Sign in  |  Register  |  Help

Most Read on APEsphere

Most Commented on APEsphere

Blogs we like

Resources

By Andrew Newton on 27 Aug, 2009 - 12:27 UTC

Was the chairman of the UK's financial watchdog just trying to impress concervatives when he expressed support for a tax on foreign exchange deals?

 

Development charities are delighted. And why wouldn't they be? The global economic crisis rooted in excessive risk-taking (rooted in remuneration policies that rewarded it) is estimated to have caused some 100 million down to the level of extreme hunger.

 

Personally I wonder whether a Truth and Reconciliation Commission could help bring some measure of justice by bringing together victims of the crisis perpetrators.

 

But a Tobin tax on currency transactions could help remedy the material impacts of the crisis rather than simply the emotional and cultural. It is argued that the tax brought in could be used to finance economic development for those who have suffered at the hands of the finance industry.

 

Lord Turner went on to comment that the UK's financial sector has "grown beyond a socially reasonable size". Hardly seems like posturing towards a future Conservative government to me; more like a note of sense from someone who is not only close to the action as a regulator now, but has himself been a business leader.

An interesting piece from Edie on the difficulties of splicing up carbon emission ownership along a supply chain, in this case the water supply chain.

 

It quotes my brother. I had no idea he was an expert on this. We should talk more.

A story from the UK's Third Sector periodical highlights the plight of social entrepreneurs trying to choose a suitable vehicle for their enterprise.

 

You either have a corporation, which opens up the prospect that eventually you will risk the socia purpose of the enterprise being compromised by new owners, or you have a non-profit/charity, in which case finance issues become hugely problematic.

ADVERTISEMENT

The US Financial Accounting Standards Board has proposed a new staff position to tackle off balance sheet financing that helped aggravate the crisis.

 

The FASB is working closely with the International Accounting Standards Board to review the role of accounting rules in bringing about and aggravating the crisis.

 

The FASB Staff Position (FSP) covers valuation techniques for off-balance sheet items.

Swiss President Hans-Rudolf Merz has asked the US Treasury Secretary Timothy Geithner to drop a lawsuit against the Swiss bank UBS AG.

 

Under the suit, the bank is being asked to provide US tax authorities with details of 50,000 US citizens who hold accounts in Switzerland with the bank. US citizens are required to inform US tax authorities if they hold more than US$10,000 in offshore accounts so that any interest can be taxed.

 

The Swiss President offered the US agreement on a new tax treaty if the suit was dropped.

 

According to the report in the Times:

 

"UBS, Switzerland's biggest bank, paid $780 million in fines and disgorgments earlier this year after admitting to assisting US taxpayers to evade tax."

A new report by EIRIS finds that the financial sector performed worst at managing environmental, social and governance risks.

 

This major survey by the ethical investment research service compared 2,200 companies listed
on the FTSE All-Word Developed Index. The research tracked the companies' progress on managing non-financial ESG risk issues over a three year period (2005-2008).

 

More broadly across all sectors, EIRIS finds that there has been some but nevertheless limited progress on management of ESG risks over the period studied.

ADVERTISEMENT

The International Accounting Standards Board is under pressure from European banks regarding the treatment of collateralized debt obligations (CDOs).

 

The IASB, argues Leon Gettler, has not shown much ability to make decisions independent of political interference in the past, but needs to be made of stronger stuff to meet this new Can standardchallenge:

 

"Synthetic CDOs are hypothetical portfolios - the issuer need not hold the portfolio and there need not be an actual portfolio of loans. Rather than being based on real loans, they are built around credit default swaps with banks.

And therein lies the perversity, because investors are essentially placing bets on bets. The heat is on the IASB to change the rules - from European banks that don't want them to know their risk exposure. They are demanding the IASB relax international accounting rules that force issuers to account for derivatives at fair value and be more like the American banks that, under their standards, can keep investors in the dark about how much those notional assets are worth."

The International Federation of Accounting (IFAC) - the global professional association for accountants - has produced a sustainability framework.

 

According to Greenbiz, the framework "is a web-based tool that targets professional accountants working in all kinds of different organizations who the IFAC believes can "influence the way organizations integrate sustainability into their objectives, strategies, management and definitions of success."

...

IFAC borrows heavily from the decade-old SIGMA Project. This project developed guidelines to help provide clear, practical advice to organizations to help them make move down the path towards sustainability. It was the first effort to link management systems, risk management, business excellence frameworks, the three responsibilities, and continual improvement into a single framework."

 

GreenBiz observes that the tool helps accountants by cutting through the internet "noise" on sustainability and giving them a coherent framework for action, one which, they note, CSR and sustainability officers often lack.

The Institute of Chartered Accountants of India (ICAI) may seek statutory backing to the power to refuse to sign off on company accounts.

The government is likely to support the proposal as it had asked the ICAI to come up with ways to improve audit controls following the Satyam scandal coming to light.

According to the Business Standard newspaper:

"Currently, auditors may only qualify accounts if managements are unwilling to accept the discrepancies they point out. “If the law mandates that the management has to incorporate the effects of the qualifications, the situation will be completely different. This will also help us penalise auditors for lapses,” said an ICAI source privy to the discussions.

An auditor, who was not an ICAI office-bearer, said managements typically pushed auditors to be removed if they made strong qualifications to the accounts. Firms or their directors also often approach the ICAI’s disciplinary committee, seeking action against an auditor who has taken a tough stance on grounds the firm was being targeted or blackmailed, he added."
60% of financial directors in the UK now regard tax as an ethical issue, the Guardian reports in its ongoing series on corporate tax avoidance.

It should always have been such, but the last time payment of corporation tax was viewed as an issue of social responsibility rather than as something to be minimised as a simple matter of financial efficiency was during the Second World War.
Heads of British banks including Lloyds and Barclays were asked in Parliament whether havnig been bailed out, they would now stop avoiding tax.

Members of Parliament were using the results of an investigation by the Guardian newspaper.

Barclays' John Varley said: "I don't recognise this statement that we have undertaken tax avoidance schemes. What we are required to do as a publicly owned company is to manage our tax affairs efficiently." Even to the point of paying less than the community expects from a responsible business in its midsts?

Lloyds chief executive Eric Daniels was emphatic that Lloyds adhered to the letter and spirit of the law. But of course that is not the point. The accusations do not cover tax evasion, but tax avoidance.

Tax avoidance schemes are presumed to be legal - though in many cases they may be challenged by the tax authorities - but result in companies that operate in a particular country and benefit from public services in that country nevertheless paying tax in relation to a small proportion of the business conducted there.

The article charts rising political pressure to address the issue.

Must read analysis

News by Impact