court of Cassation will be held tomorrow (Thursday 23 November 2017).In June 2016, Antoine Deltour and Raphaël Halet, both ex-PwC accountants, were found guilty of leaking documents in the LuxLeaks trial and given suspended prison sentences of 12 months and 9 months respectively.In March 2017, the Luxembourg Court of Appeal reduced Deltour’s sentence to six months. The court acquitted the whistleblower of breaching professional confidentiality acknowledging that he did the right thing in providing the documents to journalists, as a statement by the Antoine Deltour’s support committee explained. However, the court convicted him for having copied the documents in the first place.In Luxembourg, to qualify as a whistleblower, the intention to blow the whistle has to be immediate.This is inconsistent with the path followed by many of the most

Mid-tier UK firm does better than the Big Four on gender pay gapUK accountancy firm Kingston Smith (Morison KSi) has reported a mean gender pay gap of 7%, narrower than the UK gender pay gaps of PwC, Deloitte and EY.The UK financial services average gender pay gap is 31% and, even though PwC, Deloitte and EY have reported gender pay gaps of 13.7%, 18.2% and 19.7% respectively, Kingston Smith aims to narrow its gap further.

The Office of National Statistics’ annual survey from November 2016 stated that the UK’s mean gender pay gap was 17.5%, and found that UK financial services had larger pay gaps on average than other industries.Kingston Smith also reported a median gender pay gap of 0% and a gender bonus gap of 52.1%.At the time of publication, KPMG had not issued its gender pay gap.

important whistleblowers, the support committee argued.“The Court of Appeal denied Deltour’s disinterestedness from the beginning of his action, despite material evidence showing that he was in favour of a public debate on tax rulings well before the facts he was indicted for took place,” the support committee’s statement continued. “The Court of Appeal thus established the implausible theory of a sudden reversal of Antoine Deltour’s motivations: he would be a potential whistleblower beforehand, a recognised whistleblower afterwards, but a mere self-interested thief on the day he copied the documents that gave rise to the LuxLeaks.”The trial before the Luxembourg Court of Cassation is only one step further in the case as, regardless of its the outcome, there will either be a new appeal trial in Luxembourg or the case could be submitted to the European Court of Human Rights, the support committee noted.

LUXLEAKS TRIAL CONTINUES

news

KPMG OVERTAKES PWC AND DELOITTE IN UK FTSE AUDIT RANKINGSKPMG has jumped ahead of PwC in the FTSE 250 and Deloitte in the FTSE 100 audit rankings, according to the auditor rankings list from Adviser Rankings. PwC dropped to third place in the FTSE 250 during Q4, as KPMG took second place and Deloitte remained top of the list. EY was in fourth position, followed by Grant Thornton and RSM. In the FTSE 100 rankings, KPMG came second after PwC, ahead of Deloitte. BDO topped the list of AIM clients, and KPMG took the top position of total stock market clients overall, followed by PwC, Deloitte and BDO.


IAB 581 CLv2.indd 5 18/12/2017 13:12:34

feature | UK

UK: optimism still high in the face of a slowdown and uncertaintyBrexit, unpredictable politics and the continued crackdown on tax avoidance have created challenging conditions for the UK accounting profession over the past 12 months. Paul Golden reports

are opportunities out there for firms that get their service offering right. “An advisory ethos throughout all service lines is key to attracting the right type of clients, along with embracing opportunities arising from data analytics and other emerging technologies,” he says.

The market is competitive, with clients and prospects looking for added value to help them with strategic direction. However, many providers continue to focus on cost and providing a lower price than the incumbent, which prospects often go for as they do not always fully appreciate the consequences of buying a service purely on price.

That is the view of Paul Dickson, managing partner of MSI Global Alliance member firm Armstrong Watson. Pressure on remuneration has been there for a few years, although it has not become more challenging in 2017, he says. “Costs overall are increasing and clients continue to be sensitive to fee increases over and above inflation.”

Dickson warns that, because of the lack of clarity around Brexit, many businesses are not as prepared as they should be and are not putting in place strategies to deal with the potential risks that might present themselves after the UK exits

the EU.“Currency fluctuations, lack of overseas

workers and import duties are seen to be the major concerns,” he continues. “Weakened sterling is already having an impact on many and skills shortages are also affecting the service sector, tourism and agriculture as unemployment is low in the UK and numbers of immigrant workers are reduced as a result of Brexit

and the weaker currency.”Dickson refers to increased activity in the M&A market,

while also acknowledging that deals are taking much longer to get off the ground.

There seems to be a lot more activity in terms of both transactional work and also audit contracts being put to tender, notes HLB International member firm Beever & Struthers partner Caroline Monk.

“Some of this might be as a result of the significant changes

What has been difficult is the complete lack of direction regarding legal and taxation issues

The findings of the Q4 2017 ICAEW business confidence monitor underline the difficulty of assessing the health of the businesses that underpin accounting activity in the UK. On the

upside, business confidence was higher; export sales were deemed to be recovering; profits were up and employment continued to grow.

Yet, on the other side of the ledger, business confidence remained in negative territory; overall sales growth was slow; high levels of spare capacity held back significant increases in investment; the availability of non-management skills was constrained; and regulatory requirements were perceived as an increasing challenge.

Rakesh Shaunak, managing partner and group chairman of Baker Tilly International member firm MHA MacIntyre Hudson, agrees that the business climate is uncertain. “Most clients have assessed the likely impact on their business of the potential change in trade agreements and the movement of staff following Brexit,” he says. “What has been difficult is the complete lack of direction regarding legal and taxation issues.”

However, he also observes that demand for audit and

accountancy services has held steady and that accounting firms have benefited from a move away from employing in-house resources. “We also see great opportunities for assisting businesses keep a sense of perspective in relation to the GDPR and using the opportunity to run a slide rule over their processes for collecting and using data with a view to driving efficiency,” he adds.

John Warner, managing partner of Kreston International member firm BHP Chartered Accountants, suggests that there

6 | July 2017 | International Accounting Bulletin 6 | January 2018 | International Accounting Bulletin

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feature

to UK financial reporting, with the changes to UK GAAP that have now been implemented,” she adds. “Value for money is, as ever, a driver for such services, but there is also an increased focus on quality of service provided.”

Monk observes that, with financial services and the passporting of authorisation across Europe representing a significant concern, clients in this sector are actively considering options to export to European jurisdictions.

“However, while the UK economic environment is still uncertain, clients are appearing to take the approach that their businesses can’t stand still and that they need to take strategic decisions and manage the impact of future economic situations as they arise,” she adds.

Monk suggests that where clients feel they have received valuable support and that their accounting firm acted as a genuine partner to the business, pressure on the fees has been noticeably reduced. “Remuneration is a key area of review and clients are looking at ways to remunerate staff outside the traditional salary if this can help incentivise and lock people in,” she says.

Nigel Bostock, chief executive of Crowe Clark Whitehill, says his firm has not seen a significant change in the audit market following the introduction of mandatory firm rotation at the top end of the FTSE market, but notes there has been some rotation of larger listed audits within the Big Four firms and there is increased demand from businesses for more innovative approaches to audit, increased data analysis and global reach.

Greater attention is being paid to advanced digitisation, technology platforms, cloud and one-stop shop solutions, he notes. “Demand for services to be delivered efficiently and digitally – in a way that adds value to business – creates both opportunities and threats,” he says.

“There also continues to be an increasing focus on cross border businesses looking for a coordinated approach to their accounting needs and inbound opportunities for such services remain.”

Bostock says the GDPR has been a key topic of conversation with clients who will need to engage with the process. “We have been undertaking a range of briefings and seminars across a number of sector groups, with a top 10 GDPR checklist to help clients,” he explains. “Businesses should treat the need to address GDPR as an opportunity to improve their processes. This is principally about greater transparency, accountability and the rights of individuals, all of which should be central to any organisation’s data strategy.”

PKF UK and Ireland chair Carmine Papa suggests client readiness for Brexit varies considerably, with those in the financial services sector generally well advanced in their preparations while others play a “wait and see” game in the absence of certainty about the outcome of the negotiations.

Businesses that have yet to start making plans will need to get going soon, she warns. “The preparation process is likely to be complex and resource intensive, so it is easy to understand why people want to hold off. However, there comes a point when you have to bite the bullet.”

At a macro level, Papa refers to continued investment from businesses over the past 12 months, although she accepts that the picture becomes more complicated when you look at it in more detail. “The signs are that inward investment into the UK has reduced, but we haven’t noticed a reduction in the number of new UK owned or UK-based start-ups,” she adds.

Many businesses don’t really understand what GDPR means for them and are seeking advice, support and help to prepare, she suggests. “It is also important to remember that GDPR isn’t a one-off exercise – it is an ongoing compliance issue and will need to become a ‘business as usual’ initiative.”

According to Papa, increasing demand has made it more difficult to find good candidates, with recently qualified accountants and good managers particularly in short supply. As a consequence, there has been upward pressure on remuneration over the past 12 months.

“We haven’t yet witnessed any significant changes in clients’ attitudes towards paying fees,” she adds. “That said, it feels like we are getting to a point where some smaller clients are likely to start feeling this squeeze and that could have an impact on fee growth during 2018.”

James Bagley, managing partner at Alliott member firm Smith Cooper, suggests that although there has been a lot of scaremongering surrounding the wider economic environment, this has not had a direct influence on investment decisions in 2017.

“Investment activity remains high, particularly internationally as the UK has become a very attractive destination for overseas investors,” he says. “This is particularly evident amongst our corporate finance team who have completed well over 20 deals this year, many with an international dimension.”

Bagley reckons the firm is particularly well positioned to help businesses comply with their GDPR obligations before the May 2018 deadline through its IT business, Infuse Technology.

“Infuse is launching an enterprise – Infuse Security – to help businesses comply with ever-changing regulations, offering a range of services including security audits and GDPR readiness,” he explains.

A major problem for the accounting sector is that compliance services are perceived by the market as a necessary cost that does not add direct value to their business, which can make the ability to recover time difficult, according to Alliotts chairman Ian Gibbon.

“Technology is taking over the tasks that people used to perform – the challenge is in making better use of technology to become more efficient with cost and time and to keep realigning our HR strategy to continue growth,” he continues. “Firms need to identify the skills needed to build a practice for the future. Accounting and audit are springboards for

The are signs inward investment into the UK has reduced, but we haven’t noticed a reduction in the UK-based start-ups


IAB 581 CLv2.indd 7 18/12/2017 13:12:37

feature | UK

consultancy services and should be the start not the end of the conversation we have with a client.”

He suggests that clients who trade with non-EU states have a better mindset and feel less exposed to Brexit volatility.

Alan Worsdale, director at MGI Worldwide member firm Rickard Luckin, agrees that it has become harder to recruit suitable candidates over the past 12 months and that upward pressure on remuneration has hit the bottom line.

“While we have managed to increase our turnover by 7% in the last year, there has definitely been pressure on remuneration,” he says. “Around 50% of our extra fee income has gone on salaries.”

Roger Isaacs, MGI deputy chairman and forensic partner at network member firm Milsted Langdon, strikes an upbeat note, suggesting that exponential growth in the volume of data, increased demand for real-time KPIs delivered on mobile devices and more regulation (such as the 2017 Criminal Finances Act) mean that the need for proactive commercial advice and meaningful assurance has never been more acute.

Simon Turner, managing partner at fellow MGI Worldwide member firm Seymour Taylor, says there are plenty of opportunities from start-ups and clients looking to move away from larger firms where they can make a financial saving without a loss of service.

“It appears to be business as usual currently,” he says. “If anything, we have clients who want to push ahead, perhaps making decisions earlier about business or retirement as they have concerns about a change of government, which they feel might not be beneficial to them.”

In our 2016 survey, IAB highlighted the Treasury’s promised crackdown on tax avoidance as a major development. Warner says is a growing concern, as the lines are becoming blurred between morally acceptable tax planning and the arranging of client’s tax affairs in the most effective manner.

He reckons that, if this trend continues, “there will be a continuing reduction in the extent of the tax planning services that we feel we are able to offer to our clients and still be considered to be acting ‘ethically’”.

The attitude to tax planning is clearly changing in the UK and public perception of some well-publicised schemes has acted as a deterrent according to Monk.

“Traditionally, our clients have not shown any wish to take part in aggressive tax planning schemes,” she adds. “We try to maximise their returns through the tax credits and allowances provided through Treasury action – R&D tax credits and patent box profits being good examples. The former has had a big impact for many of our clients, encouraging more innovative research activities.”

The crackdown on tax avoidance has pushed up the cost of insurance cover as underwriters predicted a rash of claims against accountants that did not materialise, adds Isaacs. “Clients still need tax advice despite the government doing all

it can to blur the distinction between tax evasion and tax avoidance and to suggest that it is tantamount to treason to fail to organise one’s financial affairs so as to maximise the amount of tax payable,” he says.

When asked whether the profession has made any further progress towards

increasing participation from different social and ethnic groups and tackling gender inequality, Monk refers to the need to consider how the next generation of staff (both female and male) will find a balance between family and home life and work.

“Our firm has also been successful in recent years in employing students on apprenticeships rather than graduates, which has widened social diversity,” she adds.

Rosemary Hedgecock, head of Alliotts HR management services, observes that there has been a significant increase in the number of female staff at partner and senior manager level over the last two years.

“We have also undertaken a pay gap analysis internally, even though companies with fewer than 250 employees are not yet required to provide this information,” she adds.

Deloitte has made diversity and inclusion an executive committee priority, focusing on culture alongside targeted actions to address specific “pain points” from a diversity perspective. In 2012, it set a target that by 2020, 25% of its partners would be female and, two years later, the firm introduced a “women in leadership” action plan.

Women now represent 19% of partnerships, female recruitment has increased and female attrition has dropped at Deloitte UK, notes Emma Codd, managing partner for talent at the firm.

“Black and minority ethnic employees make up 18% of our UK workforce, but account for less than 5% of our most senior positions,” she continues. “As with our focus on gender, we are working hard to make progress in this area and have committed that by 2021, 10% of our partners will be BAME and our executive group will have at least one BAME member.”

Deloitte has applied a similar approach to increasing social mobility. Targeted actions include changing its hiring process in 2015 to take account of academic achievements in the context of the environment in which they were achieved, academic institution-blind CVs and changes to the interview process.

“In the last year, these changes have enabled us to hire more than 100 students from low-income backgrounds who would otherwise have not gained access to our firm,” says Codd. “We have also worked hard to ensure that all our people are able to balance their lives with a successful and fulfilling career.”

Deloitte’s most recent people survey showed that more than 80% of employees feel they are able to work in a flexible or agile way. “Since we launched agile working in 2014, we have seen an increase in the number of people working reduced hours and more than 700 employees have participated in our Time Out scheme, through which they have taken a month of unpaid leave in addition to their annual leave,” concludes Codd.

xxxx

Investment activity remains high. the UK has become a very attractive destination for overseas investors


IAB 581 CLv2.indd 8 18/12/2017 13:12:37

Q&A

Paul Beckett, senior counsel at MannBenham Advocates, talks to Carlos Martin Tornero about tax avoidance and human rights, and how orphan structures, marketed by accountants, make the super-rich anonymous and unaccountable for their actions

tax avoidance looks like a side show: compared to total anonymity

*Carlos Martin Tornero works as a senior reporter for Responsible Investor and is the former editor of sister publication The Accountant.

Carlos Tornero: What’s new regarding the connection between human rights and tax avoidance?

Paul Beckett: The book I’ve written is more on the structural side. There is a very large amount of existing literature on the effect of not paying your taxes, either by evading or avoiding them, and the deprivation of people in countries where [tax revenues are reduced].

To me, tax is the side issue, the honey trap that gets people to go to these countries but, when they see what else they can do there, tax becomes almost a sideshow. The main show is a total absence of accountability because paying or not paying your taxes is one thing, but not being accountable for anything by virtue of simply not owning anything is the determining factor.

Tornero: How does this work?Beckett: Purpose trusts [non-charitable ones

with no beneficiaries] are designed to be orphan structures. The same goes for the Bahamas Enterprise Entity, and certain structures in the Cayman Islands and the British Virgin Islands. Purpose trusts are now being marketed on street corners around the world. Jurisdiction after jurisdiction are introducing them for no other reason than that they give the possibility of anonymising or indeed totally removing beneficial ownership from the structure. There is no societal need for those structures to exist.

Tornero: Who provides them?Beckett: They are being actively marketed by local structuring

professionals. It could be accountants or lawyers. In many offshore jurisdictions, this is a specific licensed group of people, usually referred to as corporate or trusts service providers. Where I’m from, in the Isle of Man, people are fully licensed by the government and must behave in an ethical manner, according to the law, regarding anti-money laundering, countering the finance of terrorism and so forth, to have the licence in the first place; that’s the comfort. Not all jurisdictions require people to be licensed, but that’s where they are sold. They are sold in meeting rooms; they are sold when people are putting a business plan together and they say “We don’t want to be associated with this, we want to divorce ourselves from it, can that be done?” And the answer is always “Yes, it can”.

Tornero: The Isle of Man is mentioned in the book to

reformulate the definition of what a tax haven is, why? Beckett: It is used as a case study in my book because it is the one

with which I have the closest professional association. Forty years ago, being a tax haven meant being able to benefit from low tax. But in the intervening 40 years many more peripheral issues have come up. Basically, accountability and ownership avoidance, development of weird chimeric structures. And more than this – the ability to avoid reciprocity and matters of judgment, the ability to get away with fraud, transferring assets to deceive your creditors, the absence of registration of any of these structures. All those aspects have now become in 2017 the defining characteristics of a tax haven – the word tax is still in the title but the tax itself is not determinative.Now, in the case of the Isle of Man, of that checklist of matters I’ve

just mentioned, virtually nothing comes up positive. The key is that the nature and the definition of tax haven has evolved way beyond somebody putting their company offshore.

Tornero: You argue that the G20 High-Level

Principles on Beneficial Ownership Transparency are defeated by these structures. Why?

Beckett: The G20 principles make, as the title indicates, a fundamental assumption: that there is beneficial ownership. There is no owner, so all the registers in the world, all the reporting and control requirements are useless if the very thing that is being looked upon hasn’t got an owner.

Tornero: How is it possible that the principles

were built from a wrong assumption?Beckett: Because there isn’t a general awareness on the part of the

people putting these principles together that there is a countervailing international industry in orphan structures, what I call “beneficial ownership avoidance”. One can only speculate as to why they haven’t revisited the principles, knowing as they now do that there is such a worldwide market.

Tornero: Did you coin the term “beneficial ownership

avoidance”?Beckett: I coined it because at a time when tax evasion and tax

avoidance are morphing into one generally socially accepted principle that neither are beneficial to society, one must also factor in beneficial ownership avoidance. That’s who ultimately bears responsibility for civil lawsuits and criminal activities for human rights breaches. The focus of the book is that if you take away the ownership, you are creating a super elite of complete anonymity and non-accountability.


IAB 581 CLv2.indd 9 18/12/2017 13:12:38

feature | argentina

Two years after Mauricio Macri was elected Argentina’s president, in a switch from a left to right wing government, the country is working to get back on the economic

world stage, bringing back foreign investors and making its voice heard.

Argentina is to host the next G20 meeting – a major step towards achieving one of Macri’s stated ambitions for Argentina to join the Organisation for Economic Co-operation & Development (OECD).

OECD membership begins with an evaluation of the country’s laws and policies, which are therefore a high priority for the government and regulator Comisión Nacional de Valores (CNV), the Securities Exchange Commission of Argentina. The CNV passed corruption prevention legislation into law in 2017, so punishment for corruption now applies to companies as well as individuals. This new development aims to put more responsibility on companies.

BDO Argentina partner Marcelo Canetti says that, as one of the main requirements of joining the OECD is corruption prevention, the government is expecting the accounting profession to get more involved in this.

Further measures to meet OECD membership requirements include allowing non-listed companies to adopt IFRS if they wish, training for auditors, addressing bribery and improving professional standards including quality control.

For the past decade, the CNV and the controlling authority have aligned the requirements for international quality control and accounting standards for listed companies and their subsidiaries.

Since 2013, all listed companies are expected to apply IFRS standards, and a new regulation will extend the requirement to financial entities such as banks, and insurance companies, effective from 1 January 2018.

However, Argentina has delayed the implementation of the IAASB’s new auditor’s reporting model to 2018 or 2019.

Crowe Horwath Argentina CEO Esteban Basile adds: “It will require more expertise from the auditor, and that will help start changing the profile through developing their consulting skills in risk.”

MANDATORY FIRM ROTATIONThe CNV and the previous government tried to introduce

mandatory firm rotation in Argentina and, while a law introduced this in 2013, professionals opposed this.

Argentinean accountants had the same grievances over the measure as their counterparts around the world. Specifically, they criticised the most the short rotation period of three years, which they said was impractical.

Grant Thornton Argentina head of audit Leonardo Fraga says: “There is no way public companies can rotate every three years. It is impossible and a big risk for the capital markets and, given the conditions, it was really impractical.”

SMS Buenos Aires audit partner Andrea Serejski states that the terms and the three year rotation were unreasonable, but the regulators might insist on this rotation in the future as other countries push for such measures. Macri’s government dropped mandatory audit firm rotation in December 2015, introducing audit partner rotation instead, which was increased from changing the audit partner every five years to every seven years, with a cooling-off period of two years.

Serejski notes that mandatory audit firm rotation used to be the most important issue discussed at the Forum of Audit Firms in Argentina, a group of 30 firms set up three years ago, but current issues relate to inflation and corporate governance.

HYPERINFLATIONArgentina almost reached the hyperinflation threshold of

100% over three years, between 2013 and 2016, according to consumer price index (CPI) figures released by its National Institute of Statistics and Censuses (Indec). The inflation rate has fallen in the past two years to approximately 20% per year from 40% per year, notes MGI Jebsen & Co partner Rafael Faillace. The target for Macri’s government is to have one-digit inflation by 2019. Passing the 100% threshold would have allowed companies to apply an inflation adjustment to their financial statements.

Regarding the figures, Baker Tilly Argentina partner Raul Ynarra claims: “We know that it was fake information because in reality it was more than 100% in three years but the entity taking charge has reported an index less than that. Even

Economic woes: Tangled up Argentina tangos onDespite some diffuclt times both economically and politically, Argentina mainntains a steady course, and hopes to join the OECD to acertain its position on the international stage. Stephanie Wix reports

xxxx


IAB 581 CLv2.indd 10 18/12/2017 13:12:39

feature

companies hired our services as if there was inflation.”As Argentina did not cross the inflation threshold, inflation

adjustments in financial reports have not been accepted by the regulator since March 2003. As a partial solution, the profession suggests companies should apply a supplement report including inflation adjustments in order to share this information with investors, stakeholders and shareholders.

There is also a government project to allow an inflation adjustment for tax purposes as well as accounting purposes in 2018, says Deloitte Argentina national practice director Eduardo Selle. This will provide information on the past 12 years of inflation and allow taxpayers to deduct the amount of depreciation on their assets or to sell their assets at a higher cost. This bill is currently being discussed in congress and if passed will apply from 1 January 2018.

“Under this bill, companies can re-evaluate their fixed assets but it’s not mandatory. It is a one-time adjustment only for tax purposes or for accounting purposes from 1 January 2018, as an alternative to the inflation adjustment,” Selle says.

Yet Canetti claims that the fixed assets bill will doom the accounting profession to an increasing lack of relevance and that it will discourage access to the stock market.

“There are relevant macroeconomic factors because inflation and exchange rates cause distortion in historical financial information. So that distortion reduces the information’s usefulness, reliability and creates an unbalanced taxation,” he says.

Ynarra says the bill may put pressure on the tax administration to accept the inflation adjustment for tax purposes. “In future, the inflation adjustment could be mandatory for both accountancy and tax purposes if the inflation rate remains high,” he says.

TAX REFORMThere are deep discussions to reduce taxation since the

congress elections in October, according to Elizalde Casares y Asociados (AGN International) partner Alberto Adaminas, as taxation it is at a damaging rate of 70% of salary. “For the service you receive it is impossible, so we need a tax reform to reduce taxation to be more competitive. I think this process will take a minimum of 4-5 years,” he said.

According to MGI Jebsen & Co partner Carlos Anavia, the tax reform programme will be the most important change in taxation in the last 18 years.

“One purpose will be the elimination of some distortive taxes and the reduction of the high tax rates in Argentina. This programme will be implemented in gradual steps from next year,” he says.

Aspects of this reform programme have not yet been clearly or precisely disclosed by the government.

This follows a tax amnesty that the government arranged between August 2016 and March 2017 that allowed companies to disclose undeclared assets for tax purposes, which returned a successful USD $ 116bn.

The global trend of reducing fiscal havens has generated a significant need for those who have undeclared accounts in Argentina to report or declare them with the local government, explains Federación Argentina de Consejos Profesionales de Ciencias Económicas president Jose Luis Arnoletto.

“The main issue is that assets can be declared, but at a cost of time and effort,” Serejski says. “If the government finds undeclared assets of course you have to pay, so they offered the opportunity to be honest about all assets, including money, property and goods. It can present many challenges if your clients are considering taking part in the amnesty, and adds more work for tax experts and auditors.”

MGI Jebsen & Co partner Silvio Ureta says that his firm has seen many new clients incorporated because of the tax amnesty, as it is being used as an opportunity to restructure.

So the profession can continue aligning to international standards, it is widely agreed that IFRS and professional quality should be more of a focus at university level study. The study of international standards such as IFRS is not mandatory at when qualifying at Argentina’s universities. The universities are planning to introduce mandatory modules on IFRS in the next few years, Deloitte Argentina audit leader Daniel Lucca says.

“We have to teach the new staff about accounting principles, auditing as well as internal controls, which is another matter where the universities are not informed properly. So we are investing more in learning than in the past,” Selle says.

The recruitment of qualified professional accountants is a regional issue as Fraga explains that there is a lack of people in the profession wanting to work as auditors which is very different twenty years ago when the problem used to be having no senior accountants.

Basile adds: “Human resources are a challenge for Latin America, as professional people are lacking in numbers and the increase of cost in order to obtain those resources is going to be very difficult.”

IFAC deputy director Joseph Bryson says that professionals have to learn voluntarily about new standards because Argentina does not have mandatory continuing professional development requirements.

“In Latin America it is not a requirement but, nevertheless, they do have a good tradition of being active towards learning and participating in training opportunities,” he adds.

TECHNOLOGYLast year – 2017 – was the first that tax returns could be

done online in Argentina. However. technological changes such as big data, analytics, blockchain and automated solutions are seen as a threat to the traditional accountancy profession, according to Canetti.

To adapt to technology, firms are increasingly focusing on consulting and advisory services to provide value to clients, MGI Jebsen & Co partner Luis Uncal says.

“These consulting services refer to forensic, technology, risk, security, evaluation, privacy and protection, organisational design and process improvement. Technology will have an impact on audit due to the possibility of benchmarking companies and their risks across a range of sectors and regions,” he says.

Ynarra concludes: “Specialists in consultancy need to take advantage of the four pillars of technology – data analytics, process mining, business intelligence and artificial intelligence. You need these technological tools for an efficient profession; without them you will be out of the market.”


IAB 581 CLv2.indd 11 18/12/2017 13:12:39

Rank NameFee

income (€m)

Growth (%)

Fee split (%)Year end Audit &

assurance Accounting

services Tax Advisory Other

Netw

orks

1 BDO* 1001.8 6% 37 24 23 15 1 Sep-17

2 Mazars* 636.6 4% 49 16 17 16 2 Aug-16

3 Grant Thornton International* (1) 571.3 4% 44 - 17 36 3 Sep-16

4 Nexia International* 534.6 4% 30 25 27 10 8 Jun-17

5 HLB International* 491.2 11% 45 8 25 5 17 Dec-16

6 Baker Tilly International* 443.5 6% 30 27 24 4 15 Aug-17

7 Crowe Horwath International* 432.6 -2% 47 8 22 8 15 Dec-16

8 Moore Stephens International* 422.5 0% 30 30 23 7 10 Dec-16

9 RSM* (1) 362.3 8% 58 - 22 17 3 Dec-16

10 Kreston International* 313.8 -5% 52 10 21 8 9 Oct-16

11 PKF International* 252.7 13% 30 25 27 4 14 Dec-16

12 ECOVIS International* 206.9 6% 17 30 34 15 4 Dec-16

13 MGI Worldwide* 175.8 -18% 28 37 17 10 8 Jun-17

14 Russell Bedford International* 119.0 4% 28 31 18 10 13 Dec-16

15 TGS Global* 101.0 6% 9 64 14 6 7 Sep-16

16 AUREN* 78.7 5% 26 22 30 17 5 Dec-16

17 UHY International* 78.6 2% 40 21 24 12 3 Dec-16

Total fee income / growth 6,222.8 3%

Notes: (e) International Accounting Bulletin estimate. n.d. = not disclosed, n.c. = not collected, n.ap = not applicable, n.av = not available, (1) Accounting is included in Audit and Assurance. *Disclaimer = Data relating to correspondent and non-exclusive member firms is not included. Source: International Accounting Bulletin., Expansion

EurozoneNetworks: fee data

ranking |


IAB 581 CLv2.indd 12 18/12/2017 13:12:48

associations: fee Data

ranking

Rank NameFee

income (USA$m)

Growth (%)




asso

ciat

ions

1 Praxity* 846.2 4% 42 15 25 13 5 n.ap

2 PrimeGlobal* (1) (2) 632.5 27% 53 - 24 - 23 May-17

3 AGN International* 401.5 7% 25 22 20 3 30 Dec-16

4 BKR International* 320.2 -1% n.d n.d n.d n.d n.d n.ap

5 DFK International* 203.9 0% 24 28 22 8 18 31-Dec

6 Morison KSi* 157.3 0% 21 35 23 9 12 Dec-16

7 CPA Associates International* 155.6 3% 22 39 15 21 3 Dec-16

8 Allinial Global* (2) 152.6 95% 22 33 22 11 12 Dec-16

9 ANTEA* 140.0 5% 25 23 25 21 6 Dec-16

10 Alliott Group* 106.5 -1% 41 24 22 9 4 Dec-16

11 EuraAudit International* (1) 73.1 n.d 82 - 12 1 5 Dec-16

12 IAPA* 50.9 7% 22 28 25 11 14 n.ap

13 GMN International* 50.0 4% 30 27 28 8 7 Sep-16

14 INPACT* 49.6 n.d 26 20 29 19 6 Dec-16

15 MSI Global Alliance* 23.2 1% 28 43 18 7 4 Dec-16

16 UC&CS GLOBAL* (1) 2.7 -14% 25 - 56 19 - Dec-16


Notes: (e) International Accounting Bulletin estimate. n.d. = not disclosed, n.c. = not collected, n.ap = not applicable, n.av = not available, (1) Accounting is included in Auditing and Assurance, (2) Growth in fee income attributed to addition of new member firms. *Disclaimer = Data relating to correspondent and non-exclusive member firms is not included. Source: International Accounting Bulletin., Expansion


IAB 581 CLv2.indd 13 18/12/2017 13:12:48

eurozoneNetworks: staff data

ranking |

Rank NameTotal staff Growth

(%) Partners Professionals Admin Offices2016 2015

netw

orks

1 BDO* 9,681 9,258 5% 652 7,433 1,596 182

2 Grant Thornton International* 6,285 5,746 9% 522 5,045 719 128

3 Mazars* 5,966 n.av n.av 342 4,782 842 99

4 Nexia International* 5,265 4,978 6% 505 3,919 841 164

5 Baker Tilly International* 5,026 3,855 30% 525 3,631 870 191

6 Crowe Horwath International* 4,808 4,907 -2% 751 3,469 588 185

7 Moore Stephens International* 4,622 5,103 -9% 475 3,402 745 155

8 HLB International* 4,532 4,416 3% 509 3,302 721 218

9 Kreston International* 3,747 3,646 3% 349 2,938 460 199

10 RSM* 3,385 2,929 16% 326 2,648 411 95

11 PKF International* 2,668 2,461 8% 292 1,978 398 96

12 ECOVIS International* 2,332 2,080 12% 285 1,813 234 158

13 MGI Worldwide* 1,978 2,093 -5% 272 1,706 - 109

14 Russell Bedford International* 1,431 1,374 4% 137 1,101 194 65

15 TGS Global* 1,405 1,327 6% 119 1,120 166 119

16 AUREN* 1,003 1,014 -1% 166 773 64 27

17 UHY International* 944 925 2% 129 684 131 70

Total staff / growth 65,078 56,112 16% 6,356 49,744 8,980 2,260

Notes: (e) International Accounting Bulletin estimate. n.d. = not disclosed, n.c. = not collected, n.ap = not applicable, n.av = not available. *Disclaimer = Data relating to correspondent and non-exclusive member firms is not included. Source: International Accounting Bulletin.


IAB 581 CLv2.indd 14 18/12/2017 13:12:49

associations: Staff Data

ranking



Assc

ocia

tion

s

1 Praxity* 8,298 2,228 272% 621 6,446 1,231 162

2 PrimeGlobal* 8,037 7,100 13% 727 6,157 1,153 406

3 AGN International* 4,312 4,142 4% 536 3,776 n.av 158

4 BKR International* 3,801 3,249 17% 214 2,982 605 160

5 DFK International 2,257 1,728 31% 219 1,622 416 88

6 Allinial Global* 2,203 950 132% 230 1,557 416 45

7 Morison KSi* 1,741 1,706 2% 216 1,215 310 69

8 ANTEA* 1,691 1,631 4% 273 1,257 161 94

9 Alliott Group* 1,659 1,695 -2% 199 1,045 415 64

10 CPA Associates International* 1,523 1,494 2% 128 1,211 184 71

11 EuraAudit International* 915 n.d n.d 108 701 106 66

12 GMN International* 780 705 11% 80 556 144 37

13 IAPA* 643 621 4% 62 445 136 28

14 INPACT* 596 n.d n.d 107 410 79 57

15 MSI Global Alliance* 485 474 2% 25 401 59 11

16 UC&CS GLOBAL* 70 89 -21% 11 49 10 4

Total staff / growth 39,011 27,812 35% 3,756 29,830 5,425 1,520



IAB 581 CLv2.indd 15 18/12/2017 13:12:50


Rank NameFee

income (£m)

Growth (%)




Netw

orks

1 PwC* (1) 3,002.0 2% 36 - 25 21 18 Jun-17

2 Deloitte* (1) 2,941.0 9% 32 - 23 45 - May-17

3 EY* 2,348.0 9% n.d n.d n.d n.d n.d Jun-17

4 KPMG* 2,172.0 5% 23 - 20 57 - Sep-17

5 Grant Thornton International* (1) 511.4 -5% 26 - 21 53 - Sep-17

6 BDO* 465.0 4% 23 5 26 46 - Jun-17

7 Nexia International* (2) 412.5 24% 15 12 15 3 55 Jun-17

8 RSM* 319.0 9% 23 19 25 33 - Mar-17

9 Moore Stephens International* 189.3 9% 42 14 20 13 11 Dec-17

10 Mazars* 160.2 9% 32 10 20 38 - Aug-17

11 Crowe Horwath International* 157.3 3% 51 1 23 12 13 Mar-17

12 Kreston International* 153.4 7% 24 28 22 12 14 Oct-17

13 PKF International* (3) 150.4 20% 25 27 24 20 4 May-17

14 Baker Tilly International* 141.1 3% 30 37 16 12 5 Mar-17

15 HLB International* 111.0 0% 44 16 22 10 8 Sep-16

16 UHY International* 58.2 3% 20 33 21 - 26 Apr-17

17 MGI Worldwide* 34.2 5% 16 40 15 14 15 Jun-17

18 Russell Bedford International* 14.5 3% 33 27 23 10 7 Dec-16

19 ECOVIS International* 5.8 4% 34 40 18 8 - Jun-17

20 Reanda International* 4.9 8% 66 1 22 5 6 Mar-17


Notes: (e) International Accounting Bulletin estimate. n.d. = not disclosed, n.c. = not collected, n.ap = not applicable, n.av = not available, (1) Accounting is included in Audit and Assurance, (2) Growth in fee income attributed to organic growth, (3) Growth in fee income attributed to organic growth and one M&A, *Disclaimer = Data relating to correspondent and non-exclusive member firms is not included. Source: International Accounting Bulletin., Expansion

UKNetworks: fee data

ranking |

IAB 581 CLv2.indd 16 18/12/2017 13:12:59


associations: fee Data

ranking

Rank NameFee

income (€m)

Growth (%)




asso

ciat

ions

1 IAPA* (1) 259.7 -14% 30 15 15 24 16 2017

2 Praxity* 214.9 9% 27 17 19 31 6 2017

3 PrimeGlobal* (2) 106.8 5% 45 - 26 - 29 May-17

4 Allinial Global* (3) 78.1 62% 24 22 32 17 5 Apr-17

5 DFK International* 65.2 -5% 36 28 17 6 13 Mar-16

6 BKR International* 55.2 35% n.d n.d n.d n.d n.d n.d

7 AGN International* (4) 50.1 18% 17 36 27 15 5 Dec-16

8 Morison KSi* 44.0 1% 28 29 15 24 4 Apr-16

9 Alliott Group* 43.8 4% 53 29 10 3 5 Dec-16

10 MSI Global Alliance* 43.7 3% 18 31 27 3 21 Dec-16

11 CPA Associates International* 13.1 6% 16 50 16 10 8 Mar-17

12 GMN International*(5) 11.0 21% 29 17 18 7 29 Sep-17

13 INPACT* 9.7 2% 71 16 7 5 1 Dec-16

14 Abacus Worldwide* 7.0 -21% 25 40 10 20 5 Dec-16

15 Integra International* 5.3 2% 50 30 10 10 - Dec-16

16 UC&CS Global* (2) (6) 0.1 -91% 70 - 20 10 - Dec-16


Notes: (e) International Accounting Bulletin estimate. n.d. = not disclosed, n.c. = not collected, n.ap = not applicable, n.av = not available, (1) Lost four member firms. (2) Accounting services are included in audit and assurance, (3) Gained two member firms, (4) Gained a member firm, (5) Increase in fee income attributed to organic growth, (6) UC&CS Global lost an exclusive alliance with 2020 International. *Disclaimer = Data relating to correspondent and non-exclusive member firms is not included. Source: International Accounting Bulletin., Expansion

IAB 581 CLv2.indd 17 18/12/2017 13:12:59

UKNetworks: staff data

ranking |



netw

orks

1 PwC* 17,948 19,358 -7% 917 n.d n.d 30

2 Deloitte* 17,601 16,006 10% 989 13,300 2,816 29

3 KPMG* 13,969 13,112 7% 623 n.d n.d 22

4 EY* n.d n.d n.ap 698 n.d n.d 20

5 Grant Thornton International* 4,630 4,461 4% 183 3,333 1,114 30

6 BDO* 3,829 3,620 6% 203 3,014 612 19

7 RSM* 3,472 3,402 2% 343 2,574 555 36

8 Nexia International* 2,515 2,607 -4% 369 1,529 617 42

9 Kreston International* 2,474 2,405 3% 232 1,782 460 56

10 Baker Tilly International* 2,272 2,046 11% 186 1,697 389 52

11 Crowe Horwath International* 2,173 2,063 5% 226 1,498 449 65

12 PKF International* 2,094 1,927 9% 208 1,440 446 32

13 Moore Stephens International* 1,977 1,919 3% 171 1,533 273 34

14 Mazars* 1,803 1,718 5% 104 1,461 238 18

15 HLB International* 1,325 1,325 0% 149 853 323 31

16 UHY International* 874 851 3% 110 619 145 26

17 MGI Worldwide* 326 323 1% 55 271 n.d 17

18 Russell Bedford International* 171 166 3% 21 118 32 2

19 ECOVIS International* 73 68 7% 8 59 6 1

20 Reanda Interntaional* 62 54 15% 7 46 9 1

Total staff / growth 79,588 77,431 3% 5,802 35,127 8,484 563



IAB 581 CLv2.indd 18 18/12/2017 13:13:01


associations: Staff Data

ranking



Assc

ocia

tion

s

1 IAPA* 3,700 4,897 -24% 438 3,102 160 127

2 Praxity* 2,730 2,576 6% 168 2,118 444 44

3 PrimeGlobal* 1,308 1,148 14% 154 954 200 46

4 DFK International* 963 843 14% 119 670 174 28

5 Allinial* 810 664 22% 102 630 78 20

6 MSI Global Alliance* 595 582 2% 60 425 110 5

7 AGN International* 571 522 9% 67 360 144 10

8 Morison KSi* 522 502 4% 59 369 94 7

9 BKR International* 456 429 6% 54 325 77 5

10 Alliott Group* 375 383 -2% 48 269 58 11

11 CPA Associates International* 208 206 1% 14 165 29 6

12 INPACT* 145 141 3% 12 108 25 5

13 GMN International* 114 104 10% 15 84 15 1

14 Integra International* 95 95 0% 14 53 28 3

15 Abacus Worldwide* 77 55 40% 7 65 5 1

16 UC&CS Global* 1 1 0% - 1 - 1

Total staff / growth 12,670 13,148 -4% 1,331 9,698 1,641 320


IAB 581 CLv2.indd 19 18/12/2017 13:13:02

50

4947

48

46

News archive:Looking back to

2008


IAB 581 CLv2.indd 20 18/12/2017 13:13:23

hanging in there - agn internationalfinancial affairs, taxation and customs, on announcing the list:...

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