G20 ‘positive’ despite tax haven fears

Accounting experts and institutes around the world gave a broad welcome to the G20 measures announced last week in London, though there were still warnings that much remained to be done and there was some dismay at the attitude towards tax havens.

G20 took a tough line on offshore tax centres but in Hong Kong accountants were ‘very scared’ by the implications of the territory being named as a tax haven.

Robert Agnew, CEO of Matrix Services, a consultancy based in Hong Kong advising on pan-China deals, said: ‘There was a lot of hurt among regulators here to be put in the company of some of the tax havens listed by some G20 leaders.’

Hong Kong was named within a report from the Organisation for Economic Cooperation and Development.

The G20 communique aimed to strengthen regulation, bolster the International Monetary Fund, attack tax havens and support international accounting standards.
In China, the measures on standards were seen to be broadly in line with changes made by the state.

Prof Yan Yan, of the Shanghai National Accounting Institute, said G20 ‘had done a good thing for world economics by committing the whole world to similar, stricter standards’. Yan said China’s still-expanding economy and company listings means the country could be a ‘laboratory’ to study accountancy challenges in developing markets.

Chris Devonshire Ellis, a partner at Beijing-based accounting firm Dezan Shira, said it could also give China reason to accelerate reform in of its tax collection system.
Only 30 million of China’s estimated 500 million workers pay income tax. It would mean China may have to apply the same scrutiny to the accounts of local firms that it does to foreign companies.
In Tokyo there were warnings that there needs to be more action to back up the ‘words’ if there are to be meaningful improvements in financial controls that transcend international borders.
‘Our assessment is that it was a positive meeting, but we still need more action to make sure the proposals are carried through effectively,’ said Takashi Inoue, group manager of the tax and accounting affairs of Nippon Keidanren, the Japanese Business Federation.
Much depends on whether the United States adopts International Financial Reporting Standards (IFRS), he said, expressing the hope that Washington will fall into line with the world-wide trend, and acknowledging that Japan’s participation hinges on the US attitude.

In India G20 was viewed as delivering a measured response to the global economic crisis.

Kumar Dasgupta, partner at PricewaterhouseCoopers in Mumbai, also supported the plan because it was not a knee-jerk reaction and sought to support international accounting standards.

However, he found the intent to achieve clarity and consistency in the application of valuation standards as the most challenging task ahead. ‘Which is the body that will do it?’ he asked.

Mukesh Butani, of BMR Advisors, said: ‘It also means that they [G20] are looking at an international financial regulator that will prevent banks and financial institutions, particularly hedge funds, from loading themselves with dangerous levels of debt.’