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.’