Editie 1 Common Consolidated Corporate Tax Base

15th Volume November 2012 issue #1

Common Consolidated Corporate Tax Base Interview J. van de Streek

Column P. Kavelaars

News update

Necessity for the EU

New swathe of difficulties as Dublin abstains from tax plan

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p35

p50

An expert about CCCTB

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fsrforum • volume 15 • issue #1

Common Consolidated Corporate Tax Base

Preface

Dear reader, This is the first edition of the fifteenth year of the FSR Forum. The goal of the FSR Forum is to connect the theory with the practice. You can find the theory in the scientific articles and the columns provided by Prof. dr. P. Kavelaars and mister Groeneveld. You can find the practical part in the company presentations and the columns of a former FSR board member and an FSR member.

The theme of this edition is Common Consolidated Corporate Tax Base (CCCTB). CCCTB is a single set of rules that companies operating within the EU could use to calculate their taxable profits. A company or group of companies would not have different rules in each member state in which they operate, rather they would have just one EU system for computing its taxable income. In addition, groups using the CCCTB would be able to file a single consolidated tax return for all of their activities in the EU. The consolidated taxable profits of the group would be distributed to the individual companies by a simple formula so that each member state can then tax the profits of the companies at the tax rate that each member state chooses.

This edition will contain three scientific articles. The first article of this edition is from Matthias Petutschnig. This article will provide you an explanation about the apportionment factors and the apportionment system. The second article is written by Tim Moolenaar and Ivonne van den Berg. In this article the characteristics of the CCCTB and the European Union Corporate Income Tax will be addressed. The last article is from one of the professors at the Erasmus School of Economics: Rolph van Ovost. This paper answers the questions whether our depreciation limitation fits within the rules of IFRS and whether the legislation will derive concerns within European tax base.

In this edition we interviewed an expert in the field of CCCTB. Jan van de Streek is an assistantprofessor of corporation and income taxes at the UvA and he is also working at the Tax Knowledge Office of Ernst & Young. Jan van de Streek has published multiple articles on CCCTB, in this interview he gives information about CCCTB. I am pleased to tell you that mister Groeneveld PhD RA RV has again decided to devote his time five times this year on his column ‘K(r)anttekening’ in the FSR Forum. In this edition mister Groeneveld discusses the trust in the field of accountancy.

Also this year a teacher will write a column for the FSR Forum. The first teacher to write a column this year is Prof. dr. P. Kavelaars from the Erasmus School of Economics. The topic of Prof. dr. P. Kavelaars’ column is about the advantages and disadvantages about the CCCTB and why countries should not resist the CCCTB. As in every edition of the FSR Forum a former FSR board member and an FSR member will talk about their experiences in the working sector or in their internship. The FSR committees will also introduce themselves and they will give a short description of the events they are going to organize. There will be an activity report about the Kickoff Days, GMA and Ernst & Young

2 • Preface

drink. For the first time the FSR organized the Erasmus Banking Congress. You will find a report about this event in this edition. There will also be a report about the Big 4 Cycle.

Since last year the FSR Forum contains the News Update. With this item we will inform you about the news and developments around the subject of the FSR Forum. In this edition we discuss the fact that Ireland has rejected the CCCTB and the consequences of this decision.

After the News Update there is an Alumni letter from Ashmita Krishna. All former active FSR members can become an Alumni member and can join several activities that the Alumni Association organizes. This edition of the FSR Forum will end with the FSR Activity Agenda in which you can find all the events that the FSR will organize this year.

Finally I would like to thank the editorial committee, Petra van den Akker and Roija, for helping with this edition. I am confident that Petra and Roija will be of great value for the FSR Forum.

Furthermore I would like to thank Anne van Driesum for all her help and tips which helped us to make the FSR Forum.

I hope you enjoy reading this FSR Forum!

Sincerely, Maaike Lanphen Editor in Chief FSR Forum FSR board 2012-2013

Preface • 3

fsrforum • volume 15 • issue #1

Common Consolidated Corporate Tax Base

Table of contents

Common Consolidated Corporate Tax Base: Effects of Formulary Apportionment on Corporate Group Entities Matthias Petutschnig (2010)

One of the cornerstones of the CCCTB-Draft is the apportionment of the group’s overall taxable income according to a predefined micro-economic factor based formula. This article discusses the proposed definitions of the apportionment factors and shows that the apportionment system 6 might lead to over-taxation and under-taxation of any given group entity.

Introducing a European Union Corporate Income Tax on the basis of an Enhanced Cooperation Agreement Tim Moolenaar, Ivonne van den Berg (2011)

In this paper the characteristics of the CCCTB and the European Union Corporate Income Tax (EUCIT) will be addressed. There will also be given a clear explanation of the distinctive characteristics of an Enhanced Cooperation Agreement and an understanding of the existing studies on the implementation of the CCCTB amongst all or a subgroup of MS and the implementation of the EUCIT. 14

Depreciation of buildings viewed in the light of European tax base Rolph van Ovost (2012)

Because in the EU context its examined whether it is possible to develop a common tax base for corporate profits, namely CCCTB, which is often associated to IFRS rules, the question this paper wants to answer is whether our depreciation limitation fits within the rules of IFRS and whether the legislation derives concerns within European tax base.

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Colofon FSR FORUM appears five times a year and is an edition of the Financial Study Association Rotterdam KvK Rotterdam no: V 40346422 VAT no: NL 805159125 B01 ISSN no: 1389-0913 15th volume, number 1, circulation 1700 copies

4 • Table of contents

Editor in chief Maaike Lanphen Editorial department Petra van den Akker Roija Rasuli Editorial advisory Dr. M.B.J. Schauten Dr. W.F.C. Verschoor Drs. R. Van der Wal RA

With the cooperation of I. van den Berg Drs. J.G. Groeneveld RA RV Prof. Dr. P. Kavelaars T. Moolenaar R. van Ovost M. Petutschnig

Editorial address Editiorial office FSR Forum, Erasmus Universiteit Rotterdam Room H14-06 Postbus 1738, 3000 DR Rotterdam Tel. 010 408 1830 E-mail: forum@fsr.nu

Interview J. Van de Streek

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P. Kavelaars

FSR News Word of the Chairman

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FSR former board member

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FSR member

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Introduction committees

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Activity reports

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News Update

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FSR Alumni Association

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FSR Activity Calendar

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Table of contents • 5

fsrforum • volume 15 • issue #1

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

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

Abstract One of the cornerstones of the CCCTB-Draft is the apportionment of the group’s overall taxable income according to a predefined micro-economic factor based formula. This article discusses the proposed definitions of the apportionment factors and shows that the apportionment system might lead to over-taxation and under-taxation of any given group entity.

1. Introduction In October 2001, the European Commission communicated its plans for the coming years for company taxation in the European Union (COM(2001) 582 of 23/10/2001). The document identified several steps which should be taken to remove individual tax obstacles to cross-border trade in the Internal Market. Among others the Commission concluded that in the longer term member states should agree to allow EU companies to use a single consolidated base for computing tax on their EU-wide profits.

In 2004, the European Commission established a Working Party to examine from a technical perspective the definition of a common consolidated tax base for companies operating in the EU. The so called Working Party Common Consolidated Corporate Tax Base (WP-CCCTB) was thus instructed to develop and discuss recommendations and eventually draft a legislative proposal for an EU-wide corporate tax base which was eventually published in March 2001 .

The basic outline of the proposed EU-wide cross-border corporate tax system contains of a three step determination of the taxable income of any given group member. At first each group entity separately calculates its income based on its financial accounting by adjusting the financial accounting income to the provisions of the CCCTB. This separately accounted preliminary taxable income of the group entity may then be corrected to eliminate the income derived from intra-group trade to form a (semi-)separately accounted preconsolidation income of every member of the CCCTB-group.

These (semi-)separately accounted pre-consolidation profits or losses of every group entity will then be consolidated to form the Common Consolidated Corporate Tax Base of the group which will in a last step be allocated to the group entities using a predefined micro-economic factor based apportionment formula. As it is currently not proposed that the consolidated group is subject to a supranational corporate income tax

levied by the EU every group entity will consequently be taxed separately by its situs state based on the apportioned income at the situs state’s statutory tax rate.

While the proposed income determination aims at regarding the corporate group as one single economic unit the income allocation procedure and the subsequent taxation of the group income takes the corporate structure of the group in consideration and taxes the group income at the level of the group entities not at the level of the group.

The proposed sharing mechanism “itself is not the purpose of the comprehensive tax reform, but a necessary and unavoidable consequence of the consolidation” (WG CCCTB, 2007a). The sharing mechanism and the proposed apportionment formula is aimed at being “as simple as possible to apply” and “difficult to manipulate” by the taxpayers by shifting of the factors to artificially relocate (parts of) the consolidated tax base and subsequently to artificially shift taxable income to low tax countries. Additionally the sharing mechanism aims “to distribute the tax base among the various entities concerned in a way that can be considered fair and equitable” and therefore the sharing mechanism aims “not to lead to undesirable effects in terms of tax competition” (WG CCCTB, 2007a). The proposed apportionment formula is intended to achieve these aims by using three factors, Sales (S), Labour (L) and Assets (A). The factor Labour is divided into two “part-factors”: the labour costs Payroll (P) and the Number of Employees (NE). Hence the tax base of a particular group member (Π i) would be calculated as follows:

The adoption of a Common Consolidated Corporate Tax Base and a sharing mechanism using a predefined microeconomic factor based formula would be a major change in corporate income taxation for every EU member state as well as for every corporate group. Formulary apportionment of corporate income for tax purposes between sovereign nation states is currently nowhere in place (Weninger, 2009). Currently each member state of the European Union uses Separate Accounting with a dealing at arm’s length approach to determine the taxable income of corporations trading with affiliated companies. However, formula apportionment is used by a number of countries (e.g. Canada, Switzerland, Germany,

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

fsrforum • volume 15 • issue #1

Three apportionment factors

(Sales, Labour and Assets).

USA) to allocate corporate income between provinces, states and municipalities or townships (Kobetzky, 2008; Martens-Weiner, 2005; Weninger, 2009). As the implementation of a consolidation with subsequent Formulary Apportionment is a fundamental change in corporate income taxation throughout Europe, this article aims to evaluate the possible impacts of this change to the tax burden of any given group entity concerned.

2. Analysis of the Apportionment Factors The WP-CCCTB proposes an apportionment formula using three apportionment factors (Sales, Labour and Assets) whereas the factor Labour is split into two “part-factors” Payroll and Number of Employees. The aim of these apportionment factors is to represent all phases of the profit-making process of the multinational group. The factor Sales therefore represents the demand side of this process while the factors Labour and Assets represent the supply side.

These two phases are also represented in the pre-consolidation income determination of every group entity in the form of revenues and expenditures of the respective group entity.

The following section analyses differences in the definitions of the proposed apportionment factors compared to the respective income producing factors and show their effects on the outcome of the apportionment procedure compared to the group entity’s pre-consolidation income.

2.1. Sales The factor Sales represents the marketing phase of the profit making process and is basically equal to the income determination factor revenues. As all profits or losses of the group entities are consolidated and therefore the income from intra-group trade in goods and services are excluded from the apportionment factor, Sales will only contain sales from trade in goods and services to buyers not part of the consolidated group (external sales). But not all proceeds of sales of goods and services to third-party buyers will be included in the apportionment factors Sales. The WP-CCCTB suggests that extraordinary income should be excluded from the factor as well as revenues from passive income such as interests, dividends, deemed dividends and royalties should be excluded unless these revenues are accrued in the ordinary course of business of the respective group entity. The WP-CCCTB further stresses that these exclusions should only affect the apportionment factor and not the tax base with the effect that this extraordinary and passive income will be taxable (WP-CCCTB, 2007a, point 50).

The location of the factor Sales is suggested as sales by destination. One rationale of this concept is that the destination of goods or services especially the place of consumption of the goods by the customer can hardly be influenced by the seller company. A second rationale of this concept is that the marketing-state which enables supply and demand to meet is compensated with tax revenues in exchange for the cost of providing markets and infrastructure to the seller and the buyer (Oestreicher, 2000, p 155). Assuming that the sales will regularly exceed the costs of production (represented by the factors Labour and Assets) the destination-based sales-factor will regularly apportion a greater share of the taxable income to the marketing-state than to the production-state.

The concept of sales by destination causes the need to determine that very destination. A pure concept of sales by destination would lead to an allocation of a share of the group’s taxable income to any member state in which the group has sold one product or in which the group has provided one service. This would lead to an increase in the group’s compliance costs and in

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

certain situations to an increase in the group’s overall tax burden. Therefore the WP-CCCTB suggests allocating taxable income to any given member state only if the group of companies has a qualitative economic relation (Nexus) to that member state. To establish Nexus it is necessary according to the WP-CCCTB to have a physical presence (WP-CCCTB, 2007a, point 61) in that very state which means that the traditional concept of permanent establishment and its shortcomings is prolonged by the CCCTB and the concept of sales by destination is only implemented to a certain degree. Sales to a buyer located in a state where Nexus is not established will be allocated to all group entities according to the so called spread throw-back rule (WP-CCCTB, 2007a, point 58) which implicitly gives the other two apportionment factors a higher weighting.

The WP-CCCTB aims at making the apportionment factor Sales as less manipulable as possible. This aim is pursued by excluding proceeds from passive income whose underlying assets could easily be transferred to other group entities and by proposing the sales by destination concept. However, the proposed Nexus-requirements still allow the group of companies to manipulate its overall tax liability by choosing to establish Nexus or not. Not-establishing Nexus in a high tax country will lead to an apportionment of all proceeds from this country to the whole group and to a taxation of those proceeds at the effective (average) group tax rate.

2.2. Labour The factor Labour representing the supply side of the profit making process is suggested to be split into two “part-factors” Payroll and Number of Employees. The split is justified by the WP-CCCTB with the different wage levels throughout the European Union especially between the western European member states (EU-15) and the central and eastern European member states (EU-12) (WP-CCCTB, 2007c, point 16). The higher wage levels and the higher ancillary labour costs in the EU-15 would lead to an allocation of a greater part of the group’s tax base to the EU-15 which may not always correspond with the value created in these member states. Thus it is seen necessary to relativise the Payroll costs by the Number of Employees producing these costs.

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

suggested that the apportionment factor Payroll should be equal to the remuneration that is taken into account as a deductible expense for the purpose of calculating the tax base, including fringe benefits, social contributions, etc (WPCCCTB, 2007a, point 25), which should make the calculation of this apportionment factor relatively easy. However regarding the definition of the factor Payroll two issues arise: The location of the factor Payroll and the definition of ‘employee’ are critical. Usually the employee will render services at the same place where the group entity that registered this employee on its payroll is located. So therefore the corporation paying the wage will also be the corporation that benefits from the work of the employee and therefore it is reasonable to allocate taxable income to that corporation. However it is possible that a corporation has an employee on its payroll but the employee provides services to a different group entity.

The group could for example use a special purpose corporation in a low tax country that registers all employees of the group on its payroll to artificially shift portions of the tax base to this low tax country by shifting the Payroll-factor to this low tax country. To hinder such artificial factor shifting it is suggested that the factor Payroll contains only the wages paid to employees that actually perform services for or to the respective group entity regardless which group entity actually registered the employee on its payroll.

The second issue is the definition of ‘employee’. The WPCCCTB does not provide one harmonised definition of employee but instead proposes that the definition of employee should be based on the domestic legislation of the member state in which the employee performs its services (WP-CCCTB, 2007a, point 22). The WP-CCCTB further suggests a system of mutual recognition of the various employee definitions by the other member states involved. The definition of a ’typical’ employee will regularly not differ heavily from one member state to the other but on the edges of this definition where directors or (in)dependent contractors are concerned these definitions may vary from member state to member state. In the U.S., on the contrary, the harmonised definition of employee for tax purposes is seen as a major advantage (Hellerstein and McLure, 2004).

2.2.2. Number of Employees With the part-factor Number of Employees the WP-CCCTB proposes an apportionment factor that has no direct influence in the calculation of the consolidated group. The implementation

of this part-factor Number of Employees seems at a first glance reasonable and justifiable as it should help to even the influences of the different wage levels in the various member states on the apportionment results. By drawing this direct relation between Payroll and Number of Employees it is assumed that a high amount of payroll combined with a relatively small number of employees shows a lower degree of productivity whereas a small amount of payroll combined with a relatively high number of employees shows a higher degree of productivity. The lower degree of productivity therefore justifies allocating a smaller amount of tax base to the situs state whereas a higher degree of productivity justifies the opposite. But a higher amount of Payroll combined with a small Number of Employees could also mean that the services the employees perform demand a higher degree of education and knowledge and therefore higher wages are justifiable. Therefore the part-factor Number of Employees seems to result in reasonable allocations only if any one unit of labour has the same effect on the value of the corporate group which may not always be the case.

2.3. Assets The WP-CCCTB proposes that for practicability, simplicity and manipulability reasons only fixed tangible assets (Property, Plant and Equipment – PPE) should be taken into account for calculating the apportionment factor Assets (WP-CCCTB, 2007a, point 30). Financial assets and current assets are excluded because of their mobility which could easily be used by the group to manipulate its tax liability by factor shifting.

The exclusion of intangible assets (patents, trademarks, etc) is primarily justified with the difficult valuation of intangible assets especially of self-generated intangible assets. This argumentation does only hold true with respect to self-generated intangible assets while acquired intangible assets can easily be valued with their historical cost or their historical cost less amortisation (book value) as it is proposed for PPE. Additionally the WP-CCCTB mentions that self-generated intangible assets are already included indirectly in the apportionment formula by the other factors (WP-CCCTB, 2007a, point 34); in the factors Payroll and Number of Employees through the employees (researchers and developers) producing the intangible assets and in the factor Sales through the goods sold that were produced with the intangible assets.

This argument is basically correct but it is not an argument for the exclusion of only intangible assets as also self-generated

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Common Consolidated Corporate Tax Base: Effects of Formulary Apportionment on Corporate Group Entities • 9

fsrforum • volume 15 • issue #1

fixed tangible assets and self-generated current assets are represented in the apportionment formula by the other two factors. Based on this argument it would be justifiable to exclude all self-generated assets regardless whether they are fixed or current, tangible or intangible but not only self-generated intangible fixed assets.

Apart from the question which categories of assets may be included the WP-CCCTB suggests as regards to valuation using the “tax written down value” (historical cost less amortisation) of the assets (WP-CCCTB, 2007a, point 36). To hinder arbitrary factor shifting shortly before the balance sheet date the WP-CCCTB suggests the use of an average of the tax written down value at the actual balance sheet date and the previous balance sheet date.

The respective asset is suggested to be located for purposes of the apportionment factor not at the legal owner but at the group entity which effectively uses the asset. Intra-group rented/ leased assets will therefore be located at the lessee. For rented or leased assets from a lessor or to a lessee outside the group it is suggested to include the asset in both the lessor’s and the lessee’s apportionment factor as both use the asset to generate taxable income. At the level of the lessor it should be included with the tax written down value. And at the level of the lessee the asset is suggested to be included at eight times the annual lease. Using eight times the annual lease as a value for leased assets is justified by the WP-CCCTB by the current practise in the U.S. This seems rather unsubstantiated especially as this method is highly criticised in U.S. tax literature (McLure 2002; Hellerstein and McLure, 2004).

As intra-group transfers of assets will be consolidated transferring written-down assets into low tax countries prior to the disposal of the assets can be used to shift the Asset-factor and consequently the taxation of the capital gains into that country. To hinder such arbitrary factor-shifting it is suggested to either include the asset sold in the factor of the group-entity that has used it primarily over the asset’s useful life or to impose a holding-period of two years before the asset is included at the apportionment factor assets of the selling group entity (WP-CCCTB, 2007a, point 41).

2.4. Concluding Remarks The proposed definitions of the apportionment factors are obviously influenced by the WPCCCTB’s aim of making the result of the apportionment as little manipulable as possible by the corporate group. Therefore certain components of the underlying income producing factors are excluded from the definition of the respective apportionment factor.

The apportionment factor Sales consists only of ordinary sales and active sales. However the taxable income consists also of sales derived from extraordinary business and also of passive income. Therefore the group entity earning the passive or extraordinary income and benefitting from its positive cash flow is not taxed with the full amount of this passive or extraordinary income but the passive or extraordinary income is allocated for tax purposes to every group entity. With the passive income closely connected are the assets generating these revenues; basically financial assets and fixed intangible assets. These components of an Assets factor are also excluded from the apportionment factor Assets. Therefore the income producing financial assets and/or intangible assets will not be included in the apportionment factor Assets of the group entity owning these assets that also earns the passive income and benefits from the positive cash flow. Not only that the passive income is not part of the apportionment factor Sales the assets producing the passive income are also not part of the apportionment factor Assets. A

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

group entity that has passive income from these types of assets will only be taxable with this income in the relation of its Payroll and Number of Employees relative to the corporate group’s Payroll and Number of Employees. Other income producing factors used to determine a group entity’s preconsolidation income and the Common Consolidated Corporate Tax Base of the group such as depreciation, consumption of raw materials, inventory and stock are also excluded from the apportionment formula.

The exclusion of certain components of the factor Sales as well as of the factor Assets leads to an allocation of the taxable income derived from those sales and produced with those assets to all members of the corporate group regardless whether the actual cash-flow from this revenues is allocated to the whole group or not. Thus one group entity probably pays taxes for income it did not realise while another group entity realises income without being taxed.

2.5. Simulation To demonstrate the differences between the pre-consolidation income of a given group entity and the allocated share of the group’s tax base resulting from the formulary apportionment a brief simulation using a corporate group established by two corporations is conducted. It is assumed that all revenues and expenditures from intra-group trade in goods and services have already been considered and eliminated at the level of each group entity. Thus only revenues and expenditures from trade with external partners remain. It is further assumed that both the parent and the subsidiary produce a positive pre-consolidation income so that the results are not influenced by an intra-group loss offset: Income Producing Factors Parent

Subsidiary

Group

Fixed tangible (useful life: 15 Y)

1.500

1.500

3.000

Fixed intangible (useful life: 25 Y)

3.500

0

3.500

450

0

450

Sales (active)

300

600

900

Sales (passiv)

300

0

300

100

200

300

5

12

17

Assets

Financial Assets Sales

Labour Payroll Number of Employees Miscellaneous Leasing Cost Consumption of comodity

0

8

8

100

200

300

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

These income producing factors are used to calculate the following pre-consolidation earnings of the two group entities: Pre-consolidation income Parent

Subsidiary

Group

Revenues Sales (active)

300

600

900

Sales (passiv)

300

0

300

∑ Revenues

600

600

1.200

Amortisation (fixed tangible)

100

100

200

Amortisation (fixed intangible)

140

0

140

Expenditures

Amortisation (Financial)

0

0

0

Leasing Cost

0

8

8

Consumption of comodity

100

200

300

Payroll

100

200

300

∑ Expenditures

440

508

948

pre-consolidation income (absolute)

160

92

252

63,49%

36,51%

100%

pre-consolidation income (in %)

These pre-consolidation earnings are then consolidated to form the CCCTB (also presented in the table) which is then apportioned by using the proposed components of the income producing factors: Formulary Apportionment Parent

Subsidiary

Group

300

600

900

100

200

300

5

12

17

1.450

1.450

2.900

0

64

64

37,88%

62,12%

100%

95,45

156,55

252

Apportionment Factors Sales Sales (active) Labour Payroll Number of Employees Assets Fixed tangible assets Leasing (8 x annual lease) Apportionment Relation Tax Base (absolute)

If these income factors are used to allocate the group income by using the proposed apportionment procedure and factors the group income will be allocated to each group entity in a different relation. As the proposed apportionment factors exclude certain types and specifics of the income producing factors the income derived from these factors is allocated for tax purposes to every group member according to the relations of the included factors. In the example a smaller share of the group income than the pre-consolidation income is apportioned to the parent company for tax purposes while the subsidiary’s taxable share of the group income is higher than its pre-consolidation income.

system and of the proposed definitions of the apportionment factors. In an attempt of making the income allocation as little exposed to artificial manipulations by the corporate group as possible certain components of the income producing factors are not represented in the definitions of the related apportionment factors. This volitional incompleteness of the apportionment factors leads to an allocation of the income derived from the excluded components according to the included components of the income producing factor. The group entities concerned will regularly get a share of the group’s consolidated tax base allocated that does not equal the pre-consolidation income it has calculated (semi-)separately before. The amount of this allocated share of the group’s tax base can regardless of the group entity’s profitability be higher or lower than the entity’s pre-consolidation income which could lead to an over or an under taxation of that particular group entity. The Apportionment Formula will thus also allocate a share of the taxable group income to a group entity even if the (semi-)separately calculated preconsolidation income is negative which may cause a substantial decrease in liquidity of the group entity. Considering that each group entity will remain a separate legal entity with all the associated legal rights and duties the CCCTB apportionment system potentially to unremunerated transfers of liquidity and assets from one group entity to another. Therefore the principle of capital maintenance and the diligence of a conscientious manager might render an accompanying system of intra-group compensation payments from under-taxed to over-taxed group members necessary especially if the CCCTB-System will be optional. This optionality necessitates every group entity to deliberate about whether to remain in the current system or to transfer to the CCCTB-System. The conscientious manager of any given group entity however might not choose to enter into the CCCTB-System if the CCCTB-System is disadvantageous to the particular group entity with respect to its overall economic development (Petutschnig, 2012).

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

Common Consolidated Corporate Tax Base: Effects of Formulary Apportionment on Corporate Group Entities • 11

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fsrforum • volume 15 • issue #1

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

By Tim Moolenaar & Ivonne van den Berg

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

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

1. Introduction To this date, the European Union (EU) has not been successful in implementing any serious cooperation or harmonization in corporate taxation. The European Commission (EC) already called for a harmonization of corporate tax systems in the 1960’s. Subsequently the European Parliament (EP) has produced several Working Papers on the subject of tax coordination.

Research indicates that full tax harmonization would yield the biggest welfare gain. However, the burden on national sovereignty would suggest it unlikely to be implemented in the EU as a whole. An Enhanced Cooperation Agreement (ECA) enables the most ambitious Member States (MS) to deepen cooperation between themselves. This might be the only way to achieve full harmonization amongst the more willing MS. Therefore, our research addresses the following: will the introduction of a European Union Corporate Income Tax, based on an Enhanced Cooperation Agreement, lead to an increase in welfare within the participating MS and thereby create incentives for other MS to join at a later time?

In section 2 we will shortly address the characteristics of the Common Consolidated Corporate Tax Base (CCCTB) and the European Union Corporate Income Tax (EUCIT). Then, in section 3 we will give a clear explanation of the distinctive characteristics of an ECA. Section 4 will give an understanding of the existing studies on the implementation of the CCCTB amongst all or a subgroup of MS and the implementation of the EUCIT. It also addresses the possible Enhanced Cooperation Union for Corporate Taxation (ECUCT). Section 5 concludes.

2. Possible reforms Corporate taxation in Europe has been the focus of the EC for several years. In the 2001 EC Report on Company Taxation in the Internal Market, the Commission indicated various company tax obstacles prevailing in the EU, such as: high compliance and administrative costs and the distortion of the international allocation of capital. To a large extent, these shortcomings of the current system originate from the co-existence of 27 different tax systems, which requires separate tax accounting for every MS where a company operates. To reduce these obstacles, the EC has been researching the possibility of harmonizing the corporate tax systems in the EU.

The most developed concept of harmonization is referred to as the CCCTB. Under this system, the EU-wide consolidated profits of each multinational company (MNC) will be allocated to MS by an apportionment formula. Companies that are eligible and opt in, would then be taxed on their consolidated taxable profits earned across the different MS. Each state will subsequently tax the allocated profit at its own corporate tax rate. Under the CCCTB, the compliance and administrative costs of MNC are reduced, it leads to an alleviation of double taxation and it opens up the possibility of cross border loss compensation. However, the precise impact on welfare and revenues of a MS strongly depends on the choice of the apportionment formula. It will certainly be difficult to agree upon the CCCTB amongst the 27 MS, especially in view of the unanimous voting requirement on direct tax matters.

Another possibility is implementing the EUCIT. This system replaces all the corporate income taxes within the EU and thus leads to base and rate harmonization. This necessitates that countries lose their sovereign rights on corporate tax matters altogether. It will, however, lead to a truly “single level playing field”.

3. Enhanced Cooperation Agreement To reduce tax competition there is an ongoing plea for establishing a single corporate tax zone. As direct taxation is still subject to unanimous voting in the European Council, not much progress has been made. The EU has reacted to these developments by introducing a so-called Enhanced Cooperation Agreement (ECA). An ECA is a procedure wherein a minimum of nine EU MS are allowed to establish advanced integration or cooperation in an area within EU structures, but without the other EU members actually being involved.

Hence, an ECA enables the most ambitious MS to deepen cooperation between themselves. The option of an ECA amongst a subgroup could facilitate progress in integration, as not all MS might be willing or able to participate in it yet.

A successful performance of such a subgroup may motivate other MS to participate in the ECA at a later stage.

4. Conclusions and coordination effect of the CCCTB and the EUCIT Looking at the research done, it is shown that corporate tax base harmonization yields a welfare gain for Europe, though

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

fsrforum • volume 15 • issue #1

small. Amongst the individual MS it gives very different results, some will benefit while others will not. The simulations ignore the reduction of compliance costs, which are expected to increase welfare gains even more.

The CCCTB proposal consists of an optional common tax code, besides the existing national tax codes. As it would be optional, differences in treatment would remain. Under full consolidation of the tax base, profit shifting within the EU is no longer feasible. However, multinationals can still respond to tax rate differentials that might create incentives to reallocate. This implies that tax competition does not disappear under consolidation, but will take a different form and it may even cause further competition in tax rates in the EU. This offers a rationale for rate harmonization, in addition to base harmonization. Also profit shifting to low-tax countries that are not part of the EU will still be possible, which means that the individual EU MS will have to maintain separate accounting for profits earned outside the EU. Therefore the amount of cost reduction under the CCCTB may be overestimated.

By implementing the EUCIT system, which is mandatory and includes rate harmonization, some of the distortions caused by the CCCTB are eliminated. The welfare gain under the EUCIT is much larger in comparison to the welfare gain under the CCCTB system.

CCCTB and EUCIT have the same problems of arriving at a common tax code. A whole new tax system would have to be devised. Furthermore, as the EUCIT is compulsory, this necessitates that countries lose their sovereign rights on corporate tax matters altogether.

Although it seems unlikely that harmonization will be implemented in all 27 EU MS simultaneously, a small group of MS may find it in their interest to do so under an ECA. A coalition of winning countries reduces the welfare gain and may induce a process of adverse selection, which destroys the possibility of cooperation. Furthermore, a coalition of similar countries (in terms of the size of their multinational sector) is more feasible in achieving agreement and is actually preferred by those countries over a EU-wide reform. Countries with similar policies are more likely to form a coalition, as the costs of cooperation are relatively minimal. Another example of a coalition is one between larger countries. This

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

yields larger common gains from cooperation compared to a coalition between small countries, since the spillovers internalized by a coalition of small countries are much smaller than spillovers internalized by larger countries. Moreover, small MS may prefer to remain sovereign as they benefit more from tax-rate cuts.

These simulations are based on the compulsory CCCTB regime. Although the consequences for individual MS under full harmonization most likely will not correspond to the CCCTB simulations, it remains clear that for Europe as a whole, the EUCIT is more beneficial. Therefore it seems probable that under the EUCIT a group of countries will benefit from an ECA without having a significant effect for the opt-outs. Although it is possible that this group would be similar to the ones examined in the studies, this cannot be said with the utmost certainty. Further research is necessary.

Following the ECA an Enhanced Cooperation Union for Corporate Taxation (ECUCT) can be formed. Such an ECUCT could have possible positive or negative pulling-effects on the opt-outs.

The opt-outs can benefit from the experimentation and learn the pros and cons of cooperative tax harmonization by the ECUCT members. The possibility that enhanced cooperation in one field, by one group of countries, will extend to other areas and will thus benefit other countries, has already been put forward by a number of authors. Cross-border economic activities within the ECUCT are expected to increase with harmonization. If cross-country differences in effective tax rates would be removed this will lead to a more efficient allocation of capital across the ECUCT, creating an incentive for countries to be a part of the ECUCT. In case lower compliance costs yield additional welfare gains, this also increases the likelihood that countries opt in the system.

One of the fears is that enhanced cooperation may lead to a permanent divide between insiders and outsiders. Furthermore outsiders can choose explicitly to remain outside the ECUCT for reasons of tax competition or national tax preferences.

5. Conclusion In our paper we explored the possibility of a European Union Corporate Income Tax. We started by shortly addressing the

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

characteristics of the CCCTB and the EUCIT. Secondly, we explained the possibility of Enhanced Cooperation as it does not seem feasible that all EU members would agree to one corporate tax system in the near future. After this, we shortly addressed a few studies of interest to our research and applied this in our argumentation on the European Union Corporate Income tax, more specifically the Enhanced Cooperation Union for Corporate Taxation.

All studies addressed conclude that harmonization, whether

by CCCTB or EUCIT, is likely to produce a welfare gain for Europe, although probably modest. It is acknowledged that not all countries may benefit. If some countries are worse off, it will be difficult to agree upon harmonization among the EU MS. The biggest gain is expected from a reduction in compliance costs, which no studies were able to incorporate in their research.

A potential way out is enhanced cooperation whereby a subgroup of EU MS coordinates their policies. However, a question which remains is whether or not opted out countries could gradually be enticed to participate in closer cooperation at a later stage. This cannot be determined due to the different results stemming from different factors which should be taken into account such as which group of countries and the choice of the rates and bases, amongst other factors. It seems most probable that MS of similar size or with a similar multinational sector will deepen cooperation, since they will have similar tax systems. We expect that MNC will prefer to be allocated within the ECA due to the reduction in compliance costs and other benefits mentioned in our paper, which will create an incentive for the opt outs to join the ECA. As a final remark it is relevant to inform the reader that as of the 16th of March 2011 the European Commission has published its long awaited draft directive of the optional CCCTB. Although the reader knows our standing point on this proposal, it could be a stalking horse for closer tax cooperation in Europe.

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

Sandhya Poeran Staff Assurance Ernst & Young Accountants

About two years ago I was faced with the same choice you are being faced with now: where am I going to work after graduating. During my board year at the Financial Study Association Rotterdam I got in touch with Ernst & Young. The professionalism and technical expertise combined with intensive coaching attracted me the most of Ernst & Young.

I wanted to address the challenge Ernst & Young is offering to students and joined the Masterclass 2011 to New York.

In four days I experienced very intensively what it is like to work for Ernst & Young.

What surprised me the most is the fact that when you start working on the audit, you are quickly able to perform the job with the knowledge you have together with your team.

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

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

Sandhya Poeran

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Almost two years ago, during the year I did my master in Financial Economics, while simultaneously being an active committee member at the Financial Study Association Rotterdam, I first heard about Ernst & Young Transaction Advisory Services. Already having a strong interest in corporate finance, I quickly became curious to know more about Ernst & Young TAS. During an informal meeting with someone from the Valuation & Business Modelling team, I learned more about the possibilities within TAS. The way the team works closely together on intense and challenging corporate finance projects really appealed to me. After getting to know more persons from the team during interviews, I really felt I wanted to be a part of this team.

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

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Have you almost completed your studies? Are you exploring the market in hope of finding your ideal future job? Then take the time to pay a visit to Ernst & Young. Chat with staff in different departments and get a taste of the atmosphere during a shadow day or at an informal talk complete with a glass of wine.

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what working at Ernst & Young TAS is all about. I can highly recommend doing an internship, as it really gives you a valuable opportunity to learn more about the team, its work and its dynamics.

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Let’s go back to the start… September, 2009.

My first meeting with Ernst & Young was during the Big 4 Cycle, organized by the FSR. During this event I got the opportunity to discover the differences and similarities between the four largest audit firms.

Ernst & Young stood out for me by the way they represented themselves: quality in everything they do.

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

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fsrforum • volume 15 • issue #1

Depreciation of buildings viewed in the light of a European tax base Mr. Rolph van Ovost

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

Even then the utility value of the asset will fall

1. Introduction The revision of the Law on Corporation Tax 1969 with effect from 1 January 2007, the legislature, where the buildings are concerned, intervened on the principle of “good business practice” by limiting the depreciation. The reason that the legislature has given for this limitation is that there is a much higher load (a higher depreciation rate) taken than the actual value of the building. This difference is reflected in the sale of the building but this gain cannot be taxed because the entrepreneur in the sale of the building often uses the reinvestment reserve .

There were two options available to the legislature in order to highlight the levy, namely to make an exception for property for the purposes of the reinvestment reserve, or directly introducing a depreciation limitation in the law.

The legislature has chosen for reasons of his own for a depreciation limitation and not a limitation in the ability to form a reinvestment reserve.

This base broadening that results from it, yields the Treasury a structural benefit of approximately E 1.7 billion per year.

This gain is the main source of funding for the rate reduction in the Corporation tax (corporation tax) to 25.5%, and for the SME profit exemption for the benefit of IB-entrepreneurs.

Because in the EU context its examined whether it is possible to develop a common tax base for corporate profits, namely Common Consolidated Corporate Tax Base (CCCTB), which is often associated to IFRS rules, the question arises whether our depreciation limitation fits within the rules of IFRS and whether the legislation derives concerns within European tax base.

Art. 3.30, paragraph 1 IB, expects the amortization of assets from the acquisition or production costs, so the historical cost, subject of course to the residual value.

Depreciation is fiscal-judiciary cost distribution, which is expressed in the text of Art. 3.30, paragraph 1 IB. Depreciation is based on the matching principle: the cost of an asset should be allocated to the years in which revenues are recognized.

The purpose of depreciation is derived from the jurisprudence.

Depreciation is not aimed at a lower market value of an asset to come true, but to indicate a reduction in the utility value.

Even if the selling value increases, depreciation is possible because even then the utility value of the asset will fall.

An asset's value decreases due to technical wear and / or economic obsolescence. If there is no decline due to the use, for example in the use of land, then it is not permitted to depreciate.

In art. 3.30 paragraph 2 IB under "Working on earnings" at 1 January 2007 a time limitation is applied to depreciation of assets.

2.2 Depreciation of buildings From art. 3.30a, paragraph 1 IB follows that buildings can only be amortized up to the base value. This base value is according to art. 3.30a, paragraph 3 IB, for buildings that are held for investment equals the property (WOZ) value and for buildings in use at 50% of the property value.

Art. 3.30a, paragraph 4 IB provides rules for determining the property value. Art. 3.30a IB applies not only to natural persons who enjoy profits from business, but this also accounts through the linking provision of Art. 3.95 IB for taxpayers on the basis of Art. 3.90 IB and further taxable income from other activities.

In this paper I intend to answer this question.

2. Depreciation limitation on buildings 2.1 General “Good business practice” implies that the income and expenses should be allocated to the years to which they relate. When an asset wears, then the good business practice obliges to an annual depreciation, within the art. 3.25 Income Tax Act 2001 (IB) limits and according to a fixed system where arbitrariness is excluded.

Also the corporate tax bodies are faced on the basis of Art. 8, paragraph 1, corporate income tax. with the depreciation limitation of Art. 3.30a IB. There is a difference, Art. 8, paragraph 6a, corporate income tax, gives for corporate tax its own definitions of the terms 'joint entity' and 'joint person'.

Determining the residual value of a building as a result of this amendment is of limited significance, because the base value in the rule will be higher than the residual value.

However, the first depreciation area should be established

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

fsrforum • volume 15 • issue #1

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

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

3.30a IB can be accrued to.

According to the jurisdiction a fixed rule states that land and buildings which collectively are in use in the fiscal sense together constitute an asset. Moreover, on 1 January 2007, this is expressly stipulated in art. 3.30a, paragraph 2 IB. With the depreciation of the assets comprising of land and building, the continuing value will be determined by the residual value of the building, together with the residual value of the land.

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

When the value of the land increases, then, in principle, the residue value of the whole is to be increased, so that the write-space is reduced.

Art. 3.30a IB ensures that there can no longer be amortized when the book value is reduced to the base value, or the base value has risen to the book value.

2.3.2 Buildings for investment: In art.3.30a paragraph 3 IB for determining the base value distinguishes between buildings that are held for investment and buildings in own use.

Especially in buildings that are held for investment, it is the view of the legislature an undesirable development that in practice there is a significant discrepancy between the tax depreciation and actual depreciation of buildings. These buildings are mainly purchased because of the rental income and potential appreciation. Buildings in use within one’s own enterprise, said the legislator, are purchased because of the added value that these buildings have for the company activities.

Pursuant to art. 3.30a, paragraph 3, subparagraph a IB, the base value of a building that the investment is held equal to the property value of the building. A building for investment is defined as "a building that is intended to directly or indirectly principally to have at one’s disposal to a different party other than a person related to the taxpayer or body'.

2.3.3 Connected person or related entity There is no question of a building for investment as the building is made available from an associated person or body.

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

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

9 and paragraph 10 IB. Art. 3.30a, paragraph 11 IB, defines what should be understood with a connected body. There is a difference between the IB and the corporate tax, Art. 8, paragraph 6a, corporate income tax provides for corporation tax its own definitions of the terms 'related entity' and 'connected person'.The group approach is being considered here.

This means that if a building within an enterprise is rented to another subsidiary, this building is considered a building in use, allowing the amortization can occur up to 50% of the property value of the building.

3. IFRS IFRS set by the International Accounting Standards Board (IASB), prescribed to be the external commercial reporting.

The IASB is the regulatory body within the International Accounting Standards Committee Foundation. These IFRS rules are mandated, by the EU, for commercial financial statements of listed companies.

The guidelines for annual reporting as published by the Council for Annual Reporting (CAR) for firms in the Netherlands, are partly adjusted to the IFRS rules.

It is intended that the IFRS rules will become the global standard for external reporting. Currently, in the US accountants are mostly applying U.S. GAAP for unlisted companies. In the meantime, an agreement has been made between the IFRS and the SEC (Securities and Exchange Commission) that European companies with a U.S. listing can suffice with financial statements prepared according to IFRS rules. The IFRS organisation is self-regulated that is separate from the EU. In response, the EU has no direct influence. Because the EU is afraid that the IFRS rules can develop in a direction that is not desirable to the EU, the European Commission (hereafter EC) has stipulated the right of approval.

The EU has therefore created two organs, the European Financial Reporting Advisory Group (EFRAG) and the Accounting Regulatory Committee (ARC).

3.1 Real estate and IFRS The IFRS rules make a clear distinction between property held as tangible fixed asset are not on investment (IAS 16) and property held for investment (IAS 40).

3.1.1 Property not for investment In order to for an asset to be considered as a tangible fixed asset, it has to be used for more than one reporting period and generate services to the operations of the entity. The main rule of the IFRS, to set the assets in the most realistic value. The main idea is that real estate valuation is at cost.

Valuation according to IFRS may also be done at fair value, provided that they can be determined reliably.

It is obvious that the fair value at the time of the purchase is equal to its purchase price, including the transaction costs associated with the sale. IFRS also states that the reduction because of usage should be charged through depreciation annually, to the profit of the company. In addition, IFRS points to a component approach. This means that at any part of a building allocated to the cost price, this value or purchase price can have a significant impact in the course of trade so these must depreciated separately.

3.1.2 Investment Property For property that is held for investment IFRS16 has a special arrangement. The difference between property in own use and real estate for investment is that investment flows generate income, which are independent from other assets of the entity.

The valuation of investment property is to be made on the historical cost or current (fair) value. Empirical research shows that most listed companies opt for measuring fair value. A definition of fair value is, the amount for which an asset could be exchanged between knowledgeable willing parties who are acting independently of each other. The fair value of investment property is determined as the most probable price in the market is available on the date of the balance This in itself is a logical trade method. On the commercial balance, in particular used in the capital market, it is attractive to show gains, the question is whether in a time of economic crisis and falling real estate prices, it still happens.

If an investment property is carried at fair value it is not commercially depreciated. So gains and losses on the fair value that occur in one year should also be included in the profit and loss of that financial year.

If an investment property is valuated at historical cost, the rules for material tangible fixed assets are to be used. This means that there must be depreciation and any impairment losses should be taken into account. It is also permissible for investment property, the balance sheet valuation is at historical cost while the depreciation is calculated on the basis of current value.

This definition can cause problems if a building is partly used for own production and the rest meant for rental. In that case, it is checked whether both parts can be sold separately.

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

However, when the building cannot be sold separately when an insignificant portion of the building is used for own use, then we may consider it to be of an investment property.

Within the context of IFRS, it qualifies for example keeping a hotel as an investment property, even if the majority of the property (briefly) made available to others.

4. Common Consolidated Corporate Tax Base (CCCTB)

3.1.3 Related entities

4.1 Tax base differences within the EU

A property that is leased within a group of consolidated or merged companies is not regarded as an investment property in the consolidated financial statements, because that property, as seen from the group's own use. For the company that owns the property the building, should in the financial statements of the group classify it as an investment property. In the financial statements of the group the real estate should therefore be recognised and treated as an investment property.

Every EU member state has its own corporate tax, with each its own tax base, tax rate, and exceptions. According to the European Commission, the situation of little synchronization between tax systems, and the differences between tax base and tax rate lead to two (joint) problems: • Corporations, which operate in more than one EU member state, are confronted with fiscal hurdles and considerable costs. This leads to problems with the internal market not functioning optimally.

Over the past forty years multiple attempts have been made to harmonize corporate taxation legislations in the European Union (EU). These attempts have been made to prevent unfair competition and to enhance Europe’s profile as one economic region. It was the EU’s goal to be the world’s most competitive economy by 2010. Plans to achieve this goal have been set to 2020, based on the Lisbon treaty. It is the European commission’s belief a common tax base will help the EU reach this goal.

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Depreciation of buildings viewed in the light of a European tax base • 23

fsrforum • volume 15 • issue #1

• The widely differing tax rates and tax bases of corporate taxation lead to unwanted tax competition and distort the allocation of capital within the EU. On the basis of aforementioned considerations and on the agreements settled in the Lisbon treaty, the European commission has decided to come up with a guideline to come to a common fiscal base of taxation. This Common Consolidated Corporate Tax Base (CCCTB) would determine on the basis of which rules, profits should be determined. This arrangement should lead to: cost savings, and it should make filling taxes easier for corporations which are active in more than one member state. As of today, the European Commission has come up with a draft directive including a proposal for a CCCTB.

4.3 CCCTB and real estate Even though the CCCTB draft directive initially thought it could base rules for accounting for profits on the IFRS rules, it is now necessary for the CCCTB to invent their own accounting for profits rules. This is due to the fact that no less than Business Europe and several academia have pressured the CCCTB not to use the IFRS rules De European Commission has not chosen for a principle based system with general definitions of profit, but went instead for well-defined measures of profit (rule based). The determination of profit rules in the CCCTB are very short en crude. Many questions that could arise are still left unanswered. Also not all terms are defined. A typical example is the definition of a building in art. 4, which does not have a definition thus far. Theoretically the question could arise whether the tax payer has to pay taxes over a building or over a tangible long term asset. The difference, now, is in the depreciation period (40 years or 15 years).

4.3.1 Depreciation The European Commission gives 3 possibilities for the writing off of fixed assets: A) No depreciation possible ( art. 40 draft directive) B) Impairment (e.g. buildings, art. 36 draft directive) C) Depreciation within an asset pool (applies to other fixed assets with a useful life less than 15 years. Art. 39 draft directive)

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

The European Commission has decided to make a distinction between long term assets and miscellaneous assets, when it comes to depreciation methods. The long term assets, including real estate, are valued on a case-by-case basis and are written off on a case-by-case basis. This is why it is important to determine what the difference is between long term assets and miscellaneous assets. Eventually the European Commission went for a period of 15 years, where assets with a useful of over 15 years are defined as long term assets and assets with a useful life of less than 15 years are defined as miscellaneous assets.

This leads to the conclusion that buildings are determined as assets which are subject to impairment. Write-offs are mandatory (art. 34 lit 4 draft directive) and are performed by the beneficial owner. If the beneficial owner is lost, the legal owner is allowed to perform the write-off. (art. 34 lit 1 and lit 3 draft directive, these rules apply to e.g. leasing contracts.)

The depreciation base comprises all costs directly related to the acquisition, bringing in working order, or improvement of a fixed asset. (art. 33 lit 1 draft directive) These costs exclude deductible VAT. Particularly remarkable is that scrap value is set to zero in all cases.

The following rules apply to the acquisition of an existing building: a second hand building will be written off over a period of 40 years unless the legal tax payer can prove that the estimated remaining useful life of the building is less than 40 years, in which case it will be written off over a shorter period of time; (art. 36 lit 2 draft directive). Hence, there exists a rebuttal claim on the period of 40 years for the acquisition of a previously existing building.

Per building a depreciation rate of 2.5% applies. The ‘’method’’ applied to compute the amount of depreciation is simple. It entails that, in the year of acquisition, the asset is subject to write offs the entire year, but in the year the asset is disposed no write offs are possible. Real estate, which can be regarded as provision, is valued by the European commission at acquisition price or, if lower, value in use.

The directive draft does not contain any information about real estate for investments. I presuppose these assets should

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

be valued at the acquisition price, after which depreciation will take place just as with assets to a scrap value of 0.

It is not possible to write off land (art. 40 draft directive). It seems land and the building that is on it should be regarded as two separate assets. (hence not as such an asset as in art.

3.30a IB) In case it would be interpreted in such way, (as one asset, which I do not suppose, but which is not clear) then it is possible to write off real estate including land to 0. In addition, it is possible to reduce the value of land in case the legal tax payer is able to prove the value of the land has reduced definitely. (art. 41 draft directive). This could happen, for instance, for mineral land of for land which is permanently polluted.

4.3.2 CCCTB and corporate real estate There is no information in the draft directive about how real estate, which is maintained within the business and is let to another corporation, should be treated. I presuppose it should be regarded as a stand-alone depreciable asset, which shall be depreciated based on the method described in paragraph 4.3.1, by the business regarded as the beneficial owner (which is usually also the legal owner). When a corporation has chosen for CCCTB and a consolidated balance is made up with all shareholdings in the other European member states, little is left of real estate and internal renting and letting, which marks the minor importance of CCCTB and corporate real estate.

the corporation and of the capital providers. Apart from that, the prudent approach to jumps in value, either up or down, in determining profit is a major advantage tax wise. Since, a jump in value upwards would not lead to more cash or cash equivalents for the entrepreneur. If only, such an improvement in equity value could, in case it would fall under taxable profit, lead to substantial financial distress.

Moreover, under the CCCTB real estate property is written off as a standalone item, hence the building separate from the land it stands on. While art. 3.30a IB writes that the building and the land that carries the building should be regarded as one. Then, under art. 3.30a IB it is possible that depreciation will decrease of will cease as the market value of land increases. While, at the same time, under the CCCTB the change in market value of the land will have no effect whatsoever on the depreciation of the building.

Art. 3.30a IB might prove to conflict with European jurisdiction, which would give rise to the necessity of procedures concerning equality and discrimination. In addition, it is questionable whether entrepreneurs will buy the story that some real estate can be written off to 0 while other real estate can only be written off to 50 % of the value of immovable property.

Apart from that, the CCCTB will only hold for legal bodies liable to corporate taxation and not for sole proprietors. This will only increase the feeling of inequality and unjustness, either that or their will be a massive flight from sole proprietorships to corporations.

5. Summary and conclusion Firstly, it is difficult to compare the IFRS rules, which are solely important for determining balance sheets of corporations, with the accounting for profit rules mentioned under art. 3.30a IB and under the CCCTB. IFRS is written for a different target group, namely the capital providers on the capital market. This target group, within the corporation, has a different interest. Their interest is to present the corporation and its capital as beneficial as possible within the allowed framework. As well as art. 3.30a IB as for the CCCTB the main concept is to to value at historical cost on which yearly depreciation is applied. This fits the yearly profit determination of a company, which logically wants to report its profit for tax purposes as low as possible.

It is near impossible to align the two conflicting interests of

Another relevant question is whether businesses with real estate should massively choose for CCCTB. In particular, this would happen because of the contested depreciation framework of the CCCTB. This in turn could lead to problems for the public treasury in the Netherlands, which would miss out on structural cash inflows if the current depreciation limitation were to (partially) cease to exist.

The final conclusion is that the CCCTB provides business with real estate an apparent windfall compared to the current corporate taxation system in place. An effect could be that entrepreneurs choose for the CCCTB with large conviction.

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

Hence, the possibilities are still endless. May them be positive or negative.

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

W W W.G A A A N . N U

© 2011 KPMG N.V., alle rechten voorbehouden.

Scriptietip # 2:

EERST GRAVEN, DAN SCHRIJVEN “Niets werkt zo frusterend als het onderbreken van schrijfwerk voor extra onderzoek.”

Kijk voor meer tips op facebook.com/kpmgscriptiecoach.

Of beter nog: schrijf je scriptie bij KPMG.

Kun je jezelf kort introduceren?

Mijn naam is Jeroen van Engelen, 25 jaar, woon in Utrecht en ik heb 6 jaar gestudeerd aan de Erasmus Universiteit. In die 6 jaar heb ik het mr.drs.-programma gevolgd en daarmee heb ik dus zowel (Bedrijfs-)Economie als Nederlands Recht gestudeerd. Uiteindelijk heb ik hierbij gekozen voor een master in Financial Economics en in Ondernemingsrecht. Sommige studenten zullen mij mogelijk nog herinneren van mijn tijd als student-assistent voor Finance 1, wat ik drie jaar heb gedaan.

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

Naast de leuke opdracht die ik heb gedaan tijdens de inhousedag, was er ook meer dan genoeg mogelijkheid om contact te leggen met de mensen van de Corporate Finance en dat klikte. Dit gevoel was blijkbaar wederzijds, want nog geen week later werd ik gebeld om eens op gesprek te komen en daarmee ging het balletje rollen.

De belangrijkste reden voor de keuze voor KPMG is heel cliché, maar dat zijn echt de mensen. Binnen Corporate Finance is iedereen bereid hard te werken maar tegelijkertijd is er ook een grote waarde voor een leuk sociaal leven, inclusief de feestjes, uitjes, sport, etc. die daarbij komen kijken. Daarnaast sprak mij al direct aan dat KPMG de meeste deals doet in Nederland. Hierdoor werk je meestal aan meerdere opdrachten tegelijk in plaats van een lange tijd aan één grote opdracht. Hierdoor kom je dus met veel verschillende bedrijven en processen in aanraking in een korte tijd, wat het werk heel veelzijdig maakt.

Wat waren je verwachtingen van KPMG en voldeed KPMG aan je verwachtingen?

Zoals uit bovenstaande al blijkt, ben ik erg blij met mijn keuze voor KPMG. Het werk bevalt me erg goed, maar met name de mensen hier en de gezellige en tegelijk hele professionele werkomgeving maakt het een mooi bedrijf om bij te werken. Vooraf verwachtte ik met name veel achter de computer te zitten en weinig buiten de deur te komen bij de klant, ook dat viel heel erg mee, met name doordat ik meteen in een opdracht terecht kwam. Ook het harde werken en tegelijk tijd voor een sociaal leven is geen probleem. Natuurlijk moet je hard werken en zijn er weken bij dat het niet lukt om te sporten of te stappen maar over het algemeen is dat prima te combineren.

Welke tips kun je tenslotte geven aan Accountancy / Finance studenten?

Als je kijkt naar het werk binnen M&A zal dat vrijwel hetzelfde werk zijn, bij welk Corporate Finance kantoor je dat ook gaat doen. Ben je bereid 100+ uur in de week te werken en dus een paar jaar van je werk en collega’s je sociale leven te maken?

Ga dan naar bijvoorbeeld Londen. Ben je wel bereid hard te werken maar is het werk niet alles, kijk dan eens bij een aantal van de Nederlandse spelers. Ga naar inhousedagen of spreek gewoon eens af om te lunchen met een aantal van de collega’s daar. Uiteindelijk gaat het dan namelijk om de mensen waarmee je werkt, want het werk zelf zal niet heel veel verschillen tussen de verschillende bedrijven.

Hoe was je start bij KPMG? Vrijwel direct nadat ik begonnen was, werd ik aan een waarderingsopdracht gezet welke uiteindelijk uitliep tot een mooi verkoopmandaat. Zo kwam ik dus al snel in een volledig verkoopproces terecht, wat achteraf een ideale manier is geweest om snel in te werken. Daarnaast werd ik ook binnen het team snel goed opgenomen. Je wordt hier niet beschouwd als ‘een nieuweling’ maar meteen als volwaardig teamlid en naarmate je meer verantwoordelijkheid aan kan, krijg je die ook. Met andere woorden: ik mag niet klagen als ik terug kijk op mijn start bij KPMG.

Companypresentation • 27

fsrforum • volume 15 • issue #1

Interview with Jan van de Streek Assistant-professor of corporate income taxes

Petra van den Akker, Maaike Lanphen en Roija Rasuli

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

28 • Interview

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

What is common consolidated corporate tax base?

It is a harmonized tax base for companies in Europe. Currently, we are faced with 27 different tax systems, so for a company wanting to do business within Europe it has to consider and comply with maximum 27 different taxes. This causes a variety of problems, the European Commission has now launched the CCCTB. Fully stated: the Common Corporate Consolidated Tax Base. The word explains what the CCCTB contains: it is ‘common’ as it is applicable to the profits of the companies, ‘corporate’ again for the to be taxed (large) firms and the ‘tax base’ indicating the nature of the mechanism, so the added element is the ‘consolidated’ part to the whole tax base. Within the current system, a loss incurred by a company established in the EU and which is part of a European group of companies, cannot be offset against profits made by its parent, sister or other group companies established in other EU member states. The loss is locked in. However, within the CCCTB the loss can be relieved cross border due to the consolidation mechanism. Every EU country is entitled to charge their own tax rate to the companies but the rules of determining the taxable base and compliance with these rules will be harmonized. The consolidated tax bases is shared among the member states by a formula apportionment.

What are the advantages?

There are four advantages attached to the CCCTB: 1) Less administrative procedures as we will be dealing with only one tax base. In effect, tax issues relating to determine the at arm’s-length transfer price of intra-group transactions will disappear. Within the CCCTB the internal transactions are not recognized anymore in the consolidated tax base.

2) Cross border loss relief is possible. Due to the consolidated nature of the CCCTB companies recognizing a loss can net this out with the profits they have made in other countries.

However, this may be of big concern for small countries such as the Netherlands or Belgium as they cannot tax international firms on the profits they have made in their countries, as the loss from different countries may be netted out with the profits.

3) Tax free reorganizations are possible. Currently, reorganizations within companies would in general be taxed but this will change with the introduction of the CCCTB. 4) Another major advantage of the CCCTB is that it will make the European Union more transparent. This can be seen as a remedy required to solve the problems caused by the

crisis. Due to the crisis the member states are facing budgetary deficits, so they are unable to meet their budgets set by the EU. As a consequence they try to lobby and get more business to their countries by offering tax exemptions or attractive tax offers (lower effective tax rate). This socalled tax competition between member states leads to a rat race to the bottom. At the end of the day the member states are faced with even more budgetary problems. However, during the crisis the members signed a petition agreeing to support each other, so we have on one side countries competing for more business and on the other side support for each other. The introduction of the CCCTB would make the system more transparent.

What are the disadvantages?

Under the current proposal companies can choose whether or not to apply the CCCTB system. This optionality feature is important or even crucial to support the CCCTB project of the business community. As soon as companies are obliged to apply the CCCTB, a series of consequences could be attached to it, which has its disadvantages. There is a serious risk turning the CCCTB project into a mandatory system. The European Parliament is campaigning to apply the CCCTB on a mandatory basis for multinationals. Only SME’s are carved out.

Member states are exposed to a disadvantage of a budgetary nature. I will illustrate this effect with an example: If we assume the consolidated profit of a multinational is the pie which is subsequently apportioned to all member states in which it is active, the question here becomes which piece should be given to each member state to tax at its own rates?

The answer of the European Commission is apportionment by a simple formula. This formula contains three ­economic factors: labour, fixed assets and sales.

The weight of these three together determines which subsidiary gets the largest piece of pie. For the Netherlands this would mean that, since it is a smart economy thus its ratio of assets would be small, the pie piece would be relatively small.

The assets factor does not consider the intangible assets such as goodwill. Most Dutch internationals, for instance Philips, Unilever and Heineken have situated many factories in EasternEurope. The labour factor and asset factor will allocate most of the consolidated profit to this part of Europe. The sales factor will probably not be able to compensate this effect by pushing back the power of taxation to the Netherlands. The

» Interview • 29

fsrforum • volume 15 • issue #1

Dutch market is only a small home market for Dutch multinationals to sell their products. Applying the CCCTB would mean that the Netherlands would tax a relative small share of the pie compared to the Eastern countries. Basically, the CCCTB system - and the sharing mechanism in particular implies a major shift in the allocation of taxing rights between member states.

What are the consequences on the macro economical level for the Netherlands?

If the CCCTB would be applied as proposed by the European Commission, the Dutch treasury will incur a loss of tax revenue of approximately E 5 billion. As said, the cause is the shift in the allocation of taxing rights between member states. This budgetary effect is the main reason why the official Dutch policy is that the CCCTB is a bad idea and should not be implemented in Europe. I can understand this. However, in my opinion it would be impossible for the Netherlands not to participate in the CCCTB project if others do, because this will have a negative impact on the Dutch climate to attract or to keep international companies. I think most policy makers would agree with this. The only way to (partial) compensate for the loss of E 5 billion is in theory to increase the Dutch corporate income tax rate. Currently this rate is 25%. But increasing this rate would also have a negative effect on the Dutch investing climate.

How is this budgetary loss of e 5 billion calculated?

It of course is a rough estimation. The simplified calculation is as follows: 1. The European Commission has calculated that the Netherlands currently taxes 6.4% of all profits of companies established in the EU. 2. Introduction of the CCCTB would mean according to the European Commission that the Netherlands would only get to tax 4.2% of the total European tax base. This is a decrease of 2.2 percentage points.

3. The reduction of 2.2 percentage points represents a relative reduction of up to 34.38%.

4. The current Dutch corporation tax yield is approximately E 14 billion.

5. A straight forward calculation leads to the tentative conclusion that the Dutch corporate income tax revenue under the CCCTB system decreases by more than a third, namely a decrease of approximately E 5 billion.

30 • Interview

In your article “Headlines of the CCCTB” (Hoofdlijnen van CCCTB) you mentioned that the Dutch tax base is principle based and the CCCTB is rule based.

What is the difference?

In the Netherlands the rules on tax profit calculation are not stated in the corporate income tax act or any other act.

The taxable profit is determined through the principle of ‘sound business practice’ which sets a few guidelines on the basis, of which profits can be determined. These guidelines include the matching principle, realization and prudence.

However, there is no weight attached to each one of these so within a dispute the Dutch Supreme Court has to decide whether and how these three guidelines are complied to for each individual dispute. This system would be impossible for European countries and that’s why the CCCTB is rule based. It can be compared to a fiscal IFRS where many details are recorded.

Would you recommend introducing CCCTB globally?

Yes, it would be very good in fact, in the US they already apply a somewhat similar CCCTB mechanism through their federal tax system.

Is it possible that the CCCTB can be misused? Since one country can end up with more profit than the other.

As within every classical corporate income tax system, there are within the CCCTB two major weak points. First, groups of companies can put passive income, for instance income earned from investments in bonds and shares, outside the CCCTB in a tax haven company. As a consequence, income from these mobile assets cannot be taxed by member states.

The European Commission has developed a set of measures to prevent this. Second, since dividend is not tax deductible and interest is, groups of companies can transform equity easily into debt. So, to sum up a potential tax evasion scenario within CCCTB: a company established in Europe could place a huge sum of cash on the Cayman Islands as equity and take a debt on this amount back to Europe enabling the company to deduct interest from the common tax base. The Council of the European Union and the European Commission are still working on the design of anti-abuse rules to combat such tax planning. An import weapon is the so-called GAAR (General Anti-Abuse Rule). Under this rule a wholly artificial construction set up for tax purposes is simply being

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

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

Are you afraid that if nine member states apply the CCCTB and the rest will not, the EU will be divided?

It would be good for the nine countries to try the CCCTB, when this goes well the rest will probably follow. The countries that are most certain to be participating are Germany and France as these two are quite in favor of the CCCTB. Besides that I assume that the southern member states may take part as well because they are facing a somewhat weak tax system. The CCCTB would mean a boost to their tax revenue as these countries hold large part of the fixed assets, offer labour and can be huge markets for sales.

How do you see the future of CCCTB? Will it ever be reality?

It is hard to say whether the member states can reach consensus on this ambitious and controversial proposal. At the end of the day it is a political question. In 1990 the EU adopted already two Directives on corporate income tax tackling some specific problems. They were adopted quite suddenly without it being part of a planned process. I presume we need such a ‘political momentum’ like the one in 1990 to make the CCCTB proposal ready for a compromise between at least nine member states. Currently, the CCCTB Directive proposed by the European Commission is on the agenda of the European Council and incrementally plans have been drawn up to improve the proposal. However, under the current financial crisis it can go either way. I am convinced, however, that the CCCTB will be introduced sooner or later in whichever form.

Interview • 31

fsrforum • volume 15 • issue #1

Vertrouwen of (on)macht

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

Accountants zijn van oudsher vertrouwensmannen en – vrouwen in het maatschappelijk verkeer. Th. Limperg althans zag in zijn vertrouwenstheorie de grondslag voor het accountantsberoep. En Jan van de Poel noemde de accountant een handelaar in risico. Agency-theorie gaat uit van de gedachte dat de agent niet altijd zal handelen in het belang van zijn principaal. Eigenlijk komt het er op neer dat we als principaal betrouwbaar zijn, maar als agent toch ook worden geacht ons eigen belang in het oog te houden. In het bedrijfsleven zijn bonussen en winstdelingen, Stock Appreciation Rights (SAR) en opties bedoeld om de belangen van de agent parallel te schakelen met die van de principaal. En zijn we niet allemaal iemands agent? Als dat zo is, is niemand voor iedereen helemaal betrouwbaar.

Drs. Joost G. Groeneveld RA RV is directeur van Wingman Business Valuators B.V. te Breda en voorzitter van de Stichting WBO (register van business valuators).

Hij was hoofddocent aan de Economische Faculteit van de Erasmus Universiteit te Rotterdam.

Natuurlijk weten we van onszelf dat we heel erg betrouwbaar zijn. Als al die anderen dat nu ook zouden weten, zou de wereld er heel anders uitzien. Sommigen laten zich overtuigen.

Soms tot hun schade. Maar het is evenmin in je voordeel om niemand te vertrouwen. Dus worden mechanismen ontworpen om dat toch te kunnen doen. Een van die mechanismen heet toezicht en controle. Accountants worden geacht daar goed in te zijn. Maar wie controleert de accountant en ziet op hem toe? Welke flitspaal houdt die flitspaal in het oog?

Ik vrees dat hier geen ethiek-cursus zal helpen.

Is controle nodig? NRC Weekend (29-30 september 2012) geeft cijfers over enkele misstanden. Ernst & Young heeft onderzoek gedaan naar “integriteit van ondernemers in het Midden- en Kleinbedrijf. Wat blijkt? Een op de vier managers zegt corrupte praktijken te accepteren als dat het bedrijfsrendement ten goede komt. Het staat er echt: 25 procent van de managers heeft geen moeite met omkoping! En 14 procent van diezelfde managers zegt te geloven dat binnen hun eigen bedrijf sprake is van omkoping. Jazeker, 14 procent!”.

32 • Vertrouwen of (on)macht

Ik vrees dat hier geen ethiek-cursus zal helpen. En van een gesprek over de “Toon aan de top” verwacht ik ook niet veel.

Zeker niet als een kwart van de managers zonder enige dwang of noodzaak bekent waartoe het bereid is. Een vermanend woord zal dan niet veel helpen. En zouden die resterende 75 procent die nu niet heeft bekend, zich wel goed gedragen?

Nog steeds in datzelfde NRC Weekend schreef Marike Stellinga haar column. Marike schreef daarin niet over corruptie, maar over de kredietcrisis waarbij “die honderden miljarden euro’s aan niet genomen verliezen als een zwaard van Damocles boven Europa hangen”. Zij zoekt ons aller heil bij “chagrijnige accountants”. Nu ken ik die beroepsgroep als buitengewoon opgewekt, om niet te zeggen vrolijk. En ook Marike Stellinga ziet daar een ‘bottle neck’: “De chagrijnige accountant is moeilijk te vinden, uiteraard”. Dat laatste woordje is dodelijk. Uit welke aard? Volgens Marike is het zo dat “deze beroepsgroep zich te vaak laat kneden”. Maar zij heeft vertrouwen: “Ze zijn er. Het enige wat we moeten doen is ze vinden en ze vervolgens op pad sturen met een zo slecht mogelijk humeur”.

Misschien is dat ochtendhumeur iets waaraan ze bij Nijenrode voor de vernieuwde opleiding van Robuuste Accountants nog niet hebben gedacht. Daar leren ze juist te communiceren.

En als ik Marike Stellinga goed begrijp is dat het laatste wat ze moeten doen. Zij zoekt iemand die “als die topman klaar is met zijn ik-ga-de-wereld-veroveren-praatjes, zegt: “Ja, laat me eerst maar even de boeken zien”. Daarbij denk ik aan het type Sacco van der Made. Dus niet zoals bij Marike, iemand die op spekzolen loopt, hoewel dat wel mooi kan zijn meegenomen.

Maar het kan ook niet allemaal van de accountant komen. In het discussierapport van de NBA staat dat accountants de integriteit van leidinggevenden en sleutelfunctionarissen moeten gaan beoordelen. En desnoods moeten ze hun opdracht beëindigen. In wezen zou dat in 25% van het MKB dus daadwerkelijk de conclusie moeten zijn. Ik denk dat de externe accountant hier wordt overvraagd.

De accountant (auditor) heeft als wettelijk taak om bij financiële jaarrekeningen op grond van onderzoek een verklaring te geven. Die jaarrekening moet getrouw, duidelijk en stelselmatig zijn. Ik sluit niet uit dat ondanks corruptie de jaar­rekening

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

Omkoping is niet alles. Nog alsmaar in datzelfde nummer van NRC staat een verhaal over vervalste contracten bij Eurocommerce, en financiële instellingen die daar geen onderzoek naar hebben gedaan. Arno Visser, wethouder Almere: “Je wint informatie in om te kijken met wat voor een partij je te maken hebt. Dat hebben de banken nagelaten. Het is verbijsterend dat grote professionele financiële instellingen dat bij zulke grote leningen niet hebben gedaan”. Ik denk wel dat Arno Visser daarin gelijk heeft.

Uitgaande van Priestland is het

geen kwestie van gedrag (corruptie), controle en toezicht maar van macht.

En dan, na weer een bladzijde te hebben omgeslagen, tref ik een stukje aan van Philip de Witt Wijnen: “Gevaarlijk vak, dat topmanschap in Nederland”. Ja, als je met de accountant over je integriteit moet gaan praten … . PdWW verwijst naar een onderzoek van Booz & Company. Dat advieskantoor “bracht het verloop van CEO’s in kaart en concludeerde dat de duiventil aan het Damrak het wijdst open staat”. Nu is het Damrak het MKB niet, maar zou het ene iets te maken hebben met het andere? Zijn de agentschapsverhoudingen zo slecht? Of werken de bonussen en vertrekregelingen juist averechts? Zijn de agencykosten misschien al te hoog?

28 september 2012 werd in de krant door Bernard Hulsman - met verwijzing naar de Plantagenets - het koningschap “een bloedlinke job” genoemd. Sinds de middeleeuwen is er in overdrachtelijke zin dus niet veel veranderd. Dat komt ook naar voren in het beeld dat David Priestland in zijn boek (Merchant, Soldier, Sage; a new history of power) gebruikt om in zijn kastenstelsel 3 kasten te onderscheiden, al zijn die niet identiek aan de indeling in de 3 standen zoals we die vanouds kennen: de geestelijkheid, de adel en de rest. Met verwijzing naar de huidige financiële crisis is hij van mening “dat de kaste van de handelaren hoognodig moet worden beteugeld”.

Uitgaande van Priestland is het geen kwestie van gedrag (corruptie), controle en toezicht maar van macht. Als dat waar is, helpt zelfs geen chagrijnige accountant meer. Want in dat geval verliezen vertrouwen en controle hun betekenis. Dan zijn we gewoon een illusie armer.

Vertrouwen of (on)macht • 33

I HAVE UNLIMITED AMBITION I WORK HARD AND PLAY HARD I DON’T CRACK UNDER PRESSURE I HAVE EXCELLENT NUMERICAL SKILLS I DON’T LIKE TO WASTE TIME I THINK FASTER THAN MOST PEOPLE

YES

NO

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fsrforum • volume 15 • issue #1

CCCTB: high priority for the EU

Prof. dr. P. Kavelaars

For years, if not decades, the European Committee (EC) has put effort in pulling tax revenues towards itself. Despite the principle of subsidiary (art. 5 VEU) the European Committee apparently does not deem the individual member states of the European Union capable of forming their own taxation.

The question is why the EC puts so much effort in pulling the control of fiscal policy towards itself, as it seems much more economically ‘’healthy’’ if member states can go their own way in organizing their fiscal system. On the one hand, because the system can be adapted to national needs and on the other hand because it allows for a healthy competition between member states. Although a harmful competition between member states should be avoided. This would not be beneficial for the member states as well as the EU. The long standing Code of Conduct serves a valuable purpose in this respect, because it empowers the EC to force member states to answer for their actions in case they take fiscal measures that are harmful to fiscal competition. Over a decade ago, this Code was put to the test and its enactment ensured that fiscal policies undermining competition have more or less disappeared. Since then, the sole existence of the Conduct has proven enough to stop new measures undermining competition in fiscal policies from taking place. On top of this there is the act of state aid, art. 107VwEU, that prevents competitive laws from being implemented. Finally, the last few decades the Court of Justice has adequately applied its jurisdiction to prevent disruptions between fiscal policies of member states. Altogether, there seems no reason for the EC to mingle in fiscal policies.

However, this was only one side of the coin. A side that is of great importance because the principle of subsidiary is given way too little content: ‘’Brussels’’ organizes a lot more than necessary. But still. If we look at the global position of the EU, I argue that it is losing an economic battle with the rest of the world. Although the U.S. are forced to pass off some of their historically leading position, the country is still a superpower in economic and financial perspective en will unquestionably remain to be so. On the other hand, we see developing economies –China, India, Latin-America- and at some distance Africa, where China is strongly investing and developing. These areas are surpassing the EU in economic perspective. The most important reason that the EU is losing this battle, is the disunity between member states of the EU that restrict it from forming a strong power block. The way we have been dealing with the financial crisis in southern member states for the last few years has been characterizing:

keeping the holes plugged and not doing anything to change the situation. It puts the EU in a huge backlog compared to the rest of the world. From this perspective, it is necessary for the member states to not fight each other but bundle powers to –as was meant by the Lissabonagenda in 2000become the most competitive economy in the world. This did not happen at all. Developed areas of the EU are dangling on the bottom as for economical perspective. And this is only getting worse.

From this perspective of competitiveness, there is much to say in favor of a fiscal arrangement that does not operate on the member-states level, but rather on a European level, where the EU will operate as a unity. With tax on goods and services this has basically already happened a long time ago, with the introduction of customs duties and of course the more or less harmonized VAT rates. This is and has been necessary because transportation of goods and services is often transnational and without harmonization the system would easily disrupt. Another area that is highly transgressing concerns the activities of large cooperations that increasingly trade and invest transnationally. When these cooperations are faced with a diversity of fiscal policies for profit distribution, this obviously is highly disruptive. On the one hand because of the elaborate administrative burdens; on the other hand because company results cannot be pooled between countries in case the operations in one country are profitable and operations in the other country are not: for such companies it is all about the total result. Besides, there is the competition in fiscal policies between countries which causes companies to shift –solely based on fiscal considerations- with investments, goods- and service-transactions and streams of financing. When such activities occur only because of fiscal reasons, this is not a good development.

From this perspective it is a good thing that the EC proposed a CCCTB; rightfully, by the way, on an optional basis instead of a compulsory one. Keeping in mind what I argued earlier about the importance to strengthen Europe as an economic power, it is a bad thing that many member states –including the Netherlands- are resisting the implementation of CCCTB: a situation that will hopefully turn around soon. A side-note to this being that the proceeds- as is now also documented in the proposal for a CCCTB- will keep benefiting the member states and not –as a proposal for a Financial Transaction Tax by the EC suggests- the EC. For the EC autonomously to receive tax revenues is in my view highly undesirable.

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fsrforum • volume 15 • issue #1

Word of the chairman

Sep Vermeulen

Dear reader, This is the first edition of the FSR Forum of the academic year 2012-2013. This is also the first edition coming out of the hands of the XVth FSR board. The new board finally took official control since the first week of September. We are very confident that we will upgrade the FSR again this year in many ways. As the chairman of the board I have the great pleasure to try to describe the wonderful events that will take place this year. I would like to give my compliments to Maaike Lanphen who is the responsible editor of the FSR Forum this year. She and the editorial committee will take the coming five editions of the fifteenth volume to the next level, including the most recent developments in Finance, Accountancy and Controlling.

At the start of the summer the XVth board was elected. After an extraordinary informative weekend in the first week of July, it was our turn to staff the FSR-room: H14-06. With the daily help of the XIVth board we quickly learned almost all the ins and outs of all events that will occur. Therefore I would like to thank the XIVth board for their effort and trust in the past few months. Then, I would like to welcome all the new active members of the FSR. We had the chance to compose a wonderful group of dedicated students who wanted to take the extra step.

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

The academic year started with the Master Kick-Off Day on September 3rd. Next to the masters ‘Financial Economics’ and ‘Accounting, Auditing and Control’ on the ESE faculty, for the first time we were given the opportunity to introduce ourselves at the masters ‘Finance & Investments’ on the RSM faculty and ‘Quantitative Finance’ on the ESE resulting in a record breaking number of new members. Later on in the magazine you can find a detailed report of this event together with the Minor Kick-Off Day on September 6th. Recently, the prestigious International Banking Cycle has been taking place in Rotterdam and Amsterdam. During this event ten of the world’s best investment banks came to both universities to give workshops, presentations and take interviews for summer-internships and fulltime positions. This event offers the perfect opportunity for finance students to get acquainted with the dynamic world of investment banking.

But there is more happening at the moment, especially for the accounting students as the Big 4 Cycle is taking place simultaneously. During four in-house days, the largest accountancy firms open their doors to welcome the selected members. The days usually start with a case study and always ends with an informal diner to get to know the employees and employers personally. You can imagine this is a busy period for both the new board and our committee members. Not to forget, that after a hard day’s work nothing is more rewarding than looking back on a successful day and seeing the product of all the time spend on preparation.

As with the International Banking Cycle companies come to the Netherlands to meet our members, we also go abroad to widen our horizon. Firstly, we will travel to the ‘Northern Capital’ of China (Beijing) after a series of in-house days with the International Research Project. This year the project will be in cooperation with a charity for the first time: Right to Play. Together with this charity we will investigate the opportunities for Right to Play to increase their coverage in Asia, especially in and near Beijing. In this way they will be able to create more places for children to play and get education about ‘fair play’ and diseases. Secondly, this year’s edition of

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the European Finance Tour will depart to Zurich, the financial capital of Switzerland. Zurich suits the European Finance Tour as it is the largest city of Switzerland and the capital of gold trading. Here the participants will enjoy many company visits and will discover the city in an informal way.

FSR News

Also when you stay in the Netherlands, the FSR offers many events in the upcoming year. For instance the first round of the Traders Trophy is already taking place on 22 November at the Erasmus Campus. Only five days later we come back to you with the first in-house day of the Financial Business Cycle. In 2013 we will continue with the Multinational Battle, Corporate Finance Competition and many other events and activities.

Column Anna Nijdam I would like to invite you once again to participate in our events, as a participant or a partner.

The XVth board is most dedicated to get the FSR to the next level. I am looking forward to have the honor to welcome you at one of our events, battles, cycles, master classes and social drinks.

Kind regards, Sep Vermeulen Chairman FSR Board 2012-2013

Column Jan-Matthijs de Berg

Erasmus Banking Congress

Big 4 Cycle

40 41 48 49 FSR news • 37

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FSR Former board member

Anna Nijdam

Although a number of years have passed, I vividly remember the moment I got welcomed with champagne in the FSR Office on the 15th floor of the H-building at the Erasmus University. A little bit nervous and excited, I just heard that I had been selected as the new FSR Commissioner for External Relations! I met the other new board members, with whom I would form the VIIIth FSR board. Although we knew nothing about each other, we soon would. I couldn’t yet imagine that this was the start of a journey, a journey which had such a positive impact on my further life.

Seven different people, all very motivated and enthusiastic, with the same goal: ,,To bring the FSR to a higher level”. As the Commissioner for External Relations I spend my summertime by visiting the relations of the FSR. During these acquisition meetings we made new appointments for the year. This was a great opportunity to get to know more about these companies, to see their offices, to meet the employees and to develop myself in a commercial aspect. Additionally, and I hadn’t really realized this before starting my year on the board: ,,I noticed that it was pretty important for companies that students are active besides their study (a board, committee, study abroad).The most challenging part of my job was to get connected with new companies and to extend the contacts with existing relations. In the end, the important thing was that FSR members would get a good and clear overview of which companies they could work for after their study, and what their most important characteristics were. In order to achieve this, we organized a number of great events: both recurring ones (which we developed more) and new events like the Controlling Competition. And for an association with such great events, it is important to publicize them. That’s why we started with extensive promotion activities, such as renting billboards at the Erasmus Campus. (That was also right when Cubord, initial the bill board rental company, lost their rental contact at the Erasmus University... sorry for that Cubord!) Towards the end of our board year, we rented the billboards from the Erasmus University for a quarter of the initial price… Besides the billboards, the achievement of the first mention of FSR in Dutch media, ‘pimped’ cars at the campus, we really introduced FSR and our activities at the RSM Faculty. This is how many RSM students got acquainted with FSR, and we were able to assist, besides economics students, RSM students in their post-university careers as well.

We also presided over several committee for the organization of our events. As I was the only accountancy student, it was

38 • FSR news

logical that I was the person who organized the accountancy events. I thus got a really good impression of all accountancy firms. I really liked the internal atmosphere at Ernst & Young, the international opportunities, the technical knowledge, as well as the (many) employees I met. I started working at Ernst & Young in Rotterdam more than four years ago, after an internship period at Ernst & Young Auckland (NZ). And I still work at Ernst & Young in Rotterdam, as a senior staff auditor. The clients that I serve are pretty diverse, from oil and gas companies, to traders, to large media and entertainment companies. I am busy with finalizing my RA (Register Accountant) post master’s degree, of which I finished the theoretical part already. I am also a member of the recruitment team. As such, I help and advice students with writing their thesis. As well, I help organizing the recruitment events at Ernst & Young. So it is not unlikely that we meet at one of our upcoming recruitment events! Which is even better, since I still can tell you a lot about my job and about working at Ernst & Young.

Besides the fact that you learn a lot from a board year , and the fact that you get a good impression about the opportunities for your further career, I started to build up a great network and made a lot of friends. As earlier said, I didn’t know the other board members at the start of our board year, but we became good friends. And not just friends, but friends for life.

We still have dinner and drinks once a month, and have our yearly city trip. At the moment of writing, I am organizing ‘a mystery trip’ in cooperation with Geert and Tycho from the VIIIth board. Marijn, Robert and Willemijn still don’t know, but we are going to Rome next weekend, to celebrate ‘their 30 birthdays’. Additionally, Willemijn and I, aka ‘the pink ladies’, became really close friends in our board year when we went skiing together in our Pink FSR Board jackets on the white slopes of Valtho. We are still going skiing every year but now we also invite our field hockey team, as we both started playing field hockey after our board year.

I just can conclude that my board year was fabulous, one of the best years of my life. As you can read, I got and took the opportunity to develop myself, to build up a network, to make real good friends, and last but not least to get connected with my present employer Ernst & Young. Therefore I can strongly advise you, to take the opportunity and to become active at the FSR!

Passport Name Anna Nijdam Age 30 years Residence Rotterdam Centrum Employed at Ernst & Young Current position Senior Staff Audit Which FSR Board VIIIth Board Board function Commissaris Externe Betrekkingen Study Economics – Accounting, Auditing and Control Year of graduation 2009 Which car do you drive Volkswagen Polo What do you drink on a Friday night White wine, Vodka Lime Life Motto Carpe diem

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FSR Member

Jan-Matthijs de Berg

Passport Name Jan-Matthijs de Berg Age 25 years Residence Rotterdam Study Financial Economics FSR event European Finance Tour Internship at/job at Shell Department of Internship Shell Technology Ventures (Venture Capital fund of Shell)

How did you come in contact with the FSR? When you study Financial Economics it is hard not to get into contact with the FSR! The first contact was through the Financial business cycle in my Bachelor.

In which FSR event did you participate?

The European Finance Tour to Milan

How have you arranged your internship?

I became interested in Shell because of a research project in which I participated. After that I started talking to the people I knew there, to get more information and tips for the application process. The first step in the process is the online application. If you are selected for an interview, the next step is a telephone interview of an hour. This actually was a strange experience, because you cannot see someone’s reaction to your answers. If you are selected, the recruiter looks for a suitable project. Then you are invited to discuss the project with a manager, to see if it meets your wishes and skills. I had the luck to get a project in a brand new department (it existed only six months), and really liked the project itself!

Which moment of your internship will you never forget?

The moment, after about a week, that you suddenly realize how quickly you become integrated in the way the company works. You start using all the abbreviations, and start talking about “what the business needs” etc. It is amazing how fast this process works.

Have you been offered a job?

Since I am still doing the internship, I don’t know yet!

Please describe your experiences at the internship in general (corporate culture, assignments, colleagues, etc.)

Overall I would say that the culture is very professional and open-minded. There is a lot of diversity and I work with people from all sorts of backgrounds and nationalities. You also get a true international experience. Right from the start I had conference calls with people in Houston, Beijing and Vancouver! What I like about the internships at Shell in general is that you get your own project with a so-called “deliverable”.

You get access to the resources you need, but apart from that it is up to you to take the lead and do what is necessary for a good end result. In short, you get a lot of freedom and responsibility.

What do you consider to be your best performance during the internship?

Hopefully at the final presentation of the project, but this is yet to come!

FSR news • 39

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Introduction committees

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Samantha Kompanje, Maaike Lanphen, Margriet van der Lubbe, Nick Tanis

Gijs Romer, Taco Smit, Tim Geuns

Accountancy Committee

CleanTech Challenge

The first accountancy event, the Big 4 Cycle, took place in the beginning of the year. During this cycle, students had the chance to meet KPMG, Deloitte, PwC and Ernst & Young.

With the case during the inhousedays the students got a sneek preview into the life of an accountant. The informal dinner at the end of the day gave the students the chance to get to know the company and their employees from a total different angle. The other event of this committee, The Accountancy Firms Day, is more focused on the smaller companies and during this day you will meet four different companies.

These events together will give students a better picture of the accountancy world.

The CleanTech Challenge Committee will work closely together with Yes!Delft Students and the Energy Club in organizing one of the biggest entrepreneurship events in the Netherlands. These three study associations will bring together financial and technological students that like to develop and value innovative ideas, with a focus on clean technology. In several rounds they will present their ideas and develop them further with the help of companies that operate or advise in the industry. The winner will travel to London to compete with other countries. Our committee will support them and guide them in winning the worldwide finals of the CleanTech Challenge, just like last year!

Tijmen van Paasen, Gemma van der Hoeven, Joost Vlot, Jean-Paul Gobel

Roija Rasuli, Petra van den Akker, (not on this picture Maaike Lanphen)

Corporate Finance Competition Committee

Editorial Committee

During the Corporate Finance Competition you will meet a variety of companies from the financial sector. Each of these companies will challenge the students with a case during the day which they have to solve in teams. The final winner will be announced afterwards. With these cases you will meet different facets of the financial world, with a main focus on Mergers & Acquisitions. After these cases you will have a diner with the companies where you can get to know them in an informal setting and make a lasting impression. The committee will work closely together with these companies to make this three day event an unforgettable experience!

Our drive for this year is to set a milestone for the FSR Forum by providing our readers with the depth of knowledge and inspiration. There will be five forums published this year, with five different themes, each enriched with articles, columns and interviews from industry professionals. The combination of financial and accounting together will enhance the content so that our reader gets a complete package.

Moreover, the FSR Forum will provide information on all FSR activities.

On behalf of the FSR we wish you a pleasant time reading our FSR Forum.

 FSR news • 41

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Introduction committees

42 • FSR news

Jan-Willem Boer, Joost Vlot, Justin Toet, Britt Mulder

Berre Simonse, Sep Vermeulen, Gonda de Graaff

European Finance Tour Committee

FAN Committee

As a committee with an international character, the European Finance Tour Committee will organize a week full of financial and cultural activities in the Netherlands and a European city. This year we will visit Zurich, a prominent city and financial hotspot. During this week (6-10 May) the students will get to know leading companies through inhouse days and presentations. Of course there will be informal activities as well to get to know the city and culture. Before the start of this week the students will visit several outstanding companies in the Netherlands, each operating in the field of finance.

The committee will organize this whole trip from begin till end, doing their utmost to give you an amazing week!

The FAN Committee will organize events together with the study associations of other universities that are members of the Financial Study Association Netherlands (FAN). The Traders Trophy will give students a glimpse of the trading world, whereas the Multinational Battle will focus on the leading multinationals. Through different rounds you will compete with other teams from universities, guided by leading companies in the industry.

Abeda Hasanzadah, Margriet van der Lubbe, Patroesjka Zuurhout

Jules de Vrijer, Joost Vlot, Joanne Berntsen

Female Business Tour Committee

Finance Committee

As the name suggests, this committee is for women only. The ladies of this committee will organize a two day event where the female participants will meet three different companies.

Last year they had the chance to meet ING, BCG and Deloitte.

Each company had a challenging case where the ladies showed their skills and the company showed its career opportunities. At the end of the first day there will be a dinner with all three companies and afterwards the night will be spent in a hotel in Amsterdam. The next day, participants gain insights in the life of a successful business woman, teaching the next generation of women how to find their way to the top.

The biggest event of this committee is the Financial Business Cycle. This year two multinationals, two bankers, two consultants and two traders will be visited through inhouse days for Erasmus students. These inhouse days are a great opportunity to explore the variety of the financial sector. The Finance Committee will also organize the Investment Banking Masterclass (IBM), a two-day event for 40 students with a course on corporate valuation. Beside these two events they organize different company dinners as well.

FSR news • 43

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Introduction committees

44 • FSR news

Sydney Cranen, Sep Vermeulen, Taco Smit, Floris Bos, Hugo van der Wal

Monique Berlee, Edwin van Vliet, Margriet van der Lubbe, Bas Molenkamp, Anne Duindam

International Banking Cycle Committee

International Research Project Committee

The International Banking Cycle serves to give students a clear view on the operational practices and the career opportunities at ten of the most prestigious international investment banks. Taking into account the number of applicants, participating banks and the number of participants that are offered an internship or fulltime position, the International Banking Cycle is by far the largest recruitment event for international banks in the Netherlands.

This year, ten prominent investment banks gave workshops with a real life case focusing on Mergers & Acquisitions and in some cases also Sales & Trading. Following their workshop, each bank gave a presentation and an informal drink reception in the Faculty Club, providing students the opportunity to get familiar with the corporate culture, meet employees and learn about the career possibilities at the largest financial institutions in the world. The International Banking Cycle committee acquainted students with this challenging and rapidly changing investment world and ensured that every participant got the opportunity to meet their company of interest, either by participating in the workshop, visiting company presentations or joining to the drinks reception afterwards.

Each year, the International Research Project provides students the opportunity to use their theoretical knowledge in academic research and travel to an international location. This year we will visit the growing metropolis Beijing! For the first time this year, the IRP will cooperate with the charity Right To Play, which aims to provide children in developing countries with the opportunity to learn while playing.

The 20 selected Finance and Accountancy students will have several inhouse days in the Netherlands starting in January and lasting until April. After these inhouse days the students will go on a two-week visit to Beijing (at the end of April 2013) to do field research including company visits and consults.

Afterwards, students have the possibility to continue traveling for an additional two weeks. The committee will set up a balance between formal and informal activities to give you an unforgettable experience!

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FSR Activity report

Master Kick-Off Day After a few weeks of preparation, the first event of the academic year 2012-2013 was planned on September 3rd. The Master Kick-Off Day used to take place in cooperation with the Erasmus School of Economics. This year we have extended the cooperation and joined the kick-off of Finance & Investments (RSM) and Quantitative Finance (ESE) as well. For all Masters, we have organized this day to give them a clear view on the possibilities they have at the FSR. The day started with some general information about the program during the Master’s program. Furthermore, there was an introduction from the lecturers and they gave a presentation about their own courses and possible seminars.

Afterwards, on behalf of the FSR Sep Vermeulen (chairman) informed the students about the possibilities. After a stunning presentation, students were interested in becoming member of the FSR. We have recommended the students to participate in the events and have shown them the profits of being an active member.

After all, the Faculty Club was available for a drink, so students, lecturers and the FSR Board could meet each other. With some quiet jazz music on the background, the day has come to a successful end. At the end we could welcome a marvelous number of new FSR members.

General Member Assembly On September 6th the XVth FSR Board was announced to be officially in charge. After a few months, the period of orientation was over and the entire board was ready for the challenge.

After a long discussion about the minutes of the last GMA, the moment of fame for the fifteenth board was there and the institution was successful.

Ernst & Young Drink On September 20th the Ernst & Young drink was planned.

About 35 student interested in accounting, tax or advisory were invited and after a first drink Marcel de Kimpe, currently partner at E&Y, introduced himself and gave a short introduction about working at E&Y and his track from starter to partner. He told about working at E&Y, the corporate culture and an average working day as a partner. After a short break we had a special workshop called: “Fit for studying”. For studying and working as well, he had some eye-openers about concentration and the influence of sleeping on our concentration. For instance, our concentration depends for 80 percent on a good night’s sleep. For an hour we were informed about the best way of living during studying and work. At the end there were drinks and snacks available while meeting Ernst & Young employees.

Minor Kick-Off Day The next day, the Minor Kick-Off took place for third year Bachelor students to make them known with the FSR and the possibilities to join a committee or maybe in the future as a board member.

After the lecture of the minor “Ondernemen en Belastingen” and Behavioral Finance, our chairman gave a presentation about the FSR and afterwards there was a social drink in the L-building.

FSR news • 45

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Erasmus Banking Congress

On Wednesday 12 September 2012 the first congress organized by the FSR was a fact. This congress, held in the Forum-room in the M-building, was an interactive afternoon with 200 participating students and lecturers. During this congress the banking sector with its numerous drawbacks in the recent years was discussed. The opening of the congress was by Prof.Dr. I.J.M. Arnold. As the vice dean of the Erasmus School of Economics he was well suited for introducing the subject in this high-potential environment.

After this introduction the moderator of the congress, Arjen Mulder of the RSM faculty, took over the stage. He presented Dr. H.O.Ch.R. Ruding: the former minister of Finance and former vice-chairman of Citicorp. His main subject was the present monetary policy. With the current crisis many things in the financial environment have changed and new quantitative easings are the subjects of many meetings. Also the size of the by ECB created fund to defuse the European crisis was one of the subjects Dr. Ruding spoke of.

The second speaker was former director of ‘De Nederlandsche Bank’, Dr. L.H. Hoogduin. His topic was supervision on financials, which has increased rapidly, with banks abiding to the rules of the Basel III Accord and the insurance companies adhering to the Solvency II Accord.

Also the possible separation of retail banking activities from the commercial banking activities was one of his topics, which lead to heated discussions in the second round of debates.

During the first two presentations the participants sent in their questions via the SMS service.

The best questions were selected by the moderator so that they could be asked in the collective debate session of Dr. Ruding and Dr. Hoogduin.

After a short break we continued the congress with professor in Finance of the Tilburg University, Harald Benink. He told us about the current situation of the banking sector and how to ensure the stability of banks. A big subject here was the capital/asset ratio differences between the banking sector and for example the multinationals. Also, the lower capital/asset ratios of banks and the perception of guarantees and bail outs increasing the risks that banks took were discussed.

46 • FSR news

Next, Head of Commercial Banking at ING, Annerie Vreugdenhil presented to us in an interactive way. First she quickly clarified the expected extra regulations and the direct adjustments on political interventions. Then she gave us four multiple-choice questions to see what the overall consensus was of European regulation, size of future banks, splitting universal banks and the degree of lending. The opinions were split, so she concluded mainly with her own view that universal banks should stay.

Last but not least, founder of ‘Alex Beleggersbank’, Peter Verhaar covered the story of the present risks within banking. One of these risks is the possibility that because of the numerous scandals that took place, the trust in banks will be completely diminished for a long time. Another risk is that the banking sector in the Netherlands is too small with only three and a half bank. That is why he specifically pleads for more and smaller banks.

These conflicting opinions gave a perfect basis for the second debate sessions with prof. Benink, ms. Vreugdenhil and mr. Verhaar. With Peter Verhaar as an entrepreneur of a small bank, Annerie Vreugdenhil as a high ranked worker of one of the biggest Dutch banks and Harald Benink with his profound academic knowledge this led to a great discussion that could have lasted for hours.

Unfortunately we had only limited time, so a few minutes over time everyone was asked to join us for a drinks reception, where the participants had the chance to talk personally to the speakers while enjoying some drinks and snacks.

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Big 4 Cycle

In recent years, more and more students have become interested in the world of accountancy, a world full of numbers and intriguing companies. For those that have the ambition to work for one of the four biggest accounting firms, the Big 4 Cycle is a great opportunity to get familiar: with there companies. These four accountancy firms offer students inhouse days to experience the challenging and rapidly changing world of accountancy. During the Big 4 Cycle, in September and October 2012, students get the chance to find out more about the opportunities at the four leading accountancy firms and get to know the company cultures better.

For each inhouse day, a group of students was selected with a background in Business Economics or Business Administration at the Erasmus University Rotterdam. Together they visited the headquarters in Rotterdam of KPMG, Deloitte, PwC and Ernst & Young. These four leading companies opened their doors for the students to give a glimpse into the working life of an accountant.

These inhouse days started with an exclusive lunch, where the students had the first chance to meet some employees (including all levels of management) and ask their questions. After the lunch, the companies presented themselves and their specific career opportunities for graduated students. Students worked on different cases in small groups where they could bring their ­theoretical knowledge in practice and work out the different problems presented to them.

Topics that were discussed during these cases were innovation, business & accounting risks and several other accounting issues of fictive firms. Students discussed these problems and gave short presentations about what they found out and how they could solve this. By doing these cases, students could get an idea about what accountants do in their working hours.

48 • FSR news

After the presentations, it was time to have dinner. One of the firms organized a cooking workshop, where the students and the accountants had to show their cooking skills to make their own meal. The other firms organized a dinner at various locations in the heart of Rotterdam.

For the students this was a great setting to get to know the employees of the firm in an informal way and to get a feeling of the firm’s culture. The company culture is a decisive factor for many students and is therefore one of the most important experiences during the day.

The accountancy committee, hopes that we succeeded in helping students to get to know the Big 4 better, so that they are closer in making their choice for a future employer. Finally, we are proud that the Big 4 Cycle has once again been a successful event, not only for the accounting firms but also for the accountancy students!

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News Update New swathe of difficulties as Dublin abstains from tax plan

A total of nine European countries have joined Germany and France in the push for a common European tax on financial transactions.

Dublin will not be participating, but the initiative heralds more discomfort for the Government in its relations with its EU partners. The development could yet have major implications for the defence of Ireland’s corporate tax regime.

The idea behind the tax is simple. With taxpayers throughout Europe supporting stricken banks to the tune of hundreds of billions of euro, the objective is to ensure that a volatile financial system makes a greater contribution to society at large.

Irish banks are the beneficiaries of some e64 billion in capital from the increasingly indebted, cash-strapped State, so many observers might see many good moral and financial reasons for Ireland to take part. That’s not how the Government sees it, however.

Britain is abstaining from the tax. Therefore, Minister for Finance Michael Noonan fears financial institutions would move their business to the City of London from the Irish Financial Services Centre if Ireland joined while Britain stayed out.

Noonan’s overriding concern is to avoid doing anything that would threaten the employment of 33,000 people in the Irish financials sector. Amid soaring unemployment, this is a forceful argument.

To say this is politically inconvenient for Noonan is to put it mildly, although it is noteworthy that “core” euro zone countries such as the Netherlands and Luxembourg are not joining. It is no coincidence that they too operate big-league financial centres.

There is more. The participants will deploy new measures in the Lisbon Treaty which allow a coalition of at least nine countries to proceed with a European legislative initiative even if unanimous support among the 27 EU member states cannot be achieved.

The big issue for Dublin is that the transaction tax via enhanced co-operation may create a precedent for adopting a common business tax system by a group of member states.

The Minister also says Ireland already charges a 1 per cent stamp duty on all share deals, a charge smaller in scope than the proposed European tax because it is levied on transactions in derivatives.

Although the Government is pledged to engage constructively in talks on an EU-wide common consolidated corporate tax base (CCCTB), no less a man than Taoiseach Enda Kenny once dismissed the initiative as a “back door” route to tax harmonisation. In a fundamental sense, this is a no-go area for the Government.

But the plan agreed yesterday still presents a new swathe of complications to the Government. For one thing, it puts Ireland in the opposite camp to most euro zone countries at a time when Noonan is facing acute difficulty in his long campaign for bank debt relief.

The drawback for Ireland if a group of countries push ahead with their own CCCTB is clear. In short, this would dim the lustre of the storied 12.5 per cent corporate tax rate by making it more difficult for global companies to maximise the profit they book in Ireland for tax reasons.

Numerous technical questions also arise.

A part of this text was written by Arthur Beesley and published in the Irish Times on October 10th 2012

fsrforum • volume 15 • issue #1

FSR Alumni Association The multiplier which leads you to synergy!

Dear FSR Alumni or Future Alumni, The new academic year has begun and after almost a decennium the FSR Alumni Association finally has a female chairman.

According to the Finns female leadership will lead to higher profits, according to McKinsey & Company female leadership could create that competitive edge to tackle global challenges and according to the Dalai Lama there is less danger of violence under more matured female leadership.

If we all survive 21 December 2012 this could become a great year.

Together with my fellow board members Anne, Maaike and Taco we will organize new activities for our alumni members this year to keep you involved and engaged within the FSR network. This last decennium more and more FSR alumni have started to work and live in Amsterdam. Therefore, we thought it would only be just to claim Amsterdam as our city as well. Our first activity was the FSR Alumni Amsterdam drink on 19 October. The conciseness of the Rotterdam culture has colored this evening.

Concluding, my fellow board members and I look very much forward to meet with you and discuss topics varying from building the best cash flow model to my recent experiences with the Lukashenka regime in Belarus. You are cordially invited!

On behalf of the IXth FSR Alumni Board, Ashmita Krishna Chairman FSR Alumni Association Connect with us on LinkedIn on ‘Financial Study Association Rotterdam Alumni’

Currently we are also in the process of organizing a Friday afternoon drink in Rotterdam. Most probably this will be a look-a-like of the successful Ketel 1 drink of last year. Definitely an event you do not want to miss. Furthermore, also this year the tradition of the FSR Golf Tournament will be a highlight for most of our alumni members.

With this first issue of the FSR Forum I would especially like to encourage all our former active members of the FSR, as well as Pecunia and Pacioli which are not a member yet, to subscribe for the FSR Alumni Association. Not only because you will get our magazine ‘Kroonrede’ with all kinds of nostalgic stories, or a great network which has already many times led to new career opportunities; but because the common factor ‘FSR’ that binds us will make us relive the joyful moments of the past again and create new ones for the future. All it takes is sending one e-mail to alumni@fsr.nu.

FSR news • 51

fsrforum • volume 15 • issue #1

FSR Activity Agenda 2012-2013

September/October/November Erasmus Banking Congress

February Investment Banking Masterclass

The official kickoff of the International Banking Cycle

Learn to valuate, like an investment banker

BIG 4 Cycle

March Multinational Battle

Get to know the 4 leading accounting firms

International Banking Cycle

Four multinationals, five battling cities, are you part of it?

The investment in your career

Corporate Finance Competition

November Accountant Firms Day

Five star event: hotel, companies and participants!

Get familiar with the world of accounting at a top class location in Rotterdam!

Traders Trophy Can you handle the pressure?

Finance Day Want to know what finance is all about…

November/December Financial Business Cycle Explore the financial opportunities

January Multinational Dinner Get in touch with the multinationals

Finance Dinner Get acquainted with the world of banking

January-April CleanTech Challenge Grow your green ideas!

52 • FSR news

April Female Business Tour It might be a men’s world but it would be nothing without women

April/May International Research Project Using your intellect for a charity!

May Bachelor Accountancy Day Will you choose for a career in accounting?

European Finance Tour Exploring European financial world

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

ℜ ς ϓ ℘ ΞΒ⇓ ∗ ∨

⎥ ⎦ W.w e ∼ kΨn bij m Ε z a rs .⇔ ← .

Ga verder met Mazars.

Blijkt de universiteit ineens een vooropleiding.

Diederik van de Scheur Consultant TAS

Piet-Hein Touw Staff FSO

Een succesvolle carrièrestart is meer dan een goede cijferlijst. Het begint met karakter en inzicht in jezelf. Ontdekken wie je bent, weten waar je naartoe wilt groeien Ên hoe je dat voor elkaar krijgt staat altijd aan de basis. Ernst & Young coacht jou actief op weg naar jouw succes. We bieden je volop kansen in de wereld van assurance, tax, transaction en advisory. Ontdek ze op ey.nl/carriere