A matter of trust

UHY member firms are known worldwide for their core accountancy services. But member firms are expanding their service provisions into allied services specifically to meet the varying needs of their clients. As a result, clients have developed a longstanding trust of UHY and retained those services over many years, often over successive generations of family businesses. 

The phone rings again – and yet another ‘cold caller’ tries his hand at impressing you with his professional business services. Usually, you don’t want to be interrupted; you’d rather they sent you an email (which you could choose to ignore); and, in any case, you just haven’t got the time to spare. After all, you’ve had good, reliable service from current suppliers for several years now and you don’t have any reason to make a change. 

In fact, if only you could put all your outsourcing, of all your requirements, to the few trusted suppliers who know your business inside out, and who you’ve known for years, that would work well. You would feel more comfortable. The trouble is, usually, business services offered by your suppliers are standalone services, limited to resource in one particular speciality or region. 

That is, until now. 

Increasingly, professional service suppliers have branched out into a broad range of expertise across related, but identifiably separate, service areas – and, as a result, are able to meet a range of client needs with the same level of trust, commitment and knowledge that you’ve experienced with single-function suppliers of the past. 

Any risk of multi-tasking business suppliers ‘watering down’ expertise as a result of offering multiple services is readily discounted by suppliers appointing talented experts in their specialities while sustaining one point of personal contact with a key over-arching figure (usually senior and long-standing) to ensure consistency of service values and continuing goodwill.

“Once you have established yourself as the ‘trusted advisor’ with a client, it is important to be able to provide as many of the services they require as possible,” says Joseph Fay, of UHY Fay & Co, Spain. “By coordinating numerous services through one point of contact the value of using your firm increases dramatically. And client retention is hugely enhanced.

“In the last decade or so, the way businesses go about using professional services has changed dramatically,” says Joseph. “Customers and clients no longer simply expect firms to offer a standard suite of services but instead expect firms to cater for all their professional service needs.

“Traditionally, a business would engage several independent service providers to cater for their different needs: lawyers, accountants, labour consultants, tax consultants, corporate finance consultants, and so on.

‘In the last decade, the way businesses go about using professional services has changed dramatically. Clients expect firms to cater for all their professional service needs.’ 

“For each of these services, the client would have a contact person, normally a partner. Of all these professionals, perhaps one would be a ‘more’ trusted advisor who would occasionally be consulted on matters outside his or her area of expertise.

“As a result ‘trusted’ advisors were often in a position to recommend other professionals to the client as well as advising them on different courses of action. 

“This was a reasonably fair state of affairs, but it had one major drawback. The client had to coordinate the efforts of all the independent advisors, which could be an immensely time-consuming task. In addition, conflicting advice from advisors could often lead to a feeling of significant dissatisfaction on the part of the client. 

“The first change we noticed came as a consequence of consolidation and of larger firms, including the Big Four, starting to offer a broader range of services. Clients soon became accustomed to not having to coordinate the different professionals as they were all now under one roof. This saved the client time and energy which he or she could dedicate to more value added core business, thus resulting in a more efficient business environment and shorter business cycles. 

“Unsurprisingly, the ‘trusted advisor’ figure permeated through this new way of engaging professional services and indeed this role became much more important. The ‘trusted advisor’, normally a partner, took responsibility for coordinating the different professionals within the firm and had authority to make matters progress at the required pace. This is where the figure of the ‘trusted advisor’ comes into play as very much a new service in its own right.”

Legal services 

UHY Fay & Co has put its proposition into practice by, for example, launching a legal division alongside its more traditional accountancy related services. The firm has a team of 26 lawyers based in Barcelona, Spain.

One of the team’s areas of expertise is anti-money laundering, a service it launched in 2008. The move stemmed from 2005 European Union legislation applied to professionals including lawyers, auditors and notaries (apart from traditional recipients of this type of regulation), as well as financial entities and insurers. 

Following EU Directive 2005/60/CE, the law also now applies to any other type of economic operator conceivably susceptible to money laundering activity. 

All such operations are required to put into action internal policies designed to identify and know their clients, reject those suspected of money laundering, and communicate suspicious operations to the authorities.

The firm holds seminars for clients and prospects on preventing money-laundering for financial entities such as banks, investment companies, insurance companies, casinos, real estate companies, commercial jewellery organisations, and money exchange companies – all organisations that are legally bound to comply.

Human resources 

Elsewhere in UHY, our member firm in Uruguay, UHY Gubba & Asociados, has a human resources department, responsible for the recruitment of professionals on behalf of clients. 

“We offer to manage human resources, creating a new product that is very well received by existing and new clients,” says Ximena Zampedri, who runs the operation.

The operation not only offers selection and recruitment but also a wide range of other services, including organisational diagnostics, drafting of position manuals, career plans, training, and performance evaluations.

From a client’s perspective, outsourcing this type of service requirement is often far more cost-effective than providing it in-house – especially as HR regulations and policy, often provided by experienced/qualified individuals, is needed.

Bookkeeping

Bookkeeping may be more traditionally associated with an accountancy network, but one of UHY’s member firms has specialised in it. “We like to do things other people do not like to do,” says Peter Van Rooy, of member firm, Handson & Partners, Belgium.

Clients in Belgium, he says, often prefer to outsource non-core business to a specialist supplier, rather than contract their own staff, because a service level agreement for outsourced work stipulates deliverables, deadlines, quality and flexible use of people.

Use of technology – including access to a secure, dedicated client portal via a website – is at the heart of the firm’s outsourcing success; while the firm’s investment in young people has given accountants a ‘new image’.

Risk advisory services 

Meanwhile, UHY Advisors’ Enterprise Risk Advisory Services (ERAS), US, has a significant reputation for helping companies establish and enhance compliance programmes to reduce the risk of fraud, including bribery. 

In one case, an international drilling company wanted to implement a global anti-bribery programme covering key elements of the US Foreign Corrupt Practices Act, the UK Bribery Act and other international standards. 

ERAS conducted a global anti-bribery risk assessment covering the company’s operations in the US, UK, Asia and Middle East. The risk assessment results drove the amount of effort that was appropriate for the company and served as a starting point for implementing a risk-based third party due diligence programme.

‘Clients soon become accustomed to not having to coordinate different professionals as they are all now under one roof. This saves the client time and energy which he or she can dedicate to more value added core business.’ 

The team worked with management to develop and implement a series of policies including anti-bribery, business ethics, travel and entertainment and gifts and hospitality. Additionally, ERAS advised the client on selection of a web-based training programme and assisted with the roll-out efforts. 

Now that the company has rolled-out policies, established due diligence procedures and conducted training, ERAS is helping the company measure compliance through internal audits. They include determining the awareness of policies, compliance with procedures, third party contract and due diligence review, and forensic examination of payments. 

By retaining ERAS to assist in preventing bribery and fraud, “the company has made significant strides in establishing an effective compliance programme and optimising efforts to isolate itself from a rogue employee who may be tempted to commit an unethical act such as bribery”, says Christopher Lozier, principal, ERAS.

Trust, between client and supplier, resulting from the longevity of a business relationship is all-important when managing sensitive issues such as those handled by ERAS. 

Migration for business 

Some professional business service lines are particularly relevant to their regions and environments. For example, a team at UHY’s Australian firm, UHY Haines Norton, is helping business migrants settle into Australia.

“All business migrants need to fulfil certain conditions, both before and after arrival in Oz [Australia], and there are different business visas depending on age and other factors,” says Richard Swarbreck, consultant to the Perth office.

Conditions usually include employing a certain number of people, meeting a level of turnover, having and bringing funds to Australia and investing a minimum amount in the business.

“To a new migrant this presents a stressful challenge and our aim is to help them achieve success with minimum stress,” says Richard. 

The firm’s main sources of business migrants are from South Africa, the UK, Malaysia, Singapore and China. But the firm has also had clients from most of the Asian countries, France, Italy and Lithuania. 

Migration services offered by UHY firms are a natural progression for clients who are increasingly looking to expand internationally and move key staff to positions in foreign branches or subsidiaries.

Real estate valuations 

A niche market – providing valuations for fixed asset reassessments – has been developed by one of UHY’s firms in Chile, in a joint venture with an engineering company. 

The move follows a new law in Chile in 2006 which sets new criteria and standards for determining the taxable value of fixed assets, while allowing taxpayers to submit to the tax authorities legitimate and sound supported reclamations. 

For the past six years, UHY CE&A, Consultores y Auditores de Empresas, Chile, has had a strategic alliance with the engineering firm, Urban Consultores Ltda, to provide real estate valuations in support of fixed asset reassessments. 

As a result, the firm is able to offer non-audit clients a multidisciplinary package of tax, legal and real estate valuation services when reassessing taxable value.

“Our work is done in two stages,” says partner Ronny Frederick. “The first stage provides the client with a cost-free diagnosis of the likelihood of success in the application for a reassessment of the fixed assets tax assessment in force.

“We estimate the chances and the amount of the potential rebate from the assessment in force. Subject to both being material, we go ahead jointly with the client.” 

The firm’s experience over six years is that, in cases where the diagnosis shows it is worthwhile pursuing (80% of those studied), 99% are successful. 

When and if the application is accepted and approved, the taxpayer has been entitled to an average rebate on the tax assessment of the assets in the range of 20-25%. In some instances, the rebate has proved to be more significant.

Consequently, the corresponding tax on the client’s property tax assessment is reduced by the same resulting proportion, on future payment flows, provided new legislation does not become enacted that changes the assessments criteria and standards. 

The service includes a search of the client’s files and administration of the fixed assets. It also includes matching information with building drawings filed at government public offices. 

Clients looking to support their investments and acquisitions with tax-efficient vehicles rely on business service suppliers, such as members of the UHY network, who with the benefit of an in-depth knowledge of their client affairs, are able to provide robust and productive services. 

Business processes

Back in the US, Frank Fenello’s goal is that for every dollar a client pays in fees, the client gets five dollars back in efficiencies.

Managing director Frank Fenello set up the managing consulting group at UHY Advisors’ Atlanta office. He has also launched Enterprise Optimization, a methodology that defines and provides sustained value for companies by eliminating inefficiencies in business processes. 

The firm identifies and assesses waste in a client’s business then creates a solution. 

Clients benefit from processes and training aimed at improving the efficiency of the client’s workforce, which create a culture of continuous improvement and systematic elimination of waste, thus improving the client’s bottom line. 

“The result is straightforward: improved company performance,” says Frank. “The key to making it work is to make processes more predictable and reliable. This raises productivity levels and ultimately results in increased profits.” 

UHY Advisors engages a cross-functional team of the client’s employees to ensure all departments are working as effectively as possible, both individually and as a whole. By taking a look at the supply chain, accounts payable and field operations altogether, for example, UHY Advisors can see how many steps a process has, and then try to consolidate and reduce that number. 

Typically, UHY Advisors implements improvements within three to six months and clients start to see results immediately. 

One client, Cox Communications, Inc., expects to save 52,000 man hours and USD 3.9 million annually as a result of the programme. Cox is the US’ third largest cable company and has six million customers, 20,000 employees and a turnover of USD 8.7 billion. The client has already realised a 5:1 return on its investment. 

“Very few companies are doing this,” says Frank. “But those that do are experiencing more streamlined processes, increased productivity and higher profits. In addition, running more efficiently means fewer headaches and bumps in the road, happier employees, satisfied clients and customers. What’s not to love about that?” 

If you have a particular professional business service you need to outsource: 

Contact: Dominique Maeremans 
Email: d.maeremans@uhy.com 

Other UHY personnel referred to in this article can be contacted as follows:

Joseph Fay 
jfay@uhy-fay.com

Ximena Zampedri 
xzampedri@hugogubba.com.uy

Peter Van Rooy 
p.vanrooy@handsonpartners.be

Christopher Lozier 
clozier@uhy-us.com

Richard Swarbreck 
rswarbreck@uhyhn.com.au

Ronny Frederick 
r.frederick@uhy-ceya.cl

Frank Fenello 
ffenello@uhy-us.com

Power to the mid-market

It would have passed you by – a small survey in the energy sector conducted in one of the more remote parts of the UK.

Obscure it may be, but The Aberdeen City and Shire Export Survey 2010 is a microcosm highlighting the potential for small to medium-sized companies (SMEs) to develop specialist skills that are now prized internationally.

The survey encompassed 236 companies, operating primarily in the oil and gas sector, with a base in the north-east of Scotland. Of the total responses, 157 were from SMEs in the sector. Offering a range of support services, they’re far from major players in the energy sector. However, their services have a huge impact on helping operators worldwide make profits and conform with health and safety and quality standards. 

As a result of living and breathing the oil industry on their doorstep in the globally minor and declining oilfields of the North Sea for several decades (15-24 billion barrels of oil equivalent remains recoverable in the North Sea), they have developed expertise and knowledge that others internationally want to buy.

So much so, in fact, that the goods and services they exported in the past year were worth GBP 600 million (USD 957m) – that’s GBP 3.5m (USD 5.58m) each. The largest proportion of respondents stated that their approximate value of international business was in the region of GBP 250,000 a year; 15% of companies stated that their turnover from international sales equates to between GBP 2m (USD 3.1m) and GBP 5m (USD 7.75m). 

Over the next two years, 52% of these businesses expect exports to increase by up to 20%; and 28% expect exports to increase by over 20%. 

Key export markets for Aberdeen SMEs are in the barchart below. The potential is still greater, says Tom Faichnie, energy partner at UHY’s member firm in Scotland, Campbell Dallas. “Companies do not do enough market research, forecasting, or preparation of personnel – expansion is still very much opportunity-driven. Companies need bespoke, practical, reliable, cost-effective services and guidance. Our aim is to offer a comprehensive portfolio of services.” 

Yet, says Tom: “The skills developed in the North Sea have provided our companies with market leading credentials and a knowledge base which will increasingly be in global demand. The industry excels in finding solutions to complex problems, developing existing technology, an ability to quickly design and innovate along with adhering to high quality technical, health and safety and environmental standards.

“The era of ‘easy oil’ is over, and significant new discoveries are likely to be in deeper water and ‘unconventional sources’ where technology must continually advance to develop the reserves in a cost-effective manner. This expertise places our local businesses in a strong position to capitalise on this trend.” 

One of Campbell Dallas’ clients is an Aberdeen company which was offered a new contract in Brazil by one of its largest customers (the company already operated in Brazil). “Whilst adding significant revenue to the group, the high tax regime and issues of remitting cash to the UK meant that it was better for the company to reject the contract,” says Tom. “We worked with Scottish Development International to find ways to efficiently remit cash to the UK to enable the company to accept the contract and therefore increase its operations in Brazil.”

Meanwhile, across the Atlantic, UHY’s energy specialists in the US, headquartered at Houston, are lending their expertise to support for Scottish SMEs. The Houston team works with some of the world’s major oil and gas players, such as ATP Oil & Gas Corporation, which operates in both the North Sea and the Gulf of Mexico, acquiring and developing fields with proven undeveloped reserves that are economically attractive. 

Other UHY US clients include Geokinetics, which specialises in working in extreme environments – from arid deserts of the Middle East and the jungles of South America, to the environmentally sensitive Alaskan Foothills, and the mountains of the Andes. 

With its headquarters in Houston, Geokinetics is one of the largest independent, international land and shallow water geophysical service companies offering specialised geophysical solutions to the petroleum and mining industries worldwide. Its presence spans the globe with offices in 29 major countries, and a workforce covering 60 nationalities.

UHY in the US also works with various drilling companies such as Vantage POB and BassDrill Ltd. The US firm’s largest oilfield drilling client is Champion Technologies, which has a significant presence in Aberdeen and around the world. 

A client of the US firm’s Enterprise Risk Advisory Services is ATP Oil & Gas Corporation, which works in both the North Sea and the Gulf of Mexico, acquiring and developing fields with proven undeveloped reserves that are economically attractive. 

“Our energy practice is committed to building meaningful relationships with our energy industry clients in the upstream, mid-stream, power and oilfield services market segments,” says UHY LLP audit partner, Conrad Johnson.

“Our Houston office features more than 450 professionals of which over 200 serve companies in the energy sector. We serve more than 150 companies with operations in all segments of the energy industry. As a result, we have local and international resources dedicated to providing energy industry technical accounting to effectively and efficiently address the many difficult issues in today’s complex business environment. 

“The integration of our services and resources into a single, industry-focused practice delivers superior service and value to our clients. Tangible benefits to our clients include our ability to: 

  • Share the latest research and points of view on emerging energy trends
  • Locate individual experts on each issue, wherever they are based 
    Collaborate on accounting and tax issues uniq­­­­ue to energy enterprises
  • Develop industry specific benchmarks, based on leading practices.”
  • Services offered by UHY Advisors in the US include: tax services; enterprise risk advisory services; forensic, litigation and valuation services; business process outsourcing and flexible staffing; and assurance and business advisory services. 

UHY member firms’ services to the energy sector are now so significant that the network has created an energy special interest group bringing together all elements of the global network involved in the sector into one unified entity to provide services to energy clients globally still more effectively.

As a result, the Aberdeen firm is working closely with colleagues in Houston and representatives from the UHY network in London, Nigeria, Singapore, Norway, Mexico, Brazil, Australia, Kazakstan and UAE (Dubai). 

“If one of our clients needs something quickly from Nigeria, for instance,” says Tom Faichnie, “we know that our contacts in the office there not only have a thorough understanding of the energy industry, but will deliver for our clients immediately.” 

Globally, spend in the energy sector is growing, reaching a new high of USD 490 billion in 2011, according to Barclays Capital. The global market will see an increase in offshore exploration and drilling; an increase in deepwater exploration (USD 231 billion in 2011 alone); and new fields internationally leading the way over the traditional fields of North America. 

Expenditure on oil and gas in the world’s regions since 2005, with projections up to 2014, is shown here (source: EnergyFiles, a forecasting service):

Although overall spending globally is set to increase, it will be dominated by Latin America, the Middle East/North Africa, and Southeast Asia – reflecting the upsurge of consumption among emerging markets (Source: Barclays E & P Spending survey). 

Over the next decade, the prime focus for exports will switch from the more traditional routes into the US, Norway and West Africa towards exploiting huge potential in markets such as Brazil and Australia, according to researchers Maxwell Drummond, whose survey of industry respondents shows the majority believe global exploration and production will be focused in Latin America and Australasia.

Also high on the radar for SMEs, says Tom, are export markets such as Iraq, Equatorial Guinea and Vietnam where exporters have shown far stronger interest since the last Aberdeen energy export survey in 2008.

The Aberdeen survey shows that the top markets in which energy sector exporters are currently active are: Norway, the US, Australia, United Arab Emirates and Angola. Current energy sector exporters list their current future target markets (in terms of turnover) as: Brazil, Australia, Norway, Angola, Egypt and Kazakhstan.

“But the step into new international markets for SMEs is not without many challenges,”says Tom. “Finding the right partner to facilitate internationalisation is a critical step. It’s all about who you know – and the locals have the power. You need to stand out. Showcase your skills and industry experience, understand the differing business culture you find yourselves in and establish personal relationships. Be there, make an effort. It’s essential to build a friendship. Visits may be time-consuming, but costs will undoubtedly be outweighed by business benefits.”

Contact: Tom Faichnie 
Email: tom.faichnie@campbelldallas.co.uk

Contact: Conrad Johnson 
Email: conradjohnson@uhy-us.com

 

Increase in business startups over 40 times faster in BRIC countries than other nations, study finds

The increase in new business startups is now on average 40 times faster in BRIC nations than other countries, according to UHY, the international accounting and consultancy network.

The research shows that BRIC nations are, on average, creating 18% more new businesses per annum compared to non-BRIC nations, which are, on average, creating just 0.4% more new businesses per annum.

UHY professionals studied data on new business registrations over the last five years in 19 countries across its international network, including the G8, as well as key emerging economies, including the BRIC nations (Brazil, Russia, India and China).*

According to UHY professionals, policymakers have been taking measures to encourage greater entrepreneurial activity during the financial crisis, but the research highlights the need for some countries to do more to help new business startups, which in many countries are struggling with low demand and restricted access to bank finance. 

While in some countries the number of new businesses being created has increased by double digits over the last five years, in others the number of new business startups has decreased by a double digit percentage. 

The country with the fastest increase is Russia, one of the so-called BRIC nations, which has seen a 25.6% annual increase in the rate at which new businesses are being created over the last five years. Nearly 3.2 million new businesses were registered in Russia in 2010, compared to 1.3 million in 2006. 

The country which has seen the biggest slowdown in the rate of new business creation is Spain. The annual growth rate over the last five years is minus 14.6%. 76,622 new companies were created in Spain in 2010, compared to 143,859 in 2006. 

The research reveals, however, that over the past year, the gap between BRIC and non-BRIC nations has narrowed. The increase in new business startups in 2010 was, on average, 3.3% for non-BRIC nations, compared to 18% for the BRIC countries.
 

John Wolfgang, chairman of UHY comments: “The difference in the rate at which new startups are being created is quite staggering, with the number of new incorporations decreasing for about half of the countries in our study. The BRIC nations are all in the top half of the table, while among the G8, only Canada, France and Russia have seen an increase in new startup formations over the last five years.

“Small businesses are often considered the engine of growth and employment and therefore critical to economic prosperity. Many governments – particularly in the West – are under pressure to increase tax revenues to reduce public deficits. Unlike large multinationals, which can shift economic activity to low tax jurisdictions, the tax burden falls disproportionately on small businesses.

“While just three out of the 19 countries surveyed continued to see a decrease in new startups over the last year, the concern now is what impact the ongoing eurozone crisis is having on new business creation. The uncertainty is almost certainly having a chilling effect.” 

He adds: “Governments can do more to encourage business startups. Many of the respondents to our study highlighted high taxes and complex employment regulations as barriers to growth for small businesses.” 

The research shows that, among the G8, France has the highest growth rate for business startups. This is due to a new structure for small companies called ‘Auto Entrepreneur’ which was introduced in 2009. These are micro businesses with turnovers under € 80,000 for industrial enterprises and under € 32,000 for services. 

Auto Entrepreneur companies are exempt from business taxes for the first two years and have considerably lighter compliance requirements than other companies. 

Franck Narquin, Partner of UHY GVA in France, a member of UHY, comments: “France has always been seen as a country in which it is quite difficult to start a business. The tax burden on businesses is high – particularly social security contributions – and employment law is restrictive. The Government has at least made steps in the right direction with the new Auto Entrepreneur programme, but much more needs to be done to increase competitiveness.”

The research also reveals that the number of new startups in Dubai declined 4.8% from 2006-10, but jumped 53.1% in 2010 alone. 

Rajiv Saxena, Managing Partner of UHY in UAE (Dubai) says: “Dubai suffered a severe property slump during the credit crunch, and a significant number of state-backed entities were forced to restructure their debt. Confidence in the economy has revived in the past year, however, political instability elsewhere in the Middle East has led to an influx of foreign businesses into Dubai.” 

Nikolay Litvinov, partner of UHY Yans-Audit LLC in Russia – which has the highest increase in startups – comments: “Russia is one of the few countries among the G8 to have recovered quite strongly from the financial crisis. Russia’s abundance of natural resources has meant it has benefited greatly from the commodities boom in recent years. Our flat rate corporate tax rate of 20%, which is the lowest among the G8, has also helped to make Russia an attractive place to start a business.”

Max Gosch, Partner of UHY’s member firm, UHY Fay & Co in Spain, which has seen the largest decrease in startups – comments. “Spain has suffered greatly from the global crisis and it has clearly affected the creation of startups. However, it is encouraging to see that the number of new businesses increased by 2.1% in 2010 so we would urge the government to take appropriate measures to ensure this momentum is not lost. These measures will need to focus on a reform on labour laws to make them more flexible, to create confidence in the country to attract foreign investment and to reopen bank funding to companies to enhance business activity as in Spain, like in other countries; small and medium-size companies are the key drivers of competition, growth and job creation.”

 

Corporate taxes vary widely between countries, UHY study finds

Huge disparities now exist between countries on the amount of tax they take from businesses, according to UHY, the international accounting and consultancy network.
 

The tax burden on business profits can be more than three times greater in the highest versus the lowest taxed major countries – highlighting just how wide the tax gap is between ‘low tax’ emerging economies and the majority of ‘high tax’ developed nations.
 

For example, analysing highly profitable businesses (defined as making a pre-tax statutory profit of US$100 million per annum) the difference in the amount of tax collected between the highest taxing country surveyed (Japan) and the lowest taxing (Ireland) is US$29.5 million, which means that the same business in Japan would pay over three times more tax than the equivalent business in Ireland.
 

According to UHY tax professionals, many countries have been reducing their corporate tax rates in a bid to become more competitive and attract highly mobile multinational businesses. The research highlights the need for some countries to work harder to become more attractive to businesses, which are increasingly mobile and are less constrained by geography than at any time in history.
 

There are also a number of increasingly important economies, such as Dubai (UAE), that do not charge any corporate tax.
 

UHY tax professionals studied tax data in 21 countries across its international network, including all members of the G8, as well as key emerging economies. Tax professionals based in each country calculated post-tax profits for businesses making annual statutory pre-tax profits of US$100,000, US$1 million and US$100 million.
 

The G8 countries 
Corporate tax payable per country in US dollars (highest to lowest)

John Wolfgang, chairman of UHY comments: “The difference between countries in the amount of tax they take from business profits is quite staggering. It will shock many business leaders that, among the G8 countries, both the USA and Japan impose higher corporate taxes on some businesses than EU countries like France and Germany, which are traditionally seen as high tax economies.”Most non-G8 countries now impose a flat rate of tax regardless of the amount of profit generated. Most of the G8 – the exceptions are Germany, Italy and Russia – have progressive tax models with the effective tax rate increasing with profits. While this allows them to help smaller companies to grow, it does make their tax systems more complex.
 

“High corporate taxes can deter business investment, which can hinder economic growth. Over the last decade, many EU countries have slashed corporate taxes, leaving some BRIC nations, such as Brazil and India, with surprisingly high tax in comparison.”
 

He adds: “Companies are increasingly mobile and are able to switch tax domicile with relative ease. This has put governments in a quandary, as they seek to boost tax revenues in order to shore up public finances. Many countries have opted to resolve this problem by increasing personal taxes while reducing corporate tax rates. Once a major economy slashes corporate tax rates, however, it puts pressure on others to take similar measures to remain competitive.”
 

Teruo Kawakami, Director of UHY Tax Corporation, member of UHY in Japan, which has the highest corporate tax rate in the G8, says: “A provision to reduce the corporate tax rate had been originally included in 2011 Tax Reform as part of measures to lessen the tax burden on businesses, but this was subsequently set aside. Another tax bill is currently under discussion in the Diet. The effective corporate tax rate of Japan will decrease by approximately 5% when the bill is approved by the Diet.”
 

Alan Farrelly, Partner of UHY Farrelly Dawe White Limited, member of UHY in Ireland – which has one of the lowest corporate tax rates among the countries surveyed – says: “It is unlikely that the low corporate tax rate will rise, despite the need to shore up the public finances in Ireland. The low rate is considered a key strategy to maintaining Ireland’s competitiveness in the Eurozone, especially given the ongoing economic climate in the EU. Ireland’s strategy could be viewed as a test against which other economies will assess themselves when providing a response to the economic crisis.”
 

Diego Moreira, technical director of UHY Moreira-Auditores in Brazil, member of UHY, comments: “Brazil’s corporate tax rate is substantially higher than any other BRIC nation (Brazil, Russia, India and China). It is also higher than most developed nations, which is surprising. Perhaps a more competitive tax rate would help attract more international businesses to re-domicile in Brazil.”
 

UHY’s research reveals that (excluding Dubai and Estonia, which do not tax profits at all), for business with profits of US$100,000 per annum, the difference in the amount of tax collected between the highest taxing country (Brazil) and the lowest taxing (Ireland) is US$21,500, which means that a business in Brazil would pay nearly three times more tax on its profits than the equivalent business in Ireland.
 

All 21 UHY countries surveyed 
Corporate tax payable per country in US dollars (highest to lowest)

* For Italy the reported tax rate has been determined making some simplified assumptions; effective tax rate may be higher than the theoretical one indicated above.
 

The calculations assume all exceptional gains and costs have been taken into consideration, as well as things like interest, the cost of stock options and goodwill amortisation. The tables (above) rank countries from the highest tax burden first to the lowest tax burden last.

 

UHY strengthens presence in Eurasia

Global accountancy network UHY extends its coverage within Asia by appointing AZAUDIT LLC. 

ZAUDIT LLC was established in 2003. With a team of 11 staff, the firm is based in Baku, the capital and largest port of Azerbaijan and the Caucasus region. The firm provides the full range of audit, tax advisory and corporate finance services covering the region’s key sectors such as manufacturing, oil and construction. 

Managing partner, Afig Israfilov, says: “We joined the UHY network for a number of reasons. UHY is a rapidly growing and well organised network. As a local firm, we embrace the international reach by joining UHY to support the development of our local projects, to exchange skills and strengthen our overall technical knowledge. Representing UHY in our country and our region will open up new opportunities and support existing ones. We also hope to bring local expertise in support of international projects – collaboration with mutual benefits.”

John Wolfgang, chairman of UHY commented: “We are delighted AZAUDIT LLC have joined the UHY network extending our coverage and capabilities in Eurasia, especially with Azerbaijan being a growing economy and a member of the Commonwealth of Independent States (CIS). The firm’s admittance to the UHY network will add a great deal of regional market and sector expertise. We strongly believe the firm is a very good fit for our network.”

 

UHY strengthens presence in Asia

Global accountancy network UHY extends its coverage within Asia by appointing Shanghai ZhongHua Certified Public Accountants (CPAs).

Shanghai ZhongHua CPAs was established in 1985 and is today one of the largest accounting firms in Shanghai and China. With 22 partners and a team of 300 staff, the firm is based in Shanghai providing the full range of audit, tax, management consultancy and corporate finance services focussing on the business needs of privately-held, management-controlled, listed and foreign investment organisations. Shanghai ZhongHua CPAs serves over 1,000 clients, representing quite a substantial market share in China covering a variety of sectors such as banking, non-banking financial institutions, real estate development, shipping, trading, hotel, high-tech industry and manufacturing.

Managing partner, Sun Yong, says: “We joined the UHY network for a number of reasons. Training plays an important role in the continuous professional development of our partners and staff, but technical excellence is not enough today. The quality of our services depends on the caliber of the partner and team assigned to each of our clients, so we select people who are not only professionally knowledgeable but also committed, with proven business abilities, whom can analyse, interpret and advise on international concerns.” 

The full-service firm, registered with the Public Accounting Oversight Board (PCAOB), has extensive experience in Initial Public Offering (IPO) services: it has acted as reporting accountants to more than 60 companies undertaking IPO – involving companies in textiles, software, pharmaceuticals, agriculture, real estate, design, chemicals, media and manufacturing. In addition to audit and tax services, Shanghai ZhongHua CPAs’ services also include expert witness, forensic accounting and IT. 

John Wolfgang, chairman of UHY commented: “We are delighted Shanghai ZhongHua CPAs have joined the UHY network extending our coverage and capabilities in Asia. The firm’s admittance to the UHY network will add a great deal of regional market and sector expertise. We strongly believe the firm is a very good fit for our network but more importantly especially for clients that are opening operations in China, Shanghai ZhongHua CPAs have not only worked internationally but are used to dealing with inbound and outbound requirements.”
 

Issue 2011

This edition includes 5 case studies covering a range of international clients across a variety of market sectors such as consumer fashion, food preparation and servicing equipment, IT and consumer electronics, frozen food manufacturing/ distribution and medical equipment.

UHY International Business issue 23 – now available

Global accountancy network UHY publishes its latest edition of UHY International Business Issue 23. This bi-annual publication features fresh insight, provided by our members, on the most current business challenges and key issues faced by companies and individuals around the world. Issue 23 covers the following topics:

  • ‘Japan set for bounce-back’: If anyone needed a reminder that we were living in a global marketplace, the economic shockwaves from Japan’s earthquake and tsunami were quickly evident around the world…
  • ‘Next big thing’ in emerging markets?’: Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. What do they have in common? According to economists, the CIVETS – as this collection of countries are called – are the ‘next big thing’ for investors in emerging markets. They have been described by the Economic Intelligence Unit as second-tier BRICs – the acronym given to the growth economies of Brazil, Russia, India and China. So are CIVETS worthy of investment?…
  • ‘How SMEs go international’: When one of the biggest operators in the European sea produce market started trading in the early 1960s it was run by one entrepreneur who bought fresh fish on the dockside at Avilés, Spain, and sold it in nearby coastal towns and villages, using a three-wheeler van which he had adapted for the purpose. Here is how it can be done… 
     

The full content of the articles can be viewed by downloading the issue using the link above.